Q1 2024 Green Thumb Industries Inc Earnings Call
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Good.
Operator: to the Green Thumb Industries first quarter 2024 earnings conference call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a competent specialist by pressing the star key followed by zero. In today's call management, we'll provide prepared remarks, and then we'll open the call to your questions. Last question, analysts may press the star and then one using your touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. [inaudible] At this time, I'd like to turn the floor over to Shannon Weaver, Communications for Green Thumb.
Did the Green thumb industries first quarter 2024 earnings conference call and webcast.
All participants will be in a listen only mode.
Shannon Weaver: If you need assistance, they know something specialists by pressing the star key followed by zero.
Shannon Weaver: On today's call management will provide prepared provide prepared remarks, and then we will open the call for your questions.
Shannon Weaver: Last question analysts May press Star and then one touch.
Shannon Weaver: Touchtone telephone.
Shannon Weaver: You are using a speakerphone please pick up the handset before pressing the keys to ensure the best sound quality.
Shannon Weaver: Withdraw your question you May press Star two.
Shannon Weaver: Please also note today's event is being recorded.
Operator: Yeah.
Operator: At this time I'd like to turn the floor over to Shannon Weaver communications for Green thumb.
Shannon Weaver: Please go ahead ma'am.
Shannon Weaver: Thank you Jamie.
Shannon Weaver: Good afternoon, and welcome to Green Thumb's first quarter 2024 earnings. I'm here today with founder and CEO Ben Kovler, president Anthony Georgiadis, and Chief Financial Officer Matt Faulkner.
Shannon Weaver: Good afternoon and welcome to.
Shannon Weaver: First quarter 2020 for earnings.
Speaker Change: I'm here today, with founder and CEO of Bank one.
Shannon Weaver: I'll ask Anthony to work at it and Chief Financial Officer, Matt.
Shannon Weaver: Today's discussions 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 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-K. This report, along with today's earnings release, can be found in the Investors section of our website.
Shannon Weaver: These discussions are responding to the question Matt.
Shannon Weaver: These statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially.
Speaker Change: Yeah.
Shannon Weaver: These risks and uncertainties are detailed in the earnings.
Shannon Weaver: If you today with our reports filed with even I guess <unk> Securities and Exchange Commission.
Shannon Weaver: And Canadian Securities regulators.
Shannon Weaver: Most recent annual report filed on form.
Shannon Weaver: Okay.
Shannon Weaver: That's our board along with today and can be found under the investors section of our website.
Shannon Weaver: 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 Plus filing. Please note that all financial information is provided in U.S. dollars unless otherwise indicated. Thanks, everyone. And now, here's Beth.
Shannon Weaver: Green thumb it goes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise after the date.
Beth: Throughout the discussion green thumb will refer to non-GAAP financial measures, including EBITDA and adjusted EBITDA.
Beth: Reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in our earnings press release and D. C. In theater box. Finally, please note that all financial information is provided in U S dollars otherwise.
Beth: Thanks, everyone and now here's Pat.
Benjamin Kovler: Thank you, Shannon. Good afternoon, everyone, and thank you for joining our first quarter 2024 conference call. We will keep our remarks short this quarter, given there have not been a lot of substantial updates since our 2023 year-end call. I am pleased to report that our team once again delivered an outstanding quarter, particularly on the catch flow from operations line. First quarter revenue increased 11% over the prior year to $276 million, with $31 million, or $0.13 per basic and diluted share of GAP net income.
Beth: Thank you Shannon and good afternoon, everyone and thank you for joining our first quarter 2024 conference call.
Benjamin Kovler: We will keep our remarks short this quarter given there has not been a lot of substantial updates since our 2023 yearend call.
Benjamin Kovler: I am pleased to report that our team once again delivered an outstanding quarter, particularly on the cash flow from operations.
Benjamin Kovler: First quarter revenue increased 11% over the prior year to 276 million with $31 million or 13 cents per basic and diluted share of GAAP net income.
Benjamin Kovler: Cash flow from operations was over $80 million, and adjusted EBITDA was over $90 million. Additionally, during the first quarter, we repurchased more than 1 million shares, spending over $13 million, bringing the aggregate spend under the share repurchase program to almost $55 million. We continue to believe in the value-creating nature of share buybacks done at attractive prices. Remember, as the share count goes down, everyone's interest in the business goes up. From an industry perspective, there is still pricing pressure in some markets as well as pockets of inflation.
Benjamin Kovler: Cash flow from operations with over $80 million and adjusted EBITDA was over 90%.
Benjamin Kovler: Additionally, during the first quarter.
Benjamin Kovler: Purchase more than 1 billion shares spending over $13 million, bringing the aggregate spend under the share repurchase program to almost $55 million.
Benjamin Kovler: We continue to believe in the value, creating nature of share buybacks done at attractive prices.
Benjamin Kovler: As the share count goes down everyone's interest in the business goes up.
Benjamin Kovler: From an industry perspective, there is still pricing pressure in some markets as well as pockets of inflation, even so according to the most recent commerce department data consumers continue to show strength.
Benjamin Kovler: Even so, according to the most recent Commerce Department data, consumers continue to show strength, and we believe that for many Americans, well-being through cannabis is becoming more essential than ever. We see rhythm and dog walkers playing a role in America's choice for well-being and stronger mental health.
Benjamin Kovler: And we believe that for many Americans, well being through Canada, becoming more essential than ever.
Benjamin Kovler: We see a rhythm and dog walkers, playing a role in Americas choice for wellbeing and stronger mental health.
Benjamin Kovler: So, for Green Thumb, we will keep doing what we said we would do, scale our business through retail store expansion, invest in quality products and a premium brand experience, build out and scale our production facility, and operate efficiently and with common sense.
Benjamin Kovler: For Greenfield, we will keep doing what we said we will do.
Benjamin Kovler: Scale, our business through retail store expansion.
Benjamin Kovler: And best quality products at a premium brand experiences.
Benjamin Kovler: Build out and scale our production facilities.
Benjamin Kovler: Operating efficiently and with common sense and.
Benjamin Kovler: And finally, as I said before, we love our portfolio today, we love the states we're in, and we believe we have a tremendous embedded growth opportunity both near and long term. With adult youth sales on the horizon in Ohio, we are well positioned to reap the benefits of long-term planning, just like we did in New Jersey in 2022 and Maryland last year. Over the past few years, we have invested in Ohio to prepare for eventual adult use, with five Ryan Dispensaries across the state. We expanded our cultivation and manufacturing capacity to meet new demand and have an experienced team in place to ensure a smooth rollout. We believe Ohio should be a great market. Cowabunga!
Benjamin Kovler: And finally as always carefully manage our balance sheet.
Benjamin Kovler: As I've said before we love our portfolio today.
Benjamin Kovler: Well the states, we're in and we believe we have a tremendous embedded growth opportunity, both near and long term.
Benjamin Kovler: With adult use sales on the horizon in Ohio, we are well positioned to reap the benefits of long term planning just like we did in new Jersey in 2022, and Maryland last year.
Benjamin Kovler: In the past few years, we have invested in Ohio to prepare for eventual adult use.
Benjamin Kovler: Hi, Brian dispensaries across the state.
Benjamin Kovler: We expanded our cultivation and manufacturing capacity to meet new demand and have an experienced team in place to ensure a smooth rollout.
Benjamin Kovler: We believe Ohio should be a nice March.
Benjamin Kovler: Hello.
Benjamin Kovler: We see opportunity across our portfolio, from Florida to Minnesota and lots of places in between. In 2024, we will be mining diamonds in our own backyard. As you know, thoughtful and meticulous allocation of capital resources has been our touchstone. Our CapEx spend has been differentiated over the last few years, and we should start to see some of those results. Recall, we have referred to this as, quote, internal M&A, where every day we are essentially investing in or buying our own business based on those returns. As we round out year 10 as a company, it's still day one for us.
Benjamin Kovler: We see opportunity across our portfolio in Florida to Minnesota and lots of places in between.
Benjamin Kovler: And 'twenty 'twenty, four we will be mining diamonds in our own backyard.
Benjamin Kovler: You know thoughtful and meticulous allocation of capital resources has been our touchstone.
Benjamin Kovler: Capex spend has been differentiated over the last few years and we should start to see some of those results.
Benjamin Kovler: Recall, we have referred to this as well internal M&A, where every day, we are essentially investing in or buying our own business based on those returns.
Benjamin Kovler: As we round out kind of the company. It's still day one for US there is a massive opportunity in front of us and we plan to continue growing our market share by investing in our brand identity.
Benjamin Kovler: There's a massive opportunity in front of us, and we plan to continue growing our market share by investing in our brand identity, introducing new product innovations, and deepening our relationship with customers. We now have the infrastructure, experience, and cash to optimize our portfolio of award-winning brands and find new ways to engage and inspire change. Going forward, we have a clear vision, a long runway for growth, and, hands down, the best team in the business to execute the next decade of the Green Thumb story. And now, Anthony will give you some more color on our current initiatives. Anthony?
Anthony: Introducing new product innovations and deepening our relationship with customers.
Anthony: We now have the infrastructure experience and cash to optimize our portfolio of award winning brands and find new ways to engage and excite consumers.
Anthony: Going forward, we have a clear vision, a long runway for growth and hands down the best team in the business to execute the next decade of the Greenbaum story.
Benjamin Kovler: And now Andrew will give you some more color on our current initiatives Anthony.
Anthony: Thanks Pat.
Anthony Georgiadis: Thanks, Ben. As you just heard, despite continued industry and inflationary headwinds, our consistent head-down focus on the fundamentals mindset allowed us to achieve record first-quarter results. Let's look at some of the highlights.
Anthony: As you just heard despite continued industry inflationary headwinds are consistent head down.
Anthony Georgiadis: Fundamentals mindset allowed us to achieve record first quarter results.
Anthony Georgiadis: Let's look at some of the highlights.
Anthony Georgiadis: First, we invested approximately $15 million in CapEx as we continue to expand our Florida retail footprint in our Connecticut wholesale facility. All of our new Florida locations are outfitted with our Retail Rebrand, which should continue to elevate our overall vibe and store efficiency in the sunshine. Second, we launched a number of new products across our Rhythm brand, including our Solventless Bath and Concentrate line, Rhythm Artist Series, and our Rhythm Pre-Roll line, Remix.
Anthony Georgiadis: First we invested approximately 15 million in Capex as we continue to expand our Florida retail footprint and our Connecticut wholesale sorry.
Anthony Georgiadis: All of our new Florida locations are outfitted with our retail rebrand.
Anthony Georgiadis: You should continue to elevate our overall by store efficiency in the Sunshine State.
Anthony Georgiadis: Yeah.
Anthony Georgiadis: We launched a number of new products across our rhythm brand.
Anthony Georgiadis: Our solvent was basically concentrated.
Anthony Georgiadis: Rhythm artist series and a rhythm three robot remix.
Anthony Georgiadis: For those fortunate to have rhythm products in their stadium, we encourage you to give them a try and see what all the buzz is about. Third, we continue to improve the utilization, scale, and efficiency of our wholesale platform. During the quarter, we fully operationalized our Hackettstown, New Jersey facility and continue to grow into our newly expanded wholesale facilities in New York, Virginia, and Minnesota, where we've invested significant CapEx dollars in advance of future market expansion.
Anthony Georgiadis: For those fortunate that where the product's Interstate we encourage you to give them a try and see what all the buttons about.
Anthony Georgiadis: Third we continue to improve our utilization scale and efficiency of our wholesale platform.
Anthony Georgiadis: During the quarter, we fully operationalize, our habits town, New Jersey facility and continue to grow into our newly expanded wholesale facilities in New York, Virginia, Minnesota, well, we've invested significant capex dollars and advance the future market expansion.
Anthony Georgiadis: As we look ahead to the rest of the year, our team is focused on achieving the following. First, driving operating efficiencies to combat continued pricing erosion and competitive dynamics. In wholesale, this means lining up our supply as closely as we can to estimated demand, along with taking advantage of automation in a few select areas. In retail, it's closely monitoring our discount rates, throughput, and staffing levels, and customer feedback. Second, take your learnings from previous adult use conversions to optimize your opportunity in Ohio.
Anthony Georgiadis: As we look ahead to the rest of the year. Our team is focused on achieving the following.
Anthony Georgiadis: First driving operating efficiencies to combat continued pricing erosion and competitive dynamics.
Anthony Georgiadis: In wholesale this means winding up our supply as closely as we can to estimated demand along with taking advantage of automation and a few select areas.
Anthony Georgiadis: Retail is closely monitoring our discount rates throughput and staffing levels.
Speaker Change: With me back.
Anthony Georgiadis: Second taking our learnings from previous adult use conversions.
Anthony Georgiadis: Mizer opportunity in Ohio.
Anthony Georgiadis: Kudos to the Buckeye State for going the route of Maryland versus York and quickly establishing a framework that provides consumers with access to high-quality, lab-tested products through the state's existing medical program. For the year, we expect to invest approximately $100 million in CapEx, a significant reduction from the $220 million we invested in the business last year. Our 2024 CAPEX plan focuses on 10 to 15 retail store build outs and renovations. Florida, Nevada, Minnesota, Virginia, and Ohio, and continued wholesale investment in Connecticut and potentially elsewhere.
Anthony Georgiadis: Kudos to the Buckeye state for going around in Maryland burst of York and quickly establishing a framework that provides consumers with access to high quality lab tested products the state's existing medical program.
Anthony Georgiadis: Last continuing to allocate our resources and capital to markets and activities, but optimize the current environment, along with a long term company objectives.
Anthony Georgiadis: For the year, we expect to invest approximately $100 million of Capex.
Anthony Georgiadis: Net production from $220 million of investing in the business last year.
Anthony Georgiadis: Our 2020 for Capex plan focuses on 10 to 15 retail store build outs renovations.
Anthony Georgiadis: Florida, Nevada.
Anthony Georgiadis: Virginia and Ohio.
Anthony Georgiadis: Wholesale investment and potentially elsewhere.
Anthony Georgiadis: Continued strong financial performance combined with a reduction in CapEx should provide us with substantial business optionality, including with our senior debt facility that comes due in the second quarter of 2025. In closing, I'd like to leave you with a quote from the late Charlie Monk. Those that know us well know that Warren and Charlie have influenced how we run Green Summit in many ways. We'll miss you, Charlie. With that, I'll turn the call over to Matt to review our commission.
Anthony Georgiadis: Continued strong financial performance combined with a reduction in Capex should provide us with substantial business optionality, including with our senior debt facility that comes due in the second quarter of 2025.
Matt: In closing I'd like to leave you with a quote from the late Charlie Munger.
Matt: No as well, where the morning, Charlie have influence how would run green thumb anyways.
Anthony Georgiadis: Recognize reality, even when you don't like it.
Matt: Especially when you don't like it.
Matt: Well, thank you Charlie.
Matt: With that I'll turn the call over to back to review our financial results.
Mathew Faulkner: Thanks, Anthony, and hello everyone.
Matt: Thanks Anthony.
Mathew Faulkner: One.
Mathew Faulkner: We're pleased to be starting out the year with strong results and record cash flow generation. In the first quarter, we delivered over $275 million in revenue, an 11% increase compared to the prior year period.
Matt: The place we started out the year with strong results or cash flow generation.
Matt: Our first quarter, we delivered over 275 million.
Mathew Faulkner: 5 million in revenue, an 11% increase compared to the prior year period. Revenue during the quarter benefited from 15 additional retail stores and the legalization of adult use sales in Maryland. While price compression was still a factor year-over-year, the sequential impact showed that Overall, retail revenue increased 8% versus the prior year. First quarter comparable sales increased 1.8% compared to the first quarter last year on a base of 76 stores. Consumer packaged goods gross revenue increased 19% versus the prior year. Looking forward, we expect to see second quarter sequential revenue to be flat.
Mathew Faulkner: Per cent decrease compared to the prior year period.
Mathew Faulkner: Revenue during the quarter benefited from 15 incremental retail stores and the legalization of adult use sales in Maryland.
Mathew Faulkner: Price compression was still a factor year over year, the sequential impact showed improvement.
Mathew Faulkner: Overall retail revenue decreased 8% versus the prior year period.
Mathew Faulkner: First quarter comparable sales decreased one 8% compared to the first quarter last year on a base of 76 stores.
Mathew Faulkner: Consumer packaged goods gross revenue decreased 19% versus the prior year quarter.
Mathew Faulkner: Looking forward, we expect to see second quarter sequential revenue to be flat.
Mathew Faulkner: Gross profit for the first quarter was $145 million.
Mathew Faulkner: Two 5% up $125 million or 52% of revenue for the first quarter of last year.
Mathew Faulkner: on revenue for the first quarter of last year. The increase in gross margin was primarily driven by improved CPG utilization along with retail acquisition costs. Turning to OPEX, selling general administrative expenses for the first quarter were $74 million or 27% of revenue compared to $81 million or 32% of revenue last year, where the current year benefited from a one-time $16 million non-cash credit.
Mathew Faulkner: The increase in gross margin was primarily driven by a pretty CPG utilization along with retail acquisition costs.
Mathew Faulkner: Turning to Opex.
Mathew Faulkner: Administrative expenses for the first quarter were 70, 427% of revenue compared to 80, 132% last year for the current year benefited from a one time $16 million noncash credit.
Mathew Faulkner: SG&A Excluding Depreciation, Amortization, One-Time Transaction Costs, and Stock-Based
Mathew Faulkner: SG&A, excluding depreciation amortization and onetime transaction costs and stock based comp, which we refer to as normalized operating costs approximated 64 million compared to 56 billion in the first quarter of last year.
Mathew Faulkner: Appreciation, amortization, one-time transaction costs, and stock-based comps, which we refer to as normalized operating costs, approximated $64 million compared to $56 million in the first quarter of last year. The increase year-over-year is mainly attributed to the 15 incremental retail. First quarter net income was $31 million, or $0.13 per basic and diluted share during the quarter. This comparison compares with income of $9 million, or $0.04 per basic and diluted share reported last year.
Mathew Faulkner: The increase year over year, mainly attributed to the 15 incremental retail stores.
Mathew Faulkner: First quarter net income was $31 million for 13 cents per basic and diluted share during the quarter.
Mathew Faulkner: This comparison is based on an income of $9,000,000 or $0.04 per basic and diluted share reported last year and Justin Heberder, which excludes nine.
Mathew Faulkner: This compares to net income of 9 million four cents per basic and diluted share reported last year.
Mathew Faulkner: Adjusted EBITDA, which excludes noncash stock based compensation and other non operating cost was $91 million or 32, 8% of revenue for the quarter as compared to $76 million or 37% of revenue for the first quarter last year.
Mathew Faulkner: We own the first quarter of a strong balance sheet, including cash of $224 million and working capital of $245 million, all while repurchasing almost $14 million in shares. Task Force Operations came in at their record key.
Mathew Faulkner: Well on the first part of the strong balance sheet clean cash 224 million working capital of 245 million.
Mathew Faulkner: All while repurchasing almost 14 million shares during the quarter.
Mathew Faulkner: Cash flow from operations came in at a record of 84 million compared to $75 million last year.
Mathew Faulkner: In closing, I'm very proud of our team for all of our hard work and execution in the first quarter. I'm confident in our
Speaker Change: In closing I'm very proud of our team for all their hard work and execution in the first quarter.
Mathew Faulkner: I'm confident in our ability to continue to execute our strategic plan to deliver a high quality candidates to our patients and customers all while generating strong returns for our shareholders.
Mathew Faulkner: I'm confident in our ability to continue to execute our strategic plan, deliver high-quality cannabis to our patients and customers, all while generating strong returns for our shareholders. With that, I'll open the call to your questions.
Mathew Faulkner: With that I'll open the call to your questions.
Mathew Faulkner: Later.
Operator: Ladies and gentlemen, at this time, we'll begin the question and answer session. Once again, to ask a question, please press star and then 1. To withdraw your question, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.
Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session.
Operator: Once again to ask a question. Please press star and then one.
Operator: So withdraw your question you May press Star two.
Operator: If you are using a speaker phone, we do ask that you. Please pick up the handset prior to pressing the keys to ensure the best sound quality.
Operator: Please note that in the interest of time, we do ask that you please limit yourselves to a single question. Our first question today comes from Matt Bottomley from Canaccord Genuity. Please go ahead with your question.
Operator: Please note that in the interest of time, we do ask you to please limit yourselves to a single question.
Operator: Our first question today comes from Matt Bottomley from Canaccord Genuity. Please go ahead with your question.
Matt Bottomley: Good evening, everyone. Congratulations on a strong quarter here. I guess my first question's a little bit administrative, but I'm just curious if we can get a little more context on the $16 million credit to expenses. Is this something that would have understated your margins in previous quarters and maybe overstated them this quarter? I'm just trying to get an idea of if we removed it altogether, depending on the nature of it, where even a margin would have come in for the quarter. Thanks for the question there, Matt.
Matt Bottomley: Good day and good evening, everyone. Congrats on the strong quarter here I guess my first one is a little bit of administrative but I'm. Just curious on the if we can get a little more context on the $16 million credit to expenses is this something that would have understated your margins a lot you know in previous quarters, and maybe overstate them. This quarter I'm just trying to get an idea of if we removed at all.
Matt Bottomley: Together, depending on the nature of it where EBITDA margin would've came in for the quarter.
Mathew Faulkner: And to your second question, it's already out of the adjusted EBITDA. Yes, it is.
Mathew Faulkner: Thanks for the question there, Matt. So that $16 million credit had no impact on previous periods. It was a settlement of a contingent consideration, so at this point in time, once that credit and that settlement of the contingent consideration are now clear of the balance sheet, there's no more contingent consideration there.
Matt Bottomley:
Speaker Change: Thanks for the question there, Matt so that $16 million, rather it had no impact upon previous previous periods.
Mathew Faulkner: Yeah.
Mathew Faulkner: P&L It was the settlement of a contingent consideration. So at this point in time once that got credit and that's fundamentally did your consideration is now clear all of the balance sheet, there's no more contingent consideration there.
Speaker Change: The question is is out of the adjusted EBITDA already it is okay. That's that's the more important part of it. Okay. I appreciate that and then if I could just put in one general question.
Matt Bottomley: Okay, that's the more important part of it. Okay, I appreciate that. And then if I could just put in one general question, if that's all right.
Matt Bottomley: Just on Florida, so you opened up a dispensary in the quarter, and on a year-over-year basis, it looks like you've doubled there. So not asking you to predict what might happen in November, but from a capital allocation point of view, how important is that market, considering that some of your peer groups, just in that market, particularly, are well ahead in terms of their retail rollout? Yeah, sure, Matt and Anthony here
Speaker Change: Alright, just on Florida. So you had opened up a dispensary in in the quarter and on a year over year basis. It looks like you've doubled there so not asking you to crystal ball what might happen in November but from a capital allocation point, how important is that market considering that you know some of your peer groups just in that market, particularly are well ahead in terms of the retail rollout.
Anthony Georgiadis: Yeah sure Matt you have to be here I mean look what is important for us. We've got a we've opened up two stores since January one of the first quarter. One subsequent we have a number of additional stores are set to open between now and the end of the year and we're supposed to be kind of looking at our capacity as well as the new we can.
Anthony Georgiadis: I mean, look, Florida's important for us. We've opened up two stores since January, one in the first quarter, and one subsequent. We have a number of additional stores set to open between now and the end of the year, and we're closely kind of looking at our capacity as well as the newly constructed facility in Ocala. So we've got a lot of eyes on Florida at this point, and we're cautiously optimistic come November
Anthony Georgiadis: Trucking facility in Ocala so.
Anthony Georgiadis: We've got a lot of a lot of eyes on Florida at this point and where.
Anthony Georgiadis: Cause to be optimistic come November.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Thank you.
Operator: Our next question comes from Matt McGinley from Needham. Please go ahead with your question. Thank you.
Anthony Georgiadis: Our next question comes from Matt Mcginley from Needham. Please go ahead with your question.
Matthew McGinley: Thank you. So this quarter you had your best gross margin and EBITDA margin since 21, so great work with managing that. I think last year you called out on one of the calls that the underutilization of some of your cultivation facilities was a drag on your gross margin. How much of that pressure has gone away as states like New York have opened up for you? And do you think that the 52 percent that you did this quarter is kind of a sustainable gross margin rate for the year, or was this quarter just unusually good?
Matthew McGinley: So this quarter you had your best gross margin and EBITDA margin since 'twenty, one so great work with managing that.
Matthew McGinley: Last year, you called out on one of the calls that the Underutilization of some of your cultivation facilities was it was a drag on your gross margin how much of that pressure has gone away. It's state like states like New York are turned down for you and do you think that that 52% that you did this quarter is kind of a sustainable gross margin rate for the year or was this quarter just unusually good.
Mathew Faulkner: Yeah, thanks, Theron, for the question. So... Yeah, it's fair to say there was, you know, a ramp-up period for those, uh, those investments we made. And by the time you get those going and you start to increase your revenue coming out of there, the absorption improves as you improve the utilization and output of those facilities. So some of that tailwind benefited us in the current period. But looking forward, as price compression is still there, it's hard to count on a repeat of that margin. And, effectively, we're
Speaker Change: Yeah. Thanks for the question so.
Mathew Faulkner: Yes, it's fair to say there was a ramp up period for those those investments we made and by the time you get those get those going and you start to increase your revenue come out of their absorption.
Mathew Faulkner: Improves as you're improving the utilization and output of those those facilities, so that that some of that tailwind benefit or does.
Mathew Faulkner: In the current period, but looking forward.
Mathew Faulkner: As price compression still still there it's hard to count on.
Mathew Faulkner: Repeat that margin and effectively that we're still focused on the goal of adjusted EBITDA of 30%, but less concerned about the individual components of how to get there.
Speaker Change: Great. Thank you.
Operator: Our next question comes from Eric DeLaurier from Craig Hallam Capital Group. Please go ahead with your question.
Mathew Faulkner: Our next question comes from Eric Deloria from Craig Hallum Capital Group. Please go ahead with your question.
Eric Des Lauriers: Great, thank you for taking my question and congratulations again on another very strong quarter here. So mine's just a high-level capital allocation strategy question with respect to potential rescheduling and potential 280E going away. So, you know, obviously, as you mentioned in the prepared remarks, your capex for the past year or two is significantly higher than peers, that's been trailing off. You're returning cash to shareholders via buybacks. I'm just wondering how your investment in your retail and wholesale facilities may change if we do indeed get rescheduled.
Eric Des Lauriers: Great. Thanks for taking my question. Congrats again on another very strong quarter here. So mine just a high level capital allocation strategy question with respect to potential rescheduling and central to 80 going away. So I'm you.
Eric Des Lauriers: Obviously as you mentioned in the prepared remarks, you know your capex of past year or two with significantly higher than peers. That's a been trailing off you're returning cash to shareholders via buybacks I'm. Just wondering how are your investment into your retail and wholesale facilities may change if we do indeed get rescheduling.
Eric Des Lauriers: Would you anticipate sort of stepping on the gas again if you expect others to do the same, or is it kind of as simple as, you know, you're sort of running out of capital expenditure projects to do here as you've executed them over the past couple years, and that, you know, change in taxes wouldn't really impact that capital expenditure outlook? Just wondering how you're thinking about that. Thank you.
Eric Des Lauriers: Would you anticipate sort of stepping on the gas again, it's you expect others to do the same or is it kind of as simple as you know you're sort of running out of capex.
Eric Des Lauriers: Capex projects to do here as you've as you've executed them over the past couple of years and that you know change in taxes wouldn't really impact that capex outlook, just wondering how you're thinking about that thank you.
Benjamin Kovler: Sure. Hey, it's Ben, Eric. I'll take it.
Speaker Change: Sure Eric.
Ben: Eric I'll I'll take it I mean, I wouldn't say, it's running out I would say risk reward and it's constantly measuring where should we invest and what can we gain out of it.
Benjamin Kovler: I mean, I wouldn't say it's running out. I would say risk-reward, constantly measuring where we should invest and what we can gain out of it. So we're analyzing the markets. We're understanding what the demand looks like. And we've built an unbelievable foundation of a business that produced, you know, last year over 300 million Aviva dots. So we're really comfortable with what we have there. So the risk-reward calculations are just different now than they were five years ago, so running the math of five years ago is like playing yesterday's game.
Benjamin Kovler: So we're analyzing the markets were understanding what the demand looks like and we built an unbelievable foundation of our business that is producing in the last year over 300 million of EBITDA. So we're really comfortable with what we have there. So the risk reward calculations are just different now than they were five years ago. So running the math of five years goes like yesterday's game so were.
Benjamin Kovler: So we're trying to think outside of the box. We're thinking about capital allocations sort of futuristically, and that's where we're setting up the business for shareholders, for ourselves, and we're really excited about where that's going. So we like what we're up to. We're really proud of the balance sheet we've got. It allows us to be aggressive often.
Benjamin Kovler: I think out of ways, we're thinking about capital allocation sort of futuristic late and and that's what we're setting up the business for shareholders for ourselves.
Benjamin Kovler: Excited about where that's going so so we like what we're up to we're really proud of the balance sheet, we got and it allows us to play aggressive offense.
Eric Des Lauriers: Great, I appreciate the call; thank you.
Speaker Change: Great I appreciate the color. Thank you.
Speaker Change: Thank you.
Eric Des Lauriers: Yeah.
Operator: Our next question comes from Gerald Pascarelli from Wedbush Securities. Go ahead with your question.
Eric Des Lauriers: Our next question comes from Gerald Pascarelli from Wedbush Securities. Please go ahead with your question.
Gerald Pascarelli: Great, thanks. I just wanted to go back to Florida and maybe ask a question in a slightly different way. As you think about what potentially lies ahead in November, I guess, how do you think about the need to invest heavily in that market to, on the one hand, ensure that you can adequately service the robust demand if the state goes legal versus the prospects of the ballot initiative not passing? It's obviously a very transformative catalyst, but just one where the outcome is completely binary. So we'd just love to get your thoughts on how you plan and operate around something like that, you know, a few months out here. Thanks.
Gerald Pascarelli: Alright. Thanks, just wanted to go back to Florida, and maybe ask a question a slightly different way as you think about what potentially lies ahead in November I guess, how do you think about it.
Gerald Pascarelli: The need to invest heavily behind that market to on one hand ensure that you can adequately service the robust demand if the state goes legal versus the prospects of the ballot initiative not passing because that's obviously a very transformative catalyst purchased one where the outcome is completely binary so would just love to get your thoughts on how you plan and operate around some.
Gerald Pascarelli: Like that you know what.
Gerald Pascarelli: Two months out here. Thanks.
Anthony Georgiadis: Sure, Gerald. Anthony here.
Gerald Anthony: Sure Gerald Anthony here.
Anthony Georgiadis: I mean, look, the calculus in Florida is different than in other markets. All right, you've got the vertical nature of the market itself. You know, it's really, it's us against ourselves.
Anthony Georgiadis: The calculus in Florida is different than the other markets.
Anthony Georgiadis: Right, you've got the vertical nature of the market itself.
Anthony Georgiadis: Yeah. It's it's really it's it's also against yourself. So you know as we open up stores, we have to make sure that we have enough wholesale capacity to service those stores right. So we've seen some nice growth within the Florida market within our store base itself and so as we look ahead and think about okay. What kind of increase could we expect to see with the.
Anthony Georgiadis: So, you know, as we open up stores, we have to make sure that we have enough wholesale capacity to service them. So we've seen some nice growth within the Florida market, within our store base itself. And so as we look ahead and think about, okay, what kind of increase could we expect to see with an adult-use flip?
Anthony Georgiadis: Within adult you slip and then we have to figure out do we have enough product coming out of our wholesale facilities to match. It. So that's really the calculation that we're doing it's not as if we're we're in a race to <unk>.
Anthony Georgiadis: And then we have to figure out, do we have enough product coming out of our wholesale facilities to match it? So that's really the calculation that we're doing. It's not as if we're in a race to catch up with X, Y, or Z.
Anthony Georgiadis: Catch up with X y or Z, it's really about how much capital we feel comfortable deploying into the states relative to other places we could deploy that capital and that's that's how we're gonna look at so you know we look we're taking the steps to be prepared to kind of.
Anthony Georgiadis: It's really about how much capital we feel comfortable deploying in the state relative to the other places we could deploy that capital. And that's how we're going to look at it. So, you know, we're taking steps to be prepared to kind of revisit some of those decisions if and when things go our way in November. And so, you know, we'll do what we can to get prepared. But until we actually know what's going to happen, then we can't really make the right move.
Anthony Georgiadis: You know kind of revisit some of those some.
Anthony Georgiadis: Some of those decisions if and when things go our way in November and so you know, we'll do what we can get prepared but until we actually know what its going to what's going to happen and we can really make the right move but I'll just say one of the ways, we've been able to differentiate within the market as well.
Anthony Georgiadis: But I'll just say, you know, one of the ways that we've been able to differentiate within the market is when we built our purpose-built facility in Ocala, we did it with a focus on high-end indoor flour. And so that's really kind of the basis of what we're looking to kind of build our business around. And that's what we've been focused on doing since the start of the pandemic.
Anthony Georgiadis: When we built our purpose built facility in Ocala, we did it with the focus of high end indoor flower and so that's really kind of the basis of what we're looking to kind of build our business around and that's what we've been focused on doing since.
Anthony Georgiadis: Just to start with here.
Gerald Pascarelli: Perfect. Thanks so much for the call.
Speaker Change: Perfect. Thanks, so much for the color.
Operator: Our next question comes from Pablo Zuanic from Zuanic & Associates. Please go ahead with your question. Thank you.
Speaker Change: Our next question comes from Pablo Zanex and Associates. Please go ahead with your question.
Pablo Zuanic: they ask about insider buying. Despite the rescheduling news and all the positive news we've had in the last few months, we haven't really seen any insider buying, and speaking on average, in general. I don't know if you can comment from the Greens' point of view. And then the second point, I'm sorry this came up before, but I don't think I heard it.
Pablo Zuanic: Thank you I've been to two questions you know something that keeps coming up from investors the ESCO out inside the insider buying.
Pablo Zuanic: Despite the rescheduling news and all the positive Nielsen because in the last few months.
Pablo Zuanic: Haven't seen really insider buying and I'm speaking on average in general I don't know if you. If you can comment on the getting some point of view and then the second point I'm, sorry, just came up before but I don't think I heard it.
Pablo Zuanic: In terms of 280E, are you changing your tax planning in any way? Are you going to start provisioning in a different way? Are you going to start looking for tax refunds? What are your thoughts on that in the short term regarding 280E? Thank you.
Pablo Zuanic: In terms of Tweedy E are you changing your tax planning in any way or do you want to start or provisioning in a different way or do you want to still looking for the tax refunds.
Pablo Zuanic: What are you thinking of that in the short term regarding tweedy. Thank you.
Speaker Change: Thanks, Pablo I'll I'll take that.
Mathew Faulkner: The 380 EPs. You know, at this time, we continue to assess the landscape and watch what's happening in the marketplace while we make a decision.
Pablo Zuanic: Three e&ps so.
Mathew Faulkner: No it.
Mathew Faulkner: At this time, we continue to assess.
Mathew Faulkner: The landscape in watch watch what's happening in the marketplace, while we make a determination of what.
Mathew Faulkner: determination of what we're going to do next. So we continue to totally
Mathew Faulkner: Going to do not so we continue to tow the line at this junction Walla Walla the balls to be able to determine what ultimately our next steps are.
Mathew Faulkner: We continue to toe the line at this junction while it evolves to be...
Benjamin Kovler: I can hit the first one, Pablo. Hey, it's Ben. Thanks. You have an interesting question. You know, for the first time in a long time, we were able to talk about how bullish we are on the equity, right? We have a share buyback, and we're out there buying the stock because we think the equity is too cheap. We're backing that up by allocating, and I don't know this, but I think we're the largest allocator of stock to the team, which is effectively having the team buy the stock because we all want to own a piece of the boat that we're building. The massive management that owns the company... Ben is a massive shareholder, a large shareholder.
Speaker Change: And I guess, just the first one Pablo it's been.
Benjamin Kovler: Interesting question I think.
Benjamin Kovler: First time are the ones that we were able to talk about how bullish we are on the equity REIT, we have a share buyback and we're out there buying stock because we think the equity's too cheap we're backing that up by allocating and I think I don't know this but I think we're the largest allocators doctors team with respectively haven't deemed by the stocks that we all want to own a piece of the boat that we're building.
Benjamin Kovler: Massive management that owns the.
Benjamin Kovler: Madison is a massive shareholder largest shareholder in the business.
Benjamin Kovler: And lastly, we have a share buyback in here. So we're sort of letting the company come in and buy stock. As you know, and everybody knows, this is thin.
Benjamin Kovler: And lastly, do you have a share buyback in here. So we're sort of letting the company come in and buy stock.
Benjamin Kovler: You know and everybody knows this is Ben.
Benjamin Kovler: You know, this is a very, very thin market in Canada and a unique opportunity for the people who understand the balance sheet and see the future trajectory of the business. There's a lot of obfuscation going on in balance sheet land, and we're trying to keep it just as clean and tight as possible. So we love the share buyback. We sort of put it in the annual letter. If people haven't read the letter, I encourage you to read the letter, but reducing the denominator has become sort of a mantra here. We like this share buyback. We are happy to be able to buy over a million shares, and we'll see what the future holds.
Benjamin Kovler: You know, there's a very very thin market in Canada, and a unique opportunity.
Benjamin Kovler: And people can understand the balance sheet and see the future trajectory of the business.
Benjamin Kovler: There's a lot of obfuscating going on balance sheet land and we're trying to keep it as clean and tightened as possible.
Benjamin Kovler: The share buyback, we sort of put it in the annual letter and people had to read the letter I encourage you to read the letter, but reduce the denominator.
Benjamin Kovler: As it becomes sort of a mantra here, we like the share buyback, we were happy to be able to buy over a million shares.
Benjamin Kovler: And we'll see what the future holds.
Speaker Change: Alright, thank you.
Speaker Change: Thank you.
Benjamin Kovler: Yeah.
Operator: Our next question comes from Howard Penny from Hedgehive. Please go ahead with your question.
Benjamin Kovler: Our next question comes from Howard Penney from the hedge I. Please go ahead with your question.
Howard Penny: Thanks very much for the question. What are the characteristics of the Ohio market that you see that will make it such a strong adult use market, and what specifically are you going to do?
Howard Penny: Hey, Thanks very much for the question what are the characteristics of the Ohio market that you can see that will make it such a strong adult use and what specifically are you doing to take advantage of that.
Anthony Georgiadis: Hey Howard, Anthony here. Good question. I think I cut off a little bit at the end, but I think the question is about Ohio. Look, here's what we like about Ohio. You've got 13 million people. You have a medical, I don't want to say anemic, but you have a very small medical market with certainly not the penetration levels that we've seen in many other states around it. And, you know, at the same time, you've got a healthy amount of capacity that has been built up within the market itself.
Speaker Change: Hey, Howard entity here, a good question I think I.
Anthony Georgiadis: Cut off a little bit, but I think I think the questions about Ohio.
Anthony Georgiadis: Well, here's what we like about Ohio, you got 13 million people.
Anthony Georgiadis: You have a medic.
Anthony Georgiadis: Medical I don't want to say it.
Anthony Georgiadis: A very small medical market.
Anthony Georgiadis: Certainly not the penetration levels that we've seen in many other states around it.
Anthony Georgiadis: And at the same time, you've got a healthy amount of capacity that's been built up within the market itself. So you.
Anthony Georgiadis: You know, that all really sets up for when the flip happens for a vibrant, robust market on day one. And so, you know, that's really, you know, given the size of the state and knowing that, you know, you've got a healthy chunk of sales that are heading north up to Michigan, we're pretty bullish. You know, we've got a, we've got a, we have five stores in the state today. We've got, And we're doing everything we can to get ready for the events that come late summer and early fall.
Anthony Georgiadis: You know that all really sets up for.
Anthony Georgiadis: I want to flip happens for a vibrant robust market in day, one and so you know that's really given kind of the size of the state and knowing that you know you've got a healthy chunk of sales that are better heading north up to Michigan.
Anthony Georgiadis: Pretty bullish you know we've got a.
Anthony Georgiadis: We've got a we have five stores, they're understated today, we've got.
Anthony Georgiadis: Cultivation facility, that's maxed out at least under the medical canopy and you know we're doing everything we can get a range for our events come late summer early fall.
Howard Penny: Is it a rinse and repeat new market for you? Is there anything unique to Ohio that you're doing when it opens?
Anthony Georgiadis: Is it a rinse and repeat new market for you is there anything unique to Ohio that youre doing when it opens up.
Anthony Georgiadis: I mean, there is an element of risk and repetition, but as you know, given the adult use market is at least initially going to be launched off the medical regulations, there's some nuance in the Ohio market. Right? Pre-rolls are not allowed.
Speaker Change: I you know its I mean, there is an element of risk repeat but you know as you know given the.
Anthony Georgiadis: Adult use market is at least initially doing too.
Anthony Georgiadis: Be launched off the medical regs there are some nuances in the Ohio market right pre rolls are not allowed we've got tenants who says you didn't measure is just a little bit different.
Anthony Georgiadis: We've got tents instead of ink, so the unit measure is just a little bit different. And then also, I think, for the most part, given kind of the heavy pharmaceutical nature of the market itself, the infrastructure in Ohio is probably a little bit different than what we've seen in other markets, but it's generally the same with a little bit of nuance that we just have to manage around.
Anthony Georgiadis: And then also I think for the most part giving kind of apart, but any pharmaceutical nature of the market itself. The infrastructure in Ohio is probably a little bit different than what we've seen in other markets, but it's generally the same with a little bit of nuance that we just have to manage around.
Howard Penny: Awesome. Thank you so much.
Speaker Change: Awesome. Thank you so much.
Operator: Our next question comes from Aaron Grey from Alliance Global Partners. Please go ahead with your question.
Howard Penny: Our next question comes from Aaron Grey from Alliance Global Partners. Please go ahead with your question.
Aaron Grey: Good evening, and thank you for the question. I just want to speak to the kind of overall consumer trends that you're seeing somewhat toward consumer health. Obviously, the category has seen, you know, pricing pressure and down trading for some time. But curious if you're seeing any benefit from the lower pricing within cannabis versus some of the higher prices you see in other categories and then seeing consumers increasingly shift into cannabis versus some other social lubricants just from those dynamics. Thank you.
Aaron Grey: Good evening and thank you for the question.
Aaron Grey: I just want to speak to the kind of overall consumer trends that you're seeing.
Aaron Grey: Somewhat.
Aaron Grey: Towards consumer health, obviously, the category has seen pricing pressure I mean down trading for some time, but curious if you're seeing any benefit from the lower pricing within cannabis versus some of the higher prices have you seen other categories, and then seeing consumers increasingly shift into canvas versus some other social lubricant just from those dynamics. Thank you.
Aaron Grey: Okay.
Benjamin Kovler: Yeah, hey Aaron, it's Ben. I can take that.
Speaker Change: Yeah, Hey, Aaron it's been I I can take that Hum.
Benjamin Kovler: The core of your question is yes, the consumer is strong, there continues to be mixed shifts. Age Matters. And, you know, we're starting to see that in the data. I think the pricing and the lower prices will continue. The cost per buzz in cannabis is far lower than alcohol, where you pay for one drink or one shot. You know, you have on-prem versus off-prem and things like that.
Ben: Core of your question is yes. The consumer is strong there continues to be mixed shift.
Benjamin Kovler: H matters.
Benjamin Kovler: And you know, we're starting to see that in the data.
Benjamin Kovler: I think the pricing and the lower prices continue on the cost per buzz in Canada is far lower than alcohol.
Benjamin Kovler: Where how much postured for one rig or one shot and you don't get a longtime members off prem and things like that.
Benjamin Kovler: But we continue to see strength in the consumer, and what's happened is, you know, a category blowout where there are now three, four, five, six segments within flower. Flower is about 50 percent of the category, and you have real segmentation there for real different consumer tastes and preferences, branding, you know, premium exists, value, things like that. And if you're under 35, you don't drink like you used to. You know, if you're 40 to 60, like some people on this call. You know, there is a drinking culture. If you're under, and you're 35 and under, and you're 25 and under, things are different.
Benjamin Kovler: But we continue to see strength in the consumer and what's happened is category blowout, where there's now 3456 segments within flowers flowers about 50% of the category and you have.
Benjamin Kovler: Real segmentation, there for real different consumer tastes and preferences branding premium exists value.
Benjamin Kovler: Things like that and if you're under 35, you don't drink like you used to hear you know if you're 40 to.
Benjamin Kovler: 60, like some people on this call you know what drinking culture, if you're under 3500 2500 Derby and things are different.
Benjamin Kovler: So encourage those on the call that's new news to get out there and see what's going on but you know what.
Benjamin Kovler: So encourage those on the call that that's new news to get out there and see what's going on. But, you know, we're not... We're not closed ears to what's happening in the alcohol space with the biggest... Spirits Companies are the biggest beer companies, and why that's happening on the ground, and then, frankly, what the consumer wants. The same thing we've said the whole time. The North Star is the consumer. We want to make things better for the consumer.
Benjamin Kovler: We're not.
Benjamin Kovler: We're not close yours to what's happening in the alcohol space with the biggest you know.
Benjamin Kovler: Spirits companies the biggest peer companies and why that's happening on the ground and then frankly, what the consumer wants same thing we said the whole time North star as the consumer want to make things better for the consumer if we add wellbeing, we hadn't mental health you know one thing to get really good.
Benjamin Kovler: If we add well-being and mental health, you know, wow, things could get really good. But it's going to take a while, and as we see, that's got to happen. A typical opinion, a non-consensus opinion, and it takes a while to change people's thoughts. So, strength on the ground, strength in the youth, and we like what we're set up.
Benjamin Kovler: But it's going to take a while and we see you know that.
Benjamin Kovler: Atypical opinion of non consensus opinion and it takes a while to change People's thought so strength on the ground strengthened in the U.
Benjamin Kovler: We like where we're set.
Aaron Grey: Great. Thanks for the call. Now I'll jump back into the queue.
Speaker Change: Great. Thanks for the color that I'll jump back in the queue.
Aaron Grey: Okay.
Operator: Our next question comes from Scott Fortune from Roth Capital. Please go ahead with your question.
Aaron Grey: Our next question comes from Scott Fortune from Roth Capital. Please go ahead with your question.
Scott Fortune: Good afternoon. Thanks for the question. Even those over 35 or not drink as much, but just an update on capital markets here around rescheduling the momentum there. Just kind of an update if you're kind of on the exchange side of things. Are you hearing inquiries from them as far as changing that? And just wondering if you're seeing, you know, obviously, some debts coming due, and in your discussions with lenders or creditors in the capital markets in general, are you seeing better terms or debt now that they are starting to factor in rescheduling at all? Just kind of your sense on the debt side of things as far as the lenders are concerned from what you're hearing.
Scott Fortune: Good afternoon, and thanks for the question, even though the over 35 years and I drink as much but just an update on capital markets here around rescheduling the momentum there I'm just kind of an update if you are a year kind of from the exchange side of things are you hearing any inquiries from NIM as far as change in that.
Scott Fortune: And just wondering if youre seeing you know obviously some debts coming up here do you in your discussions with lenders or creditors in the capital markets.
Scott Fortune: Meaning a.
Scott Fortune: Better terms or dead now that are they starting to factor in rescheduling at all just kind of your sense on the debt side of things as far as the lenders concern from there what are you hearing.
Benjamin Kovler: Sure. Hey Scott, thanks. Ben, I can start.
Speaker Change: Sure Hey, Scott Thanks, I can start.
Benjamin Kovler: When I summarize the listing and the exchanges, which I think was the first part of your question, I would say, you know, very open dialogue, good communication channels, and summarize, no change. I would summarize the rescheduling situation as massive confusion. Which then, you know, to your last part of your question on the debt, if there's not new pricing... [inaudible]
Speaker Change: Summarizing the listing on the exchange of it which I think was the first part of your question is I would say you know very open dialogue with good communication channels and summarize no change.
Benjamin Kovler: I would summarize the rescheduling situation is massive confusion.
Benjamin Kovler: Which then you know to your last part of your question on the debt, there's not new pricing in eight days.
Benjamin Kovler: And that's not really how we're focused at all. We're thinking about a very strong balance sheet and how we're positioned extremely well to play offense and figure out what we'll do about the debt in 12 months. I mean, it's not that hard to see what would happen with the free cashflow generation of the business if you just run it out. But that's not really our style either. We'd rather extend the duration and be able to be in a very comfortable position, sleep well, and have a great balance sheet and be able to play offense and continue to answer the phone, continue to be awake for what's happening.
Benjamin Kovler: And that's not really how we're focused at all we're thinking about a very strong balance sheet and how we're positioned extremely well to play offense and figure out what will do about the debt in 12 months I mean, it's not that hard to see what would happen with the free cash flow generation of the business run it out.
Benjamin Kovler: But that's not really our style either we'd rather you know extend the duration would be able to be in a very comfortable position sleep well.
Benjamin Kovler: Great balance sheet to be able to play offense and you'll continue to answer the phones continued to be a wait for whats happening. We continue to think the the land people strategic deals increases, especially for strength, especially for the leaders, especially for those that have done and been able to do it with strategic partners and several different.
Benjamin Kovler: We continue to think the landscape of strategic deals is increasing, especially for strength, especially for the leaders, especially for those that have done and been able to do it with strategic partners in several different correlated industries that are really complementary to the cannabis user and to that consumer. So I think that's the summary there.
Benjamin Kovler: Correlated industries that are really complementary to the candidates user.
Benjamin Kovler: I knew that consumers.
Benjamin Kovler: I think that's the summary there.
Scott Fortune: I appreciate the color. Thanks.
Speaker Change: I appreciate the color. Thanks.
Scott Fortune: Yep.
Operator: Our next question comes from Rodrigo Gomez from ATB Capital. Please go ahead with your question. I'd be glad to.
Scott Fortune: Our next question comes from Enrico Gomez from E. T. D capital. Please go ahead with your question.
Rodrigo Gomez: Hi, good evening. Thank you for taking my question. Just going back to your performance this quarter, I wanted to ask about your revenue performance and just curious if there was, you know, anything on the pricing side or, I guess, in terms of consumer behavior or any specific market here that you think that, you know, performed better and maybe surprised you during the quarter to help drive the revenue beat compared to your guidance. Thank you.
Rodrigo Gomez: Hi, Good evening. Thank you for taking my question I'm, just going back to your performance this quarter I want to ask about your your revenue performance and just curious if there was anything on the pricing side or I guess in terms of consumer behavior or in a specific market here that you think that you know performed better than maybe surprised you.
Rodrigo Gomez: During the quarter.
Rodrigo Gomez: To help drive the revenue beat compared to your guidance. Thank you.
Rodrigo Gomez: Okay.
Anthony Georgiadis: Hey Puerto Rico, Anthony here. You know, look, there was, um... There was nothing that had a material impact on the... Right now, you know, when we pull back the covers a little bit and take a look at kind of what's happening at the state level, but there are some markets where pricing stabilized and actually improved. Maryland's a good example of that, you know, since adult use, when the supply, you know, with the increase in demand, you know, that differential from supply and demand kind of resulted in slightly higher prices.
Anthony Georgiadis: [laughter] Rico Anthony here.
Anthony Georgiadis: You know what there was there was nothing that was that had a material impact on the business right now.
Anthony Georgiadis: When we pulled back the covers a little bit and take a look at kind of what's happening at the state level.
Anthony Georgiadis: There's some markets where pricing stabilize and actually improved Maryland is a good example of that.
Anthony Georgiadis: Since you don't use.
Anthony Georgiadis: When the supply increases.
Anthony Georgiadis: The increase in demand.
Anthony Georgiadis: You know that that differential from supply and demand kind of resulted in slightly higher pricing.
Anthony Georgiadis: But overall, you know, what we're seeing is it's not consistent, right? So, if we look back at some of the markets where we saw some erosion in Q4, we saw a slight bounce back in Q1. Ones where we saw, you know, kind of strength in Q4, maybe a little bit of erosion in Q1, so it continues to kind of be a game that's market-to-market. And as you zoom out for us, again, what we're focused on is a high-quality product, where we can hold price and we can really drive our brand. But on a net basis, there was no material kind of shift that we saw that had a fundamental kind of impact on the top line of business.
Anthony Georgiadis: But overall, what we're seeing and then it's not consistent right. So.
Anthony Georgiadis: We look back in some of the markets, where we saw some erosion in Q4, we saw a slight bounce back in Q1.
Anthony Georgiadis: Once where we saw you know.
Anthony Georgiadis: Hum.
Anthony Georgiadis: Stride in Q4, maybe a little bit of erosion in Q1 so.
Anthony Georgiadis: It continues to kind of be a game, that's it's market to market.
Anthony Georgiadis: Zoom out for Us where again, we're focused on is high quality product.
Anthony Georgiadis: Can hold price, we can really drive our brands so but on a net basis. There was no material kind of shift that we saw that had a fundamental kind of impact on the top line business.
Speaker Change: Thank you.
Operator: Our next question comes from Mike Regan from Excelsior Equities. Please go ahead with your question.
Anthony Georgiadis: Our next question comes from Mike Regan from Excelsior Equities. Please go ahead with your question.
Michael Regan: Hey, thanks, everyone. Congratulations on a great quarter. Quick question. It's not sort of significant yet, but the 10-K noted selling Farm Bill compliant, I guess, hemp-derived products. And we saw Goodness just launch low-dose beverages in Minnesota for sale in bars and liquor stores. Is that something that, I guess, can you give us more detail on your plans and the product innovation in that area and where you're selling it, and basically what you're doing around that?
Michael Regan: Hey, thanks, everyone Congrats on a great quarter.
Michael Regan: Quick question, that's it's not significant yet, but the 10-Q10-K noted about filling a farm bill compliant Ah I guess him drive products and we saw goodness just launch you know low dose beverages in Minnesota for sale in bars and liquor stores.
Michael Regan: Is that something that I guess can you give us more detail on your plans and the product innovation in that area, and where you're selling it and particularly when youre doing around that.
Anthony Georgiadis: Yeah, sure. Mike here. Mike Anthony here.
Michael Regan: Yeah sure Mike here, Mike Anthony here.
Michael Regan: Great question so.
Anthony Georgiadis: Great question. Let's take a step back. So we got into the hemp space first in Minnesota. That's really where we dipped our toe in the water. And we're really still in the discovery phase. But when we take a step back, you know, these are the things that we're focused on.
Michael Regan: Let's take a step back so we got into that space you know first in Minnesota.
Anthony Georgiadis: That's really where we've dipped our toe in the water and we're still like.
Anthony Georgiadis: Really still in the discovery space.
Anthony Georgiadis: But when we take a step back you know here's the things that we're focused on first is the consumer.
Anthony Georgiadis: First and foremost, it's the consumer. So, first and foremost, when we looked at the landscape, you know, what we saw was, effectively, packaging and communication to the consumer that didn't make a lot of sense. And so for us, one of the things we've really tried to do is to kind of open up the transparency with the consumer on product testing, what's actually in the product, the cannabinoids and the ratios and whatnot.
Anthony Georgiadis: So first and foremost.
Anthony Georgiadis: When we looked at the landscape.
Anthony Georgiadis: What we saw was.
Anthony Georgiadis: Effectively.
Anthony Georgiadis: Packaging and communication to the consumer that didn't make a lot of sense.
Anthony Georgiadis: So for US one of the things we've really tried to do is to kind of open up.
Anthony Georgiadis: The transparency with the consumer on the product testing, what's actually in the product the cannabinoid in the ratios and whatnot. So that's first secondly, what we've also seen is that the market seems to be smaller at least than what anecdotally. We've heard from others quotes we've heard of $15 million to $20 million. So I'll just tell you that.
Anthony Georgiadis: So that's first. Secondly, what we've also seen is that, you know, the market seems to be smaller, at least anecdotally, from what we've heard from others. The quotes we've heard of 15 to 20 billion dollars; I'll just tell you that we're not seeing a market of that size, at least yet. And third, you know, you've got a regulatory landscape where the ground is shifting literally underneath us, market to market. So, you know, for us, what we're going to continue to do is we're going to continue to kind of study the market, focus on the consumer.
Anthony Georgiadis: We're not we're not seeing in the market of that size at least yet in the third.
Anthony Georgiadis: You've got a regulatory landscape landscape, where the ground is shifting literally underneath us market to market. So you know for US we're going to continue to do is we're going to continue to kind of studying the market.
Anthony Georgiadis: Focus on the consumer taking one step at a time.
Michael Regan: As I said, we're still studying only Minnesota, but I guess if, I guess, is it possible you could do that in other markets as well, or even ones beyond the, you know, your core marijuana markets, you know, more broadly across the country?
Anthony Georgiadis: As I said, we're still studying only Minnesota, but I guess, if I guess is it possible you could do that in other markets as well or even ones beyond the core marijuana markets you know more broadly across the country.
Anthony Georgiadis: Sure, I mean, you know, everything's on the table if it makes sense, but I was just sort of a little look behind all the work we've done there. This looks a little smaller than we thought, maybe not quite as exciting, but we'll see.
Speaker Change: Sure I mean everything's on the table if it makes sense, but I was just sort of a little look behind all the work. We've done there is this looks a little smaller than we thought and maybe not quite as exciting, but we'll see.
Anthony Georgiadis: Maybe not quite as exciting, but we'll see.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Thank you.
Operator: And with that, we'll be ending today's question and answer session. I'd like to turn the floor back over to management for any closing remarks.
Speaker Change: And with that will be ending today's question and answer session I'd like to turn the floor back over to management for any closing remarks.
Benjamin Kovler: Thank you everybody for joining us. Look forward to the next update next quarter. Have a good start to summer.
Speaker Change: Thanks, everybody for joining us look forward to the next update next quarter.
Benjamin Kovler: Good start to summer.
Operator: And with that, ladies and gentlemen, we'll conclude today's conference call and presentation. We thank you for joining us. You may now disconnect your lines.
Speaker Change: And with that ladies and gentlemen, we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.