Q4 2023 Green Thumb Industries Inc Earnings Call
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Operator: Good day, and welcome to Green Thumb Industries' fourth quarter and full year 2023 earnings conference call and webcast. All participants are in a listen-only mode.
Good day, and welcome to Green thumb industries fourth quarter and full year 2023 earnings conference call and webcast.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. On today's call, management will provide prepared remarks, and then we will open up the call for your questions. To ask a question, analysts may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Operator: And to withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Shannon Weaver, VP of Communications. Please go ahead, ma'am.
I would now like to turn the conference over to Shannon Weaver VP of Communications. Please go ahead ma'am.
Shannon Weaver: Thanks, besties. Good afternoon, and welcome to Green Thumb's fourth quarter and full year 2023 earnings call. I'm here today with founder and CEO Ben Kovler, President Anthony Georgiadis, and Chief Financial Officer Matt Faulkner. Today's discussion and responses to questions may include forward-looking statements that are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. These risks and uncertainties are detailed in the earnings press release issued today, along with the reports filed with the United States Securities and Exchange Commission and Canadian securities regulators, including our most recent annual report filed on Form 10-2. This report, along with today's earnings release, can be found under the Investors section of our website. Green Thumb assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. Throughout the discussion, Green Thumb will refer to non-GAAP financial measures, including EBITDA and adjusted EBITDA. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in our earnings press release and SEC and CDER 5.0. Please note all financial information is provided in U.S. dollars unless otherwise noted. Thanks, everyone. And now, here's Beth.
Thank you Betsy and good afternoon, and welcome to the Green Bancorp fourth quarter and all year in 2023 earnings.
I'm here today with founder and CEO of Banco were I think Anthony Georgiadis, Chief Financial Officer, Matt.
Today's discussion and responses to questions may include forward looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these days.
These risks and uncertainties are detailed in the earnings press release issued today, along with our reports filed with the United States Securities and Exchange Commission and Canadian Securities regulators, including our most recent annual report filed on Form 10-K.
The report along with today's earnings release can be found under the investors section of our website.
Green thumb assumes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise. After the date of this call.
Throughout the discussion greenbaum overburden as non-GAAP financial measures, including EBITDA and adjusted EBITDA.
Reconciliation of non-GAAP financial measures and most directly comparable GAAP measure is included in our earnings press release and hockey and to your filing. Please note all financial information is provided in U S dollars unless otherwise indicated.
Everyone and now here's Pat.
Benjamin Kovler: Thank you, Shannon. Good afternoon, everyone. Thank you for joining our fourth quarter in 2023 year-end conference call. I'll lead off with an overview of our results and some quick observations on the industry. Anthony will discuss the progress we made in 2023, designed to carry momentum into 2024 and beyond. Then Matt will dive into the financials, and after that, we'll open the call up to questions.
Thank you Shannon and good afternoon, everyone. Thank you for joining our fourth quarter 2023 year end conference call.
Lead off with an overview of our results quick observations on the industry.
He will discuss the progress we made in 2023 designed to carry momentum into 2024 and beyond.
Then Matt will dive into the financials and after that we'll open the call up for questions.
Benjamin Kovler: I'm pleased to report that our team delivered a strong finish to 2023. Even with price compression in some markets and an inflationary impact on consumer spending, we saw our year-over-year revenues increase 7.3% in Q4. This performance contributed to a record fourth quarter for revenues, cash flow from operations, and adjusted EBITDA. On a GAAP net income basis, we reported $3 million, or one cent per basic and diluted share for the fourth quarter.
I'm pleased to report that our team delivered a strong finish to 2023.
Even with price compression in some markets and inflationary impacts on consumer spending we saw our year over year revenues increased seven 3% in Q4.
This performance contributed to a record fourth quarter revenues cash flow from operations.
And adjusted EBITDA.
Our GAAP net income basis, we reported $3 million, one per basic and diluted share for the fourth quarter.
Benjamin Kovler: Importantly... For 2023, cash flow from operations was $225 million, and at year end, we had $162 million in cash on our balance sheet. Net of share buybacks, debt repurchases, and fully funded tax payments, Green Thumb is in strong financial shape that largely reflects the capital allocation strategy focused on generating cash flows.
Importantly.
We're calling 23 cash flow from operations was 225 million.
And at year end, we had $162 million in cash on our balance sheet net share buybacks debt repurchases and fully funded tax payments.
Green thumb is in strong financial shape largely reflects the capital allocation strategy focused on generating cash flows.
Benjamin Kovler: Over the past few years, we have deployed considerable capital within our key markets in anticipation of expansion. When New Jersey, Maryland, Connecticut, and New York launched adult-use sales, we had an expanded infrastructure in place to serve a greater market demand. Adult-use sales are on the horizon for Virginia, Ohio, and Minnesota, and potentially other states where we operate, like Florida and Pennsylvania.
Over the past few years, we have deployed a considerable capital within our key markets in anticipation of expansion.
We have New Jersey, Maryland, Connecticut, and New York launched adult use sales, we had an expanded infrastructure in place sort of a greater market demand.
Adult use sales are on the horizon for Virginia, Ohio, and Minnesota.
And potentially other states, where we operate like Florida and Pennsylvania.
Benjamin Kovler: We are ahead of the curve when those markets open for adult-use retail sales. While our major CapEx cycle is behind us, we will continue to invest in accelerating growth within our operating market. As part of our capital allocation strategy, in September, our board authorized our first share repurchase program for up to $50 million.
We are ahead of the curve when those markets open for adult use retail sales.
While our major Capex cycle is behind US, we will continue to invest in scaling growth within our operating markets.
As part of our capital allocation strategy in September our board authorized our first share repurchase program for up to $50 million we.
Benjamin Kovler: We believe that this share repurchase program is an appropriate tool for creating shareholder value without compromising our growth initiative. To date, we have purchased approximately $40 million, or 3.8 million shares. We paid a reasonable price and now every shareholder owns a slightly bigger piece of the pie. In addition, the board approved an additional $50 million for the repurchase program, bringing the remaining authority to repurchase shares to approximately $60 million, for a total of $100 million for the program.
We believe that this share repurchase program is an appropriate is an appropriate tool for creating shareholder value without compromising our growth initiatives.
We have purchased approximately $40 million or three 8 million shares.
We paid a reasonable price and now every shareholder owns a slightly bigger piece of the pie.
In addition, the board approved an additional $50 million for the repurchase program, bringing the remaining authority to repurchase shares to approximately $60 million for a total of $100 million for the program.
Benjamin Kovler: Additionally, as it relates to the senior debt, we repurchased $25 million of that debt at a 5% discount during the fourth quarter, bringing our remaining principal balance to $225 million at the end of 2023. We continue to focus on building a business to succeed regardless of federal change, while remaining hopeful for the potential reclassification of cannabis to Schedule III, a move that would eliminate the punitive impact of 288. This would be helpful for Green Thumb, especially since we paid over $100 million in cash taxes in 2023.
Additionally, as it relates to the senior debt, we repurchased 25 million of bad debt and a 5% discount during the fourth quarter, bringing.
Bringing a remaining principal balance to $225 million at the end of 2023.
We continue to focus on building a business to succeed regardless of federal change while remaining hopeful for the potential reclassification of Canada the schedule III.
A move that would eliminate the punitive impact of $2 80.
This would be helpful for green thumb, especially since we paid over $100 million in cash taxes for 2023.
Benjamin Kovler: Separately, we also look forward to the day when U.S. cannabis companies can list on the U.S. exchange, which would increase the company's access to capital and the marketability of our stock. Turning to consumer demand, We see positive indicators that consumer sentiment will continue to drive the long-term growth prospects of Canada. Number one: Acceptance of cannabis for health and well-being is evident, with 70% of U.S. adults believing cannabis should be legal. Number two.
Separately, we also look forward to the day that U S. Cannabis companies can list on the U S exchange.
The increase of the company's access to capital and the marketability of our stock.
Turning to consumer demand.
We see positive.
Indicators that consumer sentiment will continue to drive the long term growth prospects co candidates.
Number one.
Acceptance of candidates for health and wellbeing is evident with 70% of U S. Adults, believing cannabis should be legal.
Number two.
Benjamin Kovler: U.S. legal cannabis sales are estimated at approximately $30 billion for 2023, with more growth expected ahead. And number three, my favorite: over the next five years, there are expected to be 18 million new cannabis consumers in the U.S., while there will be 2 million fewer alcohol consumers. And that's the driver.
U S. Legal cannabis sales are estimated at approximately $30 billion for 2023 with more growth expected to head.
And number three my favorite over the next five years, there are expected to be 18 million new cannabis consumers in the U S well, there will be $2 million less alcohol consumers.
And that's that drives us.
Benjamin Kovler: Now more than ever, we remain hyper-focused on our patients and customers. We are growing our family of award-winning cannabis brands, Rhythm, Dogwalkers, Incredibles, and Bebo, to provide our customers with an even wider array of choices that suit their preferences and price range. We're on a mission to continue building brands that will be part of the American experience for decades to come, and we will continue to explore innovative ways to connect people to cannabis. Whether it's the first-of-its-kind, miracle-in-Mundelein legal cannabis consumption music festival that I mentioned last quarter...
Now more than ever we remain hyper focused on our patients and customers.
We are growing our family of award winning cannabis brands rhythm dog walkers Incredibles in vivo to provide our customers with an even wider array of choices that suit their preferences and price points.
We're on a mission to continue building brands that will be part of the American experience for decades to come.
And we will continue to explore innovative ways to connect people to candidates.
Whether it's the first of its kind miracle I'm underlying people cannabis consumption music festivals as I mentioned last quarter.
Benjamin Kovler: The expansion of our Rhythm Artist Series, including the exciting momentum around Tinashe's Green Tea Strain, for new collaborations like the one with Magnolia Bakery and Our Incredibles. Our strong brand recognition is opening doors to engage and excite our customers in new ways. And as our brands grow, the stars are aligning to create even more opportunities to increase brand awareness and attract new customers. We believe this is just the beginning for Rhythm, Dogwalkers, Incredibles, and Beep.
The expansion of our rhythm artist series, including the exciting momentum around <unk> Green tea strain.
Or new collaborations like the one with Magnolia bakery and our incredible brand.
Our strong brand recognition is opening doors to engage and excite our customers in new ways.
As our brands grow.
Sars are aligning to create even more opportunities to increase brand awareness and attract new customers.
We believe this is just the beginning for rhythm dog walkers Incredibles and BMO.
Okay.
Benjamin Kovler: My confidence in the future of cannabis has continued to grow since we founded Green Thumb ten years ago. That said, outsized opportunity is only as good as an organization's ability to maximize its potential. We are continuously studying what separates success from failure, and it all comes down to long-term planning paired with strong execution that delivers organic growth and cash flow. For us, it's about focusing on investing capital for the greatest risk-adjusted return, our obsession with providing customers with the best, most authentic cannabis product and experience, and our intensity around strategically executing our growth. Every day is still day one, and we are always looking forward to ways to get better as we evolve and continue to win. The team accomplished a great deal in 2023, and that sets us up well for 2024 and beyond, as Anthony will discuss in a moment. However, no achievement, whether big or small, happens without an amazing and committed team across all aspects of the business. We can build cultivation facilities, open stores, and develop new products, but it's the people who care about promoting well-being through the power of cannabis and who are dedicated to treating people well that matter most.
My confidence in the future of candidates has continued to grow since we founded wrapped up 10 years ago.
That said outsized opportunity is only as good as an organization's ability to optimize its potential.
We are continuously studying what separates success from failure and it all comes down to long term planning paired with strong execution that delivered organic growth and cash flow.
For us it's about focusing on investing capital for the greatest risk adjusted returns are.
Our obsession on providing customers with the best most authentic cannabis products and experiences.
Our intensity around strategically executing our growth plan.
Every day is still day, one and we are always looking forward to ways to get better as we evolve and continue to win.
The team accomplished a great deal in 2023 and that sets us up well for 2024 and beyond as Anthony will discuss in a moment.
However, no achievement, whether big or small happened without an amazing and committed team across all aspects of the business.
We can build cultivation facilities open stores and develop new products, but it's the people who care about promoting well being through the power of cannabis and who are dedicated to treating people well that matters most.
Benjamin Kovler: And this dedication extends beyond the doors of Green Thumb and out into our community. On February 8th, we published our second annual social impact report that shares many stories of our Growing for Good program and the positive impact it's having in the communities we serve. The report highlights the causes we support to promote a more inclusive and equitable industry, the ways we advocate for social and restorative justice, and how we seek to be more environmentally aware. Above all, our social impact report celebrates our team's dedication and achievement. And I could not be prouder of our 4,600-plus team members who make it happen every day in every way. Now, I'll turn the call over to Anthony to add his thoughts on 2023 and beyond. Anthony?
And this dedication extends beyond the doors at green thumb out into our communities on February eight we published our second annual social impact report shows many stories of our growing for good program at positive impact, it's having in the communities we serve.
The report highlights the causes we support to promote a more inclusive equitable industry waves, we advocate for social restorative justice and how we seek to be more environmentally aware.
Above all our social impact report celebrates our team's dedication on achievements and I could not be prouder of our 4600 plus team members, who make it happen every day in every way.
Now I'll turn the call over to Anthony to add his thoughts on 2023 and beyond Anthony.
Anthony Georgiadis: Thanks, Ben. As you just heard, despite substantial industry, inflationary, and consumer headwinds, the company posted robust fourth-quarter results, tapping off an incredibly successful year for our team. Let's look at some of the highlights.
Thanks, Dan.
Just heard despite substantial industry inflationary in consumer habits.
The company posted robust fourth quarter results capping off an incredibly successful year for our team.
Let's look at some of the highlights.
Anthony Georgiadis: First, throughout the year, we invested $220 million in CapEx and opened 15 new stores across six states, ending the year with 91 stores. We also made major wholesale investments in New York, Minnesota, Virginia, New Jersey, and Florida. Markets that we anticipate will grow considerably in the years to come. Second, continue strong performance across our award-winning family of brands Rhythm, Dogwalkers, Incredibles, and Bebos. We're incredibly proud of our BDS market share gains in Illinois, Maryland, and Pennsylvania, along with our 12 High Times Candidates Cup wins in Illinois and Massachusetts, including six Gold Cups. Third, an incredibly successful adult use launch in Maryland. Since July 1st, our team has established a leading market position in the state and has not looked back. And last, but not least, the successful launch of the first open cannabis consumption music experience, The Miracle in Mundelein, as well as the launch of our Rhythm Artist Series with Mitchell Tenpenny, Marcus King, State Champs, and Tinashe.
First throughout the year, we invested $220 million in Capex and opened 15, new stores across six states ending the year with 91 stores.
We also made major wholesale investments and New York, Minnesota, Virginia, New Jersey, and Florida markets.
Markets that we anticipate will grow considerably in years to come.
Second continued strong performance across our award winning family of brands rhythm dog walkers Incredibles in vivo where it.
Credibly proud of our Bds market share gains, Illinois, Maryland, and Pennsylvania.
Along with our 12 high times cannabis Cup winds in Illinois, Massachusetts, including six Cold Cups.
Third an incredibly successful adult use launch in Maryland.
Is July 1st our team has established a leading market position in the state and its not look back.
And last successful launch of the first open candidates consumption music experience, a miracle and bundle.
As well as the launch of our rhythm hardest series with Mitchell 10, cutting markets King State Champs internationally.
Anthony Georgiadis: These results represent the culmination of a tremendous amount of hard work, discipline, and passion with which our team approaches the work we do for patients and consumers every day. Two months into 2024, and some of last year's themes continue to ring true. For example, we remain skeptical about the timing of any fundamental federal reform, including rescheduling and capital market accessibility.
These results represent the culmination of a tremendous amount of hard work discipline and passion with which our team approaches to work we do for patients consumers every day.
Two months into 2020 for some of last year's themes continue to ring true.
One we remain skeptical on the timing of any fundamental federal reform.
Coding rescheduling and capital market accessibility.
Anthony Georgiadis: As a reminder, we were left at the altar of safe banking around this time last year. Two, we anticipate continued price erosion in many of our markets. The confluence of supply-demand imbalances, competition from unregulated and or Farm Bill compliant products, and the current state of the consumer leads us to believe that industry pricing and margins will continue to be under pressure throughout the year. While we prefer wind at our back versus in our face, this setup plays to our strengths.
As a reminder, we were left at the altar on safe banking around this time last year.
Two we anticipate continued price erosion in many of our markets.
I'd like to supply demand balances competition from unregulated indoor farm Bill compliant product and the current state of the consumer leads us to believe that industry pricing and margins will continue to be under pressure throughout the year.
Well, we prefer winded our back versus in our face. This setup plays to our strengths as cash flow generation and balance sheet management have been core to our DNA since day one.
Anthony Georgiadis: Cash Flow Generation and Balance Sheet Management have been core to our DNA since day one. Despite regulatory challenges and industry pricing, we are cautiously optimistic about the state adult use discussions happening in Ohio, Minnesota, Virginia, Florida, and Pennsylvania. In the last 24 months, we've deployed significant capital into these markets, and our well-timed investments should provide strong shareholder cash-on-cash returns. For the year, we anticipate CapEx spend to be approximately 50% less than in 2023. The bulk of the spend will be focused on 10 to 15 retail store buildouts and renovations in Florida, Nevada, Minnesota, Virginia, and Ohio, along with some wholesale investment in Connecticut and potentially others.
Despite regulatory challenges and industry pricing, we are cautiously optimistic on the state of adult use discussions happening in Ohio, Minnesota, Virginia, Florida and Pennsylvania.
And the last 24 months, we've deployed significant capital into these markets and are well timed investments should provide strong shareholder cash on cash returns.
For the year, we anticipate capex spend to be approximately 50% less in 2023.
The bulk of the spend will be focused on 10 to 15 retail store build outs renovations in Florida, Nevada, Minnesota, Virginia, and Ohio, along with some wholesale investment in Connecticut and potentially others.
Anthony Georgiadis: In terms of business strategy, within CPG, we plan to operationalize our recent facility expansions in New Jersey, Virginia, and Minnesota. We will continue to innovate and expand our brand and product portfolio. And last, improve our overall operational efficiency and product quality, and Retail who plan to continue to build out our physical store presence, taking a hard look at those states that will convert to adult-use markets soon, invest further in our omni-channel strategy, and refine our curated product selection and consumer experience in each market with the stated goal of being best in class. Our success in implementing these various strategies will be defined by our ability to obsessively focus on the consumer, continue to optimize our competitive market positions, and deploy capital to projects that optimize shareholder returns.
In terms of business strategy within CPG.
The operationalized, a recent facility expansions and New Jersey, Virginia and Minnesota.
Continue to innovate and expand our brand and product portfolios.
And last improve our overall operational efficiency and product quality.
In retail we plan to continue to build out our physical store presence.
A hard look at those states that convert to adult use market soon.
Invest further into our Omnichannel strategy and.
And refine our curated product selection and consumer experience in each market with a stated goal of being best in class.
Our success in implementing various strategies will be defined by our ability to access and we focus on the consumer continue to optimize our competitive market positions.
<unk> capital to projects that optimize shareholder returns.
Mathew Faulkner: We continue investing in our team, who remain the heartbeat of our organization and core to everything that we do. With that, I'll turn the call over to Matt to review our financial results. Thanks, Anthony, and hello, everyone. Report fourth quarter revenue of $278.2 million, a 7% increase over the fourth quarter of last year, while sequential revenue saw an increase of $1.4 billion. The year-over-year increase was primarily driven by the legalization of adult use sales in Maryland and Connecticut.
And continue investing in our team who remain the heartbeat of our organization and core to everything that we do.
With that I'll turn the call over to Matt to review our financial results.
Thanks, Anthony and Hello, everyone.
We reported fourth quarter revenue of $278 2, Million% to 7% increase for the fourth quarter of last year, all sequential revenue saw an increase of 1%.
The year over year increase was primarily driven by the legalization of adult use sales in Maryland and Connecticut.
Mathew Faulkner: While the effect of price compression continues to pressure the top line, continued unit growth, as well as revenue generated from 15 new stores opened during the year. Overall, retail revenue increased 6% versus the fourth quarter of 2020, and 2 percent of Equipment. Fourth quarter comparable sales increased 1.3% over the prior year on a base of 76 stores, while growing 1% sequentially on a base of 8%. Consumer packaged goods net revenue increased 13% over the prior year quarter at 3%.
While the effect of price compression continues to pressure the top line continued unit growth as well as revenue generated 15, new stores opened during the year also contributed to the increase.
Overall retail revenue increased 6% versus the fourth quarter of 2022 and 2% sequentially.
Fourth quarter comparable sales increased one 3% over the prior year base of 76 stores, all growing 1% sequentially on a base of 82 stores.
Packaged goods net revenue increased 13% over the prior year quarter and 3% for the full year.
Mathew Faulkner: Looking forward, we expect to see first quarter sequential revenue to be down mid-single, much like we saw sequentially last year. Gross profit for the fourth quarter was $142.7 million or 51% compared to $124 million or 48% of revenue for the fourth quarter last year. For the full year, gross profit was $526.5 million, or 50% of revenue, versus $504 million, and 20. The increase in gross profit was directly attributed to the revenue.
Looking forward, we expect to see first quarter sequential revenue to be down mid single digits much like we saw sequentially last year.
Gross profit for the fourth quarter was $142 7 million or 51% compared to $124 million or 48% of revenue for the fourth quarter last year.
For the full year gross profit was $526 5 million for 50% of revenue versus $504 million or 50% in 2022.
The increase in gross profit was directly attributed to the revenue growth.
Mathew Faulkner: Turning Topics. Selling general administrative expenses for the fourth quarter were $92.3 million, or 33% of revenue, compared to $80 million, or 31% of revenue, for the fourth quarter of 2020. SG&A excluding depreciation, amortization, one-time transaction costs, and StockBaseCom, which we refer to as Normalized Operating Costs, approximated $61 million this quarter, compared to $59 million in Q3. Normalized operating costs for the full year increased 4%, to $233 million from $224 million last year.
Turning to Opex, selling general and administrative expenses for the fourth quarter were $92 3 million or 33% of revenue compared to eight 8 million or 31% of revenue for the fourth quarter of 2022.
SG&A, excluding depreciation amortization, and one time transaction costs and stock based comp, which we refer to as normalized operating costs approximated $61 million this quarter compared to $59 million in Q3 and $53 million last year.
Normalized operating costs for the full year increased 4% $233 million from 224 million last year.
Mathew Faulkner: The increase in total expenses primarily reflected costs associated with opening new stores and supporting the adult use law. Continuing Cost Management and Discipline enabled us to carefully manage our costs. Fourth quarter net income was $3.2 million, or $0.01 per basic and diluted share, compared to a net loss of $51 million.
Increased total expenses, primarily reflected costs associated with opening new stores and supporting adult use watches.
Continued cost management discipline enabled us to carefully manage our cost base.
Fourth quarter net income was $3 2 million <unk> per basic and diluted share compared to a net loss of $51 million or 22 cents per basic and diluted share in the prior year period, which included a noncash impairment charge.
Mathew Faulkner: 22 cents per basic and diluted share in the prior year period, which included a non-cash impairment. And Justin Iveda, which excludes non-cash stock-based compensation and other non-operating costs, was $90.8 million, or 32.6% of revenue, as compared to $81.9 million in 2020, for 31.3% of revenue for the fourth quarter of 2020. Adjusted EBITDA for the full year was $325.8 million, or 30.9% of revenue, compared to $311.5 million. Microsoft Macintosh 3.0. On the liquidity front, we ended the year with a strong balance sheet, including cash of $160,000. Operating cash flows increased $66 million to $225 million from $159 million last year.
Adjusted EBITDA, which excludes noncash stock based compensation and other non operating cost was $90 8 million or 32, 6% of revenue as compared to $81 2 million or 31, 3% of revenue for the fourth quarter of 2022.
Adjusted EBITDA for the full year was $325 8 million or 39% of revenue compared to $311 5 million or 36% revenue last year.
On the liquidity front, we ended the year with a strong balance sheet, including cash of $162 million.
Operating cash flows increased 66 million to 225 million from $159 million last year with $71 million generated during Q4 alone.
Operator: $71 million generated during Q4. In closing, we're pleased with our fourth quarter results, and we are in a strong financial position as we enter 2021. We look forward to speaking with you soon when we report our first quarter 2024 results. With that, we'll open the call to your questions, Operator. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
In closing I'm pleased with our fourth quarter results were in a strong financial position as we enter 2024.
Look forward to speaking with you soon when we report first quarter 2024 results.
With that we'll open the call to your questions operator.
We will now begin the question answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
Matt Bottomley: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. In the interest of time, please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question today comes from Matt Bottomley with Canaccord Genuity. Please go ahead. Good morning, everyone.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
In the interest of time, please limit yourself to one question.
At this time, we will pause momentarily to assemble our roster.
The first question today comes from Matt Bottomley with Canaccord Genuity. Please go ahead.
Mathew Faulkner: Thanks for the question. I'm just wondering if we can get a little more granular on the outsized performance in your adjusted EBITDA margins and operating margins, considering that SG&A was up a little bit, and we did see, you know, maybe a 1% increase in revenue. It looks like on a year-over-year basis, some of this might have to do with non-cast charges in SG&A on the back of M&A, but I'm just wondering to kind of triangulate the sort of outperformance we saw in adjusted EBITDA given a higher cost base in SG&A. Well, we did.
Hi, Good morning, everyone. Thanks for the question I'm, just wondering if we can get a little more granularity on the outsized performance in your adjusted EBITDA margins and operating margins.
During that SG&A was up a little bit and we did see you know maybe a 1% increase in revenue it looks like on a year over year basis. Some of this might have to do with noncash charges and SG&A on the back of M&A, but I'm. Just wondering if you kind of triangulate the sort of outperformance we saw in an adjusted EBITDA given our higher cost based on yesterday.
Mathew Faulkner: Thanks for the question, Matt. So we did see some improvement in March and in the quarter, thanks in part to improved scale and efficiency in CPG. But, you know, at the end of the day, we continue to manage costs and focus on our goal of 30% and are less concerned about the components. Great. Thanks, guys. The next question comes from Matt McGinley with Needham.
Well, we did thanks for the question, Matt. So we did see some improvement in margin in the quarter.
Thanks in part to improve scale and efficiency.
B G.
But you know at San Jose, we continued to manage costs and.
Focus on our goal of adjusted EBITDA.
30%.
Less concerned about about the components there.
Great. Thanks, guys.
Thanks, Matt.
The next question comes from Matt Mcginley with Needham. Please go ahead.
Matthew Robert McGinley: Please go ahead. Thanks. Maybe I'll have a follow-up on that one. I mean, there was something unique about the fourth quarter, where you were able to generate the highest gross margin in two years. I mean, was there something with regard to production efficiency or less pricing pressure or some sort of shift in geographic mix that enabled you to get that margin rate up so much? You did have an increase in revenue, and it did increase sequentially year over year, but the dollar amount there is incongruous with the amount of margin increase you got there.
Yeah. Thanks, So maybe I'll follow up on that one.
Something unique about the fourth quarter, where you were able to generate the highest gross margin in two years.
Was there something with regard to production efficiency or less pricing pressure or some sort of shift in geographic mix. It enabled you to get that margin rate up so much.
And you did have an increase in revenue and it did increase sequentially.
And year over year, but the dollar amount there just it it's it's not it's in congruent with the amount of a margin increase you got there and you did note that you could see some pressure going forward, but you know I guess, what I'm trying to get at there is like was there something different this quarter in terms of gross margin.
Anthony Georgiadis: And you did note that you could see some pressure going forward, but I guess what I'm trying to get at there is, was there something different this quarter in terms of gross margin? I'm not sure if that's unique or if that's just good management of the business that you can sustain that level on a go-forward basis. Yeah, Matt, Anthony here. I'll take that.
I'm not sure if that's unique or if thats just good good good good management of the business that you can you can sustain that level on a go forward basis.
Yeah, Matt Anthony here I'll take that so well, we definitely had strong performance on the CPG side of the business better operational utilization.
Anthony Georgiadis: So look, we definitely had strong performance on the CPG side of the business, and better operational utilization. We also, you know, took a hard look at discounting at the retail store level and maybe made some adjustments there that kind of flowed to the bottom line. But, you know, I mean, look, at the end of the day, it's, you know, the other contributing factor was that some of the states that are big contributors to the overall business had a strong quarter. So that, you know, that was also a contributing factor.
You know we also took a hard look at discounting at the retail store level.
<unk> made some adjustments there that kind of flowed to the bottom line.
But you know I mean like at the end of the day. It's you know the other the other contributing factor was it <unk>.
Some of the states that are big contributors of the overall business you know had a strong quarter. So that you know that that was also a contributing factor.
Eric Des Lauriers: But again, kind of looking back as we look ahead, you know, our North Star is really kind of 30 percent. It was a strong quarter. We took some learnings from it. I'm already on to Q1, and we're looking ahead. Thank you. The next question comes from Eric DeLaurier, with Craig Hallam. Please go ahead.
But again kind of looking back as we look ahead.
Starz really kind of 30% it was a strong quarter.
We took some learnings from it already on the Q1 and we're looking ahead at this point.
Yeah.
Okay. Thank you.
The next question comes from Eric to Laurie with Craig Hallum. Please go ahead.
Anthony Georgiadis: Thanks for taking my questions and congrats again on yet another strong quarter here. A bit of a qualitative question for me, so given this outlook for, you know, continued elevated competition, obviously your operational efficiency kind of gives you more room to absorb price compression, but wondering if you can comment on your assessment of your product quality, just how that's trended, you know, whether that's sort of over the past year or in individual situations, and then maybe just sort of comment on, you know, how you're seeing maybe market average I'm just wondering if you can kind of comment on your overall quality and how it's performing in the market. Thanks. Yeah, Eric, this is Anthony here.
Hi, Thanks for taking my questions and congrats again on yet another strong quarter here a bit of a.
<unk> question for me.
So given this outlook for continued elevated competition, obviously your operational efficiency kind of gives you more room to absorb price compression, but wondering if you can comment.
On your assessment of your product quality I'm, just how that's trended.
That's sort of over the past year or in an individual's situations and then maybe just sort of comment on how youre seeing maybe market average quality sort of trending over the past year, you know, obviously quality, having a big.
The impact on pricing here I'm, just wondering if you can kind of comment on your overall quality and how that's performing in the market.
Yeah. Eric This is Anthony here Great question. So yeah look this is something we take a lot of pride in.
Anthony Georgiadis: Great question. So, you know, look, this is something we take a lot of pride in. We're very focused on product quality. And, you know, starting at the beginning of the year, we really leaned into this effort, and we saw a lot of nice progression over the course of the year.
Very focused on product quality and starting at the beginning of the year really waned in this effort and we saw a lot of nice.
Progression over the course of the year you were in my prepared remarks prepared remarks, I talked about the market share gains that we saw in Illinois, Pennsylvania, Maryland, and we think the Prada.
Anthony Georgiadis: You know, in my prepared remarks, I talked about the market share gains that we saw in Illinois, Pennsylvania, and Maryland. And we think, you know, product quality was a big contributor to that. In addition, you know, we talked about the Cannabis Cup wins, where we're up against every other operator out there, and a very strong performance. So, you know, really kudos to the team for just continuing to do really strong work out there. The flower quality is incredibly strong.
Product quality was a big contributor of that.
In addition, you know we talk about the cannabis Cup wins.
We're up against every other operator out there and you know very strong performance, so really kudos to the team for just continuing to really strong work out there.
Our quality is incredibly strong we're leading with the brands.
Pablo Zuanich: We're leading with the brands, you know, obviously with Driven being kind of the lead horse there. But, you know, product quality is front and center for us. Thank you. The next question comes from Pablo Zuanich with Zuanich & Associates. Please go ahead. Good afternoon, everyone.
Obviously with rather than being kind of the lead horse there, but you.
Product quality is front and center of course, we will continue to be.
Okay.
Thank you.
The next question comes from Pablo Atlantic with Atlantic and Associates. Please go ahead.
Good afternoon, everyone been I guess, the one question regarding the rescheduling.
Mathew Faulkner: Ben, I guess one question regarding rescheduling. Do you have an estimate of the cash savings for Green Thumb, if you were to have rescheduling, and what would you do with that cash? And related to that, we've seen other companies take a more, I guess, proactive stance against 280E, and they have either stopped paying their taxes or even started providing for a normal corporate tax rate, as opposed to being a cannabis company. So is that something you're also looking at in terms of how you deal with 280E?
Do you have an estimate of the cash savings for Green thumb. If you were to have rescheduling on what would you do with cash.
And related to that we've seen other companies take them or I guess proactive stance against way D E and they have either stopped paying their taxes or.
Or even started providing for the normal corporate tax rate I was supposed to be economies company. So is that something you are also looking at in terms of.
How are you Peter without Tweedy person. Thank you.
Mathew Faulkner: Hey Pablo, this is Matt. I can take that question. So with rescheduling, we can. Thank you, savings there from a tax perspective. It should cut our tax burn in about half or so. We look at what we would do with that cash. You know, we have options on what we could do in there. And when we get to that point, we'd evaluate all those, but you're looking at things such as stock buyback, debt paydown, M&A, and cap back. So there are no definitive plans.
Yeah, Hey, Paul This is Matt I can I can take that question, so with with rescheduling we.
We think the savings there from a tax perspective, it shouldn't cut our tax.
Burned in and about half or so.
When we look at what we would do with that cash.
We have we have options.
What we could we could do it there so.
And when we get to that point, we would evaluate all of those but youre looking at things such as the stock buyback debt pay down M&A and Capex. So no definitive plans, we're waiting to see what happens there before we can count on any any real tax savings as far as others in the industry. We are.
Anthony Georgiadis: We're waiting to see what happens there before we can count on any real tax savings. As far as others in the industry go, we are definitely aware and familiar with their position. But at this time, we will continue to follow and apply the tax code as we have in the past. Thank you. And can I ask a follow-up just quickly regarding New York? I know you opened your Rochester store. Can you comment on how that's going, and also when do you start planning to supply the wholesale market? Hey Pablo, Anthony here.
Definitely aware and familiar with their position, but at this time, we continue to follow and applies the tax code as we have in the past.
Thank you and can I ask a follow up just quickly. If you are in New York I know you opened your approaches Rochester store. If you can comment on how that's going and also when do you do you start learning to supply the wholesale market in New York State.
Hi, Pablo Anthony here.
Anthony Georgiadis: Yeah, look, we opened Rochester just recently. Things are going well. We also entered the wholesale market in January, and that's really where we're leading at this point. We have indoor capacity that we've built out, and we're really leading that through rhythm. And so far, we've got a warm reception from the market. We're adding doors kind of by the week, and so far, so good.
Yeah look we opened Rochester, just recently things are going well.
We also entered the wholesale market.
And in January and that you know, that's really where we're leaning in at this point, we have indoor capacity that we built out and we really leaving that through through rhythm and we've got so far it's got warm reception from the market.
We're adding doors kind of by the week and so far so good. So I think we have a lot more visibility probably on our next call, but we're cautiously optimistic we've got a pretty good start in New York and hope we can build from here.
Gerald John Pascarelli: So I think we have a lot more visibility probably on our next call, but we're cautiously optimistic. We've got a pretty good start in New York, and I hope we can build from here. The next question comes from Gerald Pascarelli with Wedbush Securities. Please go ahead. Hi, this is Antoine. I'm on behalf of Gerald.
Thank you.
The next question comes from Gerald Pascarelli with Wedbush Securities. Please go ahead.
Hi, This is antoine on for Gerald Thanks for taking the question.
Benjamin Kovler: Thanks for taking the question. Can you provide an outlook on your expectations for the cannabis category dynamics in general headed into 2024? Do you expect performance to improve relative to 2023, considering most major operators meaningfully cut back on CapEx, which in theory should improve the supply, demand, and balance? And lastly, there looks to be some top-down tailwinds on the horizon just related to the lower-income consumer, including the cycling removal of SNAP benefits and marching the potential for lower interest rates that result in higher disposable income. So any color on category health and your broad outlook would be great. Sure, I can take that. Hey, it's Ben.
I'm just can you maybe provide an outlook on your expectations for the cannabis category dynamics in general heading into 2024 do you expect performance to improve relative to 2023, considering most major opera, whose meaningfully cut back on Capex, which in theory should improve the supply demand imbalance and lastly, just it looks to be some talk down until wins on the horizon.
It's the.
The lower income consumer including the removals.
Removal of snap benefits in March and the potential for lower interest rates. The result in higher disposable incomes. So any color on category health and your broad outlook would be great. Thank you.
Sure I can take that hey, it's Ben.
Benjamin Kovler: The question was consumer health... I think that's a good first question on what's going to happen in the industry and overall supply demand. We've certainly watched the CapEx numbers come cratering down to freakishly low numbers. We've continued to spend. 2023 was a big year for us, and we have a real number going into 2024. However, EBITDA is very strong.
Let's see the the question was the consumer health.
The second bucket of Capex and supply demand Oh, Yeah, I think that's a good first question on what's going to happen in industry and overall supply demand, we certainly watch the capex numbers come cratering down to previously low numbers.
We've continued to spend twice when I thought he was a big year for us and we have a real number going into 2024. However, the EBITDA is very strong. So we can continue to play offense, we're continuing to spend its hard for me to comment on others, but I'd be curious what's going on how that growth gets there how that balance sheet rectifies and other kinds of core questions in terms of the state of the consumer.
Benjamin Kovler: So, we can continue to play offense. We're continuing to spend. It's hard for me to comment on others, but I'd be curious what's going on, how that growth gets there, how that balance sheet gets repaired, and other kinds of core questions. In terms of the state of the consumer, again, a good question.
Again. Good question you know what we see in terms of some of those pressures you mentioned, which are real which are macro which make it. The more you know staples I guess would be the term.
Benjamin Kovler: You know, what we see in terms of some of those pressures you mentioned, which are real, which are macro, which may hit the more, you know, staples, I guess, would be the term. We're seeing a lot of growth, new markets opening, and some of the, like, step function up towards war with those sorts of things. But those are very real.
See a lot of growth new markets open and some of them like the step function up for dwarf those sorts of things, but those are very real.
Aaron Thomas Grey: But I would say, broadly, the cannabis consumer remains resilient. People still like the products, we see them behave like other products in this space, you know, and they're not giving it up. Particularly for us, it's an investment in the brands. I think you're seeing it with Rhythm. You're at the very early stage, we've talked about this on these calls over the years, but watch out for what happens with Rhythm and Incredibles, Dog Walkers, and Bebo over the next decade. We're pretty optimistic about that. Thank you. The next question comes from Aaron Grey with Alliance Global Partners. Please go ahead.
I'd say broadly the canvas consumer remains resilient.
People still like the product we see it behaved like other products in this space, you know and they're not they're not giving it up particularly for us as an investment in the brands I think you're seeing it with rhythm here at the very early stage. We've talked about this on these calls over the years, but you know watch out for what happens with rhythm and Incredibles dog walkers and people over the next decade.
We're pretty optimistic about that.
Thank you.
Thank you.
The next question comes from Aaron Grey with Alliance Global Partners. Please go ahead.
Anthony Georgiadis: Hi, good evening, and thank you for the question. I just wanted to talk a little bit about, you know, CPG and wholesale opportunities and third-party stores, particularly states such as, you know, Illinois, New Jersey, and New York, where we have new stores opening; any color you could provide on strategy in terms of getting on the shelf, how that might differ in new stores ahead of them opening versus, you know, trying to get on the shelf of already open stores; you might not be there. And then any color you might be able to provide in terms of, you know, how you're looking to approach that in these markets would be appreciated. Thank you. Sure, and I'll take that one.
Hi, Good evening and thank you for the question I just wanted to talk a little bit about you know CPG and wholesale opportunities and third party stores, particularly maybe in states such as you know, Illinois, New Jersey, and New York, We have new stores opening just any color you can provide on strategy in terms of getting on shelf and how that might differ and new stores.
Opening versus you know trying to get on shelf.
Any open storms you might not be there and then any color you might be able to provide in terms of how youre looking to approach that in these markets would be appreciated. Thank you.
Sure and I'll take that one.
Anthony Georgiadis: You know, look, we're very focused on building out our CPG presence within third-party doors, right? We're leaning into our brands. You know, in terms of market-to-market kind of strategies, the reality is all these are different games given the different components of regulation, product sets available, supply, demand, and whatnot. So it's not a kind of – it's not a one-size-fits-all approach.
Yeah look we're very focused on building out our <unk>.
Our CPG presence.
Within third party doors right relating into our brands.
You know in terms of market to market kind of strategies. The reality is all these are different games given the different components of regulation products, that's available supply demand and whatnot.
It's not a kind of it's not one size fits all approach.
Anthony Georgiadis: But, you know, look, we just talked about product quality. That's one area that we're really leaning into because, at the end of the day, we think we can win there. And so, you know, it's really just establishing the ground game, building the sales team, and having products that are demanded by consumers.
But you know what we just talked about product quality. That's one area that we're really leaning in because at the end of the day. We think we can win there and so you know it's really just establishing the ground game building the sales team and you know having products that are demanded by consumers and if you can do that you can maintain product quality. The rest largely takes care of its.
Anthony Georgiadis: And if you can do that and you can maintain product quality, the rest largely takes care of itself. So that's what we're focused on. Product quality is kind of the tip of the spear there.
So that's what we're focused on product quality is kind of a tip of the spear there and then all the other kind of operational kind of you know execution type things associated with servicing third party accounts in terms of delivery fulfillment and everything else.
Sonny Randhawa: And then all the other kinds of operational things associated with servicing third-party accounts in terms of delivery, fulfillment, and everything else, we're just incredibly focused on building that part of the business and doing it in the right way. Okay, great. The next question comes from Sonny Randhawa with Seaport. Please go ahead.
We're just incredibly focused on building that part of the business and doing it in the right way.
Yeah.
Okay, great. Thanks for the color.
The next question comes from Honey Randhawa with Seaport. Please go ahead.
Anthony Georgiadis: Great, thanks for the question. I just wanted to talk about the Florida investments you guys have made. How many locations, I guess on the retail side, do you think that that investment could support once it's fully ramped up? Just trying to think about 2024 and modeling out, you know, additional locations in Florida. So kind of wanted to see what the constraints there were. Yeah, sure, Sonny. This is Anthony again.
Great. Thanks for the question.
Wanted to talk.
Talk about the Florida.
Florida investments you guys had made.
How many locations I guess on the retail side do you think that that investment could support once it's fully ramped just trying to think about 2020 for modeling out.
Additional locations in Florida, So kind of wanted to see what what the constraints there were.
Yeah sure. So I'll provide this anthony I'll provide some context on that so.
Anthony Georgiadis: I'll provide some context on that. So, you know, as everyone is probably aware, given the verticality in Florida, you really have to build out wholesale first before retail. So we did that with our first real phase in Ocala. You know, we have 14 stores open today. We've got another one opening in the next few days.
As everyone is probably aware of you know given the verdict County in Florida, and you really have to build out wholesale first before retails.
So we did that with our first real phase in Ocala.
We have 14 stores open.
Today, we've got another one opening in the next in the next few days and then we've got several more that we anticipate opening throughout the rest of the 24, what we are doing is obviously watching the ballot initiative.
Anthony Georgiadis: And then we've got, you know, several more that we anticipate opening throughout the rest of 24. What we are doing is obviously watching the ballot initiative in Florida pretty closely because, you know, if things head in a positive direction, we're probably going to have to reinvest in the wholesale capacity and then revisit kind of our retail plan. So that's really where we are at the moment. You know, we'll have a lot more kind of visibility on our next call, my guess. But, you know, in Florida, it's build a wholesale business first and then the retail second.
In Florida pretty closely because you know if things things head in a positive direction.
Gonna have to reinvest into the wholesale capacity and then revisit kind of our retail plants. So that's really where we are at the moment you know well.
I have a lot more kind of visibility on our next call.
Is my guess, but you know in Florida is build a wholesale person in the retail sector. That's really that's really how we did it.
Scott Thomas Fortune: That's really how we did it. The next question comes from Scott Fortune with Roth Capital. Please go ahead. Yeah, good afternoon.
Yeah.
The next question comes from Scott Fortune with Roth Capital. Please go ahead.
Anthony Georgiadis: Thanks for the question. I just want to dig in a little, unpack the fourth quarter a little bit. You guys anticipate a low single-digit decline, and you called out better states kind of contributing a little more strength there, but just kind of understand was it was less discounting price compression there and kind of calling out for the same thing in the first quarter, but are you starting to see some pricing stabilization here in your kind of key states to kind of call out some of the better pricing opportunities that you see in some of your key states kind of going forward? Hey, Scott I'll take that as well.
Yes, good afternoon, and thanks for the question just wanted to dig in a little unpack the fourth quarter, a little bit you guys anticipate a low single digit decline and you called out stays kind of contributing a little more strength there, but just kind of understand was it was a less discounting price compression there.
And kind of calling out for the same thing in the first quarter, but are you starting to see in some states some pricing stabilization here in your kind of key states is kind of call out some of the better pricing opportunities that you see in some of your key states kind of going forward.
Hey, Scott I didn't get your I'll, just I'll take that as well.
Anthony Georgiadis: So let's zoom out, obviously, a very strong quarter from a profitability standpoint. We talked about operating leverage at wholesale. We talked about kind of, you know, really, really looking at the retail gross margin line. You know, those were the two biggest drivers.
So, let's do not obviously very strong quarter from a profitability standpoint for the business.
We talked about the operating leverage at wholesale we talked about kind of you know really.
Really looking at the retail gross margin line.
You know those were the two biggest drivers now look we had a we had a very strong December particularly late December and you know given the overall operating leverage of the business.
Anthony Georgiadis: Now, look, we had a very strong December, particularly late December. And, you know, given the overall operating leverage of the business, you know, with us, the way we manage the SG&A line, every incremental dollar of gross profit really just drops to the bottom line. So, in terms of pricing, we've started to see a slowdown in a few markets, but it's too early to say that we're out of the woods yet. The reality is, however, we continue to see price erosion in most of the markets that we operate in. We saw a slight slowdown in the fourth quarter, but it's too early to say if that slowdown is systemic and not going to continue. But it really, again, just comes back to running the business and trying to optimize wholesale retail by state and just running a good, clean business while keeping fixed costs low. I appreciate the color, thanks.
With us the way, we manage kind of the SG&A line every incremental dollar of gross profit really just drops the bottom line. So.
You know in terms of pricing.
We starting to see a slowdown in a few markets, but it's just too early it's too early to say that you know we're proud of what's yet the reality is we continue to see price erosion in most of the markets that we operate in so.
You know we saw a slight slowdown in the fourth quarter, but you know.
Too early to say if that slowdown is a.
Systemic and and you know I'm not going to continue.
But it's really again it just comes back to running the business and trying to optimize wholesale retail by state and and just running at a good clean business with you know keeping fixed costs left.
I appreciate the color. Thanks.
Ty Collin: The next question comes from Ty Collin with 8 Capital. Please go ahead. Hey guys, thanks for the question. As you're thinking about your capital allocation options for the year ahead, especially with the pretty significant step down in CapEx, how are you guys weighing share buybacks against debt repurchases at this moment? And do you think that share repurchases are still a good use of capital, considering the repricing we've seen in your stock over the last few months and compared to where you guys were buying in the second half of last year? Sure, I can take that.
The next question comes from Todd Cohen with <unk> capital. Please go ahead.
Hey, guys. Thanks for the question as you're thinking about your capital allocation options for the year ahead, especially with the pretty significant step down in Capex. How are you guys weighing share buybacks against debt repurchases at this moment and do you think that share repurchases are still are good.
Use of capital considering the repricing that we've seen in your stock over the last few months and compared to where you guys were buying in the second half of last year.
Sure I can take that it's been a great question, Joe what I would tell you. It's a core is.
Benjamin Kovler: It's been a great question. You know, what I would say at the core is... We remain opportunistic. Things are set up pretty well, given where the balance sheet is. However, debt is due in April of 2025, so we want to be sure we cover that.
We remain opportunistic things are set up pretty well given where the balance sheet is however that is due in April 2025. So we want to be sure. We cover that I think in the last call and maybe two or three calls we've talked about.
Benjamin Kovler: I think in the last call, and maybe two or three calls, we've talked about... Regression of CapEx I, Hand of the Debt II, and think about the share repurchases and how to return capital or what else we could do. Obviously, there's always an overlay of M&A, and we've given thoughts on that before. So that really remains what it is.
Freshen of Capex, one handle the debt two and thinking about the share repurchases and how to return capital or what else. We can do obviously, there's always an overlay of M&A.
We've given thoughts on that before.
So that really remains what it is we want to make sure we handle all of those things all those things we feel good about the Capex, obviously, some regulatory changes could come that make 'twenty five 'twenty six 'twenty seven and beyond look a little different we obviously plan pretty far in advance we have shown a tendency to do that we're optimistic about the stock you know I don't think that's a secret. It's the first time in a while we've been able to.
Benjamin Kovler: We want to be sure we handle all those things. We feel good about the CapEx. Obviously, some regulatory changes could come that make 25, 26, 27 and beyond look a little different.
Benjamin Kovler: We obviously plan pretty far in advance. We've shown a tendency to do that. We're optimistic about the stock. I don't think that's a secret.
Benjamin Kovler: It's the first time in a while we've been able to talk about that in the last few quarters now that the board has authorized the buyback. We want to be opportunistic on the price. It's very volatile. We'll see what happens, but we want to be able to be in there and see what happens. You know, you never know, but obviously, the price you pay matters.
About that over the last few quarters not the board has authorized buyback.
And we want to be opportunistic on the price, it's very volatile so.
So we'll see what happens, but we want to be able to be in there and let's see what happens.
You never know, but obviously the price we pay matters.
Mike Regan: The next question comes from Mike Regan with Excelsior Equities. Please go ahead. Hey guys, great quarter. And thanks for taking the question. In terms of sort of more recently, the first thing you've been mentioning M&A as a potential use of capital, can you please give us a little more color on sort of what types of things you'd be looking to acquirers in sort of new markets, fill-in markets, things like that. Thanks. Sure, hey, it's Ben. Didn't mean to imply it's any different than the answer last time.
The next question comes from Mike Reagan with Excelsior Equities. Please go ahead.
Hey, guys, great quarter, and thanks for taking the question in terms of the sort of.
Originally the first time, you've been mentioning our M&A as a potential use of capital could you. Please give us a little more color on sort of what types of things.
You'd be looking to acquire or is that sort of new market still end markets things like that thanks.
Sure Hey, it's been two didn't mean to imply that's any different than the b.
The last time.
Benjamin Kovler: Uh, you know, we answer the phone, we talk to a lot of people. Things are always on the table. We're down to be creative and think through stuff, but... You know, given where multiples are, given the cost of capital, given where balance sheets are, given the, you know, non-believability of most people's quoted EBITDA, we tend to sit where we are and sort of take the calls. We're always interested in looking and seeing what's out there and trying to be a creator for shareholders. You never know what's gonna happen in the future, so we wanna be up to speed. But right now, we're pretty focused on.
We answer the phone we talked a lot of people things are always on the table, we're down to be creative and think through stuff, but.
You know given where multiples are given the cost of capital will get more balance sheets are given the you know nonbeliever ability of most peoples quoted EBITDA.
We tend to sit where we are and sort of take the calls we're always interested in looking at seeing what's out there and trying to be accretive for shareholders. You never know what's going to happen in the future. So we want to we want to be up to speed, but right now we're pretty focused inward.
Anthony Georgiadis: All right, great. And a quick follow-up. Is there sort of any update on how the regulators are looking at the co-located Rise Express stores with the Circle K agreement, which could allow you to really expand in Florida pretty rapidly if they approve that? Sure, Mike, Anthony here.
Great. That's it good follow up.
Is there sort of any update on how the regulators are looking at the co located rise express stores with the circle K agreement.
Which could allow you to really extend Florida pretty rapidly if they approve that.
Sure Mike Anthony here. Unfortunately, no no real tangible update there we continue to work with state regulators to.
Anthony Georgiadis: Unfortunately, there is no real tangible update there. You know, we continue to work with state regulators to get the requisite permits. And look, we continue to believe that, you know, at some point in time, we're going to open up a rod dispensary adjacent to a Circle K. Great, thanks. The next question comes from Andrew Semple with Echelon Capital Markets. Please go ahead. Hi there, congrats on the results. Just want to return to the question of capital allocation. I think it would be helpful maybe if you could provide some sort of a sense of what you think an appropriate minimum cash balance would be for Green Thumb or maybe even a minimum or maximum leverage ratio that you'd be comfortable bringing the business to, just to give us a longer-term sense of what sort of spare capital you would think is available for capital investment, share buybacks, or M&A Any thoughts on that? Sure, I can take it. You know, it's just more of an art than a science.
You get the requisite permits.
We continue to believe that you know at some point in time, we're going to open up.
Dispensary adjacent to a circle K.
Great. Thanks.
Thanks, Mike.
The next question comes from Andrew Semple with excellent capital markets. Please go ahead.
Hi, there congrats on the results.
Just wanted to turn to the question of capital allocation I think it'd be helpful. Maybe if you could provide some sort of a sense of what you think an appropriate minimum cash balance would be for green thumb or maybe even like a minimum or maximum leverage ratio that you'd be comfortable bringing the business to just to give us a longer term sense of what sort of spirit.
If at all.
You would think is available for capital investment and share buybacks or M&A any thoughts on that.
Sure I can take it out you know this is more of an art than a science, we read buffett's letter over the weekend and we like their cash balance, we certainly not that many decimal places yet, but we like to sleep well, we'd like to have a lot of cash and the debt.
Benjamin Kovler: We read Buffett's letter over the weekend, and we like their cash balance. We're certainly not that many decimal places yet, but we like to sleep well, and we like to have a lot of cash. As the debt comes due, we want to be sure we're in a position to figure it out, and the and despite paying taxes, which I never thought would have to be something we'd actually have to call out. But paying taxes, paying tuity, and paying the interest produces additional cash for us to figure out what to do.
Debt comes due we want to be sure we're in a position to figure it out and.
And protect the balance sheet over we don't know what happens for the long term for shareholders, but we're we feel really good about where we are.
So I can't really give you the exact number but we like where things are we have some room to play offense. So we continue to produce cash as a business. Despite 280 <unk>.
Despite paying taxes, which I never thought it would have to be something we'd actually have to call out, but paying taxes paying to the paying the interest produces additional cash for us to figure out what to do and we're measuring those returns inside the business M&A debt equity and what we can do to best position the business for medium and long term growth, but not.
Benjamin Kovler: And we're measuring those returns inside the business, M&A, debt, equity, and what we can do to best position the business for, you know, medium and long-term growth, and not, you know, next quarter or next year even, but trying to really think outside the box and think long-term. So that puts us in a pretty good position. Thank you. The next question comes from Frederick Obeng with APB Capital. Please go ahead.
Quarter of next year, even if we're trying to really think outside the box I think long term.
So that puts us in a pretty good position.
Thank you.
The next question comes from Patrick Obeying with a P. P capital. Please go ahead.
Frederick Obeng: Hi, thanks for taking my question. Just coming back to the margin side, I'm just curious, now as you come off the large capex cycle this year, how far along are you in utilizing your capacity and achieving efficiencies in some of the facilities you have invested in this year? And do you see any sort of low-hanging fruit there to continue to optimize and improve your margins? Frederick, Anthony here.
Hi, Thanks for taking my question just coming back to the margin side I'm just curious to know as you come off the large capex cycle. This year, how far along are you in your life in your capacity and achieving efficiencies in some of the facilities you have invested in this year end and do you see any sort of a low hanging.
Food there to continue to optimize and put their margins. Thank you.
[noise] Fredrik Anthony here I can provide some context on that so.
Anthony Georgiadis: I can provide some context on that. So, you know, that question really, to answer that correctly, you have to look at it on a state-by-state basis. So, there are some states where we have excess capacity. I'll tell you that, you know, those are states where we're also having adult use discussions today. And so, you know, when we look ahead, you know, as Ben mentioned, a lot of the CapEx building that we did over the last two years was really in advance of what we think is to come. So, in some ways, we're operating those facilities at a less than ideal kind of perfect scale, but we've got a lot of optionality that we can kind of grow into. So, you know, we don't talk specifics about kind of capacity utilization and things like that.
My question really to answer that correctly, you have to look at it on a state by state basis. So.
There are some states, where we have excess capacity I will tell you that you know those are states, where we're also having adult use discussions today and so you know when we look ahead you know as I mentioned, we you know a lot of the Capex building that we did.
Over the last two years really in advance of what we think is to come so and so.
Some ways, we're operating those those facilities that are less than ideal kind of perfect scale, but we've got a lot of optionality that we can kind of grow into so.
We don't talk specifics on kind of capacity utilization and things like that but.
Anthony Georgiadis: But... We are well positioned to take advantage of some of the adult use discussions that are taking place today such that, you know, in a number of the markets, we already have the capacity built. So, feel very comfortable with where we sit there and our ability to continue to kind of grow into the facilities that we've built out. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Ben Kovler for any closing remarks. All right, thanks everybody for joining us. Look forward to our next update in the spring. Thanks, everybody. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect, www.greenthumb.com The Ulita Foundation 2016, BF-WATCH TV 2021
We are well positioned to take advantage of some of the adult use discussions that are taking place today, such that you know, we effectively and in a in a number of the markets. We already have the capacity built so.
Feel very comfortable with where we sit there and our ability to continue to kind of grow into the.
The facilities that we built out.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Ben Kofler for any closing remarks.
Alright, thanks, everybody for joining us look forward to our next update in the spring.
Thanks, everybody.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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