Q1 2024 urban-gro Inc Earnings Call
[music].
Hello, and welcome to the urban Girl first quarter 'twenty 'twenty four earnings conference call. As a brief reminder, all participants are currently in a listen only mode. If anyone requires operator assistance during the conference. Please press star zero on your telephone keypad.
Following the presentation, there will be a question and answer session for those on the teleconference line. Please note that this conference call is being recorded today April 32024, and a replay will be made available on the company's website. Following the end of the call.
At this time I'd like to turn the conference call over to Christian Momsen Urban Girls Executive Vice President and General Counsel Sir. Please go ahead.
Good afternoon, and thank you for joining us today's call will be led by Brad Mattress, Chairman and Chief Executive Officer, and <expletive> accurate Chief Financial Officer.
I'd like to remind our listeners that remarks made during this call will include a discussion of non-GAAP metrics, including adjusted EBITDA and backlog did you cite and should not be utilized as a substitute for urban growth financial results prepared in accordance with GAAP.
<unk> of our GAAP net loss to adjusted EBITDA are available in our press release and in our Form 10-Q filed with the Securities and Exchange Commission and can be assessed from the Investor Relations section of our website at IR Dot urban dash grow dot com.
On this call, we may stay to mad managers intentions beliefs expectations or future projections.
These are forward looking statements and involve risks and uncertainties.
Looking statements on this call are made pursuant to the safe Harbor provisions of the federal Securities laws and are based on urban growth current expectations.
Actual results could differ materially as a result, you should not place undue reliance on any forward looking statements.
One of the factors that could cause actual results to differ materially from such forward looking statements are discussed in the periodic reports urban grow flat files with the Securities and Exchange Commission.
Documents are available in the investors section of the company's website and on the Securities and exchange Commission's website. We do encourage you to review these documents carefully.
Lastly, a copy of our earnings press release and website for replay for today's call may be found on the Investor Relations section of our website, which again is IR Dot U R. D. A N dash G R O dot com.
With that I will now turn the call over to Brad.
Brad: Thank you Christian.
Good afternoon, everyone and thank you for joining us today.
What a phenomenal day for the cannabis industry.
I'm sure. Most of you are now aware a few hours ago. There were incredible reports in the media, indicating that the U S. Drug enforcement agency is supporting the department of Health's recommendation to reclassify cannabis and the most stringent schedule one to the less stringent schedule three.
<unk>, providing our long awaited catalyst for the cannabis industry.
Well there still is a review periods are complete with the expected removal of the 280 <unk> related tax burden and the D O J addressing state run programs through our guidance memo. We believe many cannabis operator will realize significant increases to their working capital and that in turn could be and reinvest it in their business infrastructure.
To refresh existing facilities and build out new ones.
Because the last two years I'm proud to sit on the board of the National candidates round table alongside Ceos from some of the leading multistate operators in the space.
It's the tireless dedication of MSL leaders like these and the lobbying efforts from organizations like N. P. R that paved the way for our industry and the exciting wins along the way.
As it relates to what this news and the subsequent final approval of rescheduling means for urban gross future.
It's significant.
With over 1000 projects completed in the cannabis market over the last eight years.
120 employees, which include architects engineers construction managers and horticulturist herbs.
Urban grows the leading professional services firm in the cannabis industry that refreshes existing operations there.
Brad: And or build new dispensary in cultivation facilities.
And further procure as it integrates cultivation equipment solutions as well.
The successful rescheduling of cannabis is a long awaited catalyst that we've anticipated to reinvigorate and industry theres been facing strong headwinds for the last couple of years.
With that said, they're moving on and I'm excited to report that in the first quarter, we had positive cash flow from operations and in turn delivered our strongest quarterly adjusted EBITDA results in two years.
This improved performance is attributed to both the diversified revenue streams that we've been seeking and building out as well as our focused efforts throughout 2023 to reduce operating expenses on a go forward basis.
Brad: Today, our multi sector focused professional services in design build firm operates out of offices in three states and Europe in our targeted markets extend from the cannabis in vertical farming sectors to also include light industrial commercial hospitality recreation education and health care sectors.
Yeah.
Looking at the highlights from our first quarter performance.
Both revenue of $15 $5 million.
The slight adjusted EBITDA loss of $3 million beat our quarterly guidance.
The $3 $1 million year over year improvement in adjusted EBITDA was driven by a combination of reduced operating expenses and strengthening margins.
It relates to the reduced expenses and as a result of the optimization efforts made in 'twenty. Three we began to benefit from the previously communicated $8 million reduction in general and administrative expenses.
In fact, we realized a $2 $8 million improvement from the first quarter versus Q1 of 2023.
The margin growth in the first quarter was tied to both increased productivity from our professional services providers as well as the strengthening of our returns delivered by our construction business.
Further backlog remains strong at $99 million.
As a result.
Brad: Relating to full year 'twenty 'twenty four.
We are maintaining our guidance to recognize more than $84 million in revenue and to generate positive adjusted EBITDA.
A further note that this does not take into consideration todays rescheduling related developments, if there are still unknowns, including timing that need to be clarified.
Looking at market trends.
Our suffocation is most definitely assisted in insulating our business from the previously discussed headwinds we've been facing within the candidate and vertical farming sectors for the last couple of years.
Brad: Consistent with the sector breakout in 'twenty three in the first quarter approximately 72% of our revenues came from the commercial sectors that we serve.
28% from controlled Environment Act.
In the commercial sector. Our client base continues to be comprised of top tier companies that include Fortune 50, and 500 firms and revenues recognized in the quarter were from a combination of ongoing and new projects.
In the cannabis sector well the market sentiment has been stronger than it has been in more than a year, especially after today, we're actively engaged with clients in multiple fronts.
However, cautious optimism has been the status quo for operators so far this year.
In the interim and while we wait for the rescheduling narrative to play out in the months ahead.
Second to see steady activity and to continue signing both services and construction contracts the legal markets across the U S. As operators work through persistent state level regulatory and legal delays.
Brad: This being said and then in addition, today's announcement there were a couple of key additional catalyst, but should also result in a significant and sustained positive change in momentum for our business.
First on the federal level with prospects of successfully passing of banking related build by year end continues to be discussed.
Of particular importance. This would potentially include a capital markets clause that allows plant touching businesses to list on the larger public market exchanges.
Riding a more efficient path for them to access capital and create greater liquidity.
That's what attract institutional investors can participate via these exchanges or provide capital directly to the issuers.
The second at the state level, what progress continues to be made of legalization in multiple states.
We maintain our position that the most impactful change would be in Florida. The nation third most populous state and one of the fastest growing in the country.
Now that it's confirmed to be on the ballot in November a successful vote to allow the adult use recreational sales would have a profound and sustained impact for Florida operators and we anticipate for urban grow as well.
And clothing and supported by our $99 million backlog our qualified pipeline. The recognition of last year's 8 million dollar general and administrative expense reduction and today's positive regulatory development. We believe that we are well positioned to continue building momentum through the end of the year N.
Brad: Beyond.
Thank you and with that I will now turn the call over to <expletive>.
Thanks, perhaps in the first quarter of 'twenty 'twenty four we generated revenue of $15 $5 million, which represents a sequential improvement of zero point $5 million or 4% over the 15.0 a million dollars of revenue generated in the <unk>.
Fourth quarter of 2023.
Yeah, the $1.2 million or 7% decrease over the $16 $8 million of revenue generated in the prior year period.
The decrease in revenue over the prior year period was driven by a 0.4 million dollar decrease in construction design build revenue, which reflected a decrease in the number of projects and average size of projects during those periods.
Equipment systems revenue decreased by zero point $4 million and services revenue decreased by zero point $3 million, which corresponds to the historical downturn on the cannabis industry.
Gross profit was $3 $1 million or 20% of revenue in the first quarter of 2024 compared to $1 $7 million or 11% of revenue in the fourth quarter of 2023, and $2 $1 million or <unk> 17 per seller.
Revenue in the prior year period.
The increase in gross profit dollars and margin percentage for both of these comparable periods was driven by the impact of improved margins in services and construction design build revenues as we experienced improvements in delivery of services projects.
<unk> work on higher margin construction design build projects during the current quarter.
Operating expenses were $5 $2 million in the first quarter of 'twenty 'twenty, four which on a sequential basis is a decrease of $1.2 million.
On a year over year basis is two point something million dollars less than the operating expenses of $7 $9 million in the first quarter of 2023.
Both of these decreases are associated with the company's expense optimization and resource reallocation initiative.
Net loss was $2 1 million or a negative 18 cents per diluted share in the current quarter compared to a net loss of $5 $1 million or a negative 48 cents per diluted share in the prior year period.
Adjusted EBITDA improved by $2.7 million sequentially to negative zero point $3 million in the first quarter of 2024.
This is an improvement in adjusted EBITDA of $3 $1 million compared to the prior year period.
The improvement in our adjusted EBITDA for both periods was driven by lower operating expenses as previously discussed.
Turning to our balance sheet, we ended the quarter with a zero point $7 million of cash on our balance on our line of credit was up 2.0 a million dollars.
With the support of the working capital line of credit that we put in place in December. We currently do not see the need to bring new dilutive capital into the company.
Our total backlog as of March 31, 2024 was approximately $99 million.
Black thing, a decrease of $11 million or 10% honest sequential basis.
This backlog is comprised of $93 million in construction design build.
$5 million of professional services and $1 million of equipment systems contracts.
Breaking backlog out by sector, 76% is with clients and the C E sector and 24% is with clients in the commercial sector.
Supported by our backlog and pipeline, we remain confident that our cash position.
Find with our $10 million line of credit will provide us the necessary flexibility to manage through various macroeconomic scenarios.
We continue to remain focused on our execution and returning to positive adjusted EBITDA on an ongoing basis.
That concludes our prepared remarks.
Operator, please open the call for questions.
Certainly at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star one on your phone at this time, if you wish to ask a question. Please hold while we poll for questions.
And the first question today is coming from Eric Deloria from Craig Hallum, Eric Your line is live.
Great. Thanks for taking my questions the first.
First of all when I made.
With.
Two.
We said, okay, let's schedule three Oh, let's see.
Uh huh.
Operator.
Apologies apologies Eric Your line is just really bad quality, we will and we'll reconnect to you we'll dial out to you. So that we can get a better connection if that's okay with you and and Brad if it's okay I'll move onto the next question I'm Gonna reconnect Eric as soon as possible.
Oh, that's great Paul Thank you.
Take Scott Fortune from Roth M can match.
Next Scott your line is live.
Scott Thomas Fortune: Thank you for the question hopefully you can hear me better I will leave the T. A question for Eric but.
Curious on Florida, Brad I'm, if you know obviously that the four adult use a ballot vote now it's still a big hurdle to get 60% of the vote, but are you seeing now that it's up for vote are you seeing operators come in and engaging more in your services as they look to build.
It has the potential vote in Florida or are we still kind of muted.
Interests from that standpoint to wait to see if this does pass in Florida from the adult use side of things just curious on kind of the.
The operators kind of emphasis for moving forward now and building out potential ahead of some of these states.
Thanks Scott.
Thanks, Thanks for the question Yeah, Florida. It is a hurdle at the 60% and there's a lot of confidence that that will be that will be beat.
But the heavy work starts now and it will be great for people to.
To donate and and to give to the path that are truly it's created in the state with a lot of the other multistate leaders. So they can get the word out and keep pushing hard at the port.
Those are trending higher than 60% at this time from what I've heard but again, it's a it's early stage and it's important to the Gibbs. The weekend, we can fight that fight in terms of uptick yes for sure in terms of the the uptick and the excitement and the planning.
Moving forward to hard large orders that's not quite here.
The conversations on many fronts that we have been having are preparing to be in a good place from an equipment standpoint, some equipment needs to be ordered four to six months in advance.
There's is entering the design stage for new facilities, and then at some point in the future proceeding to the to the built but absolutely a very positive uptick in the states so far.
Okay.
I appreciate the color there. Thank you and then just focus on guidance are you guys are keeping guidance at more than $84 million in revenue for 2024.
The projects in the backlog and focus can you can you provide a little more cadence to to kind of the remaining of the 24 year. Obviously you had some delays from for Q and a I assume those projects are a recognized here in one queue, but just kind of step us through.
On the year as you see your backlog in the second half loaded from a cadence standpoint to meet your revenue guidance.
Yeah first I'm addressing the three projects that we discussed on the on the 2023 or Q4 23 call. All three projects that are active two of them are recognizing revenue in Q1 and the third has has began recognizing for us in the second quarter.
So those are those are all on track.
We remain right now we're cautiously optimistic we believe that we've turned the corner.
And I'm excited about where we're moving and that's before today's development. So it came to light.
We are all trying to.
Under promise and over deliver in terms of our setting an expectation.
We're off to a good start in Q1, our backlog remains strong of course, we'd like to see it start to appreciate and an increase again, but to where we're in a very good place we feel good especially with.
The right sizing of the company in terms of an SG&A standpoint, we've we've lowered the.
Break at the breakeven level for the company Scott. So so that's I feel as good as we're going forward and where we can keep growing the business as the demand.
<unk> increases.
Scott Thomas Fortune: Yeah.
Oh perfect I appreciate the detail and I'll jump back in the queue. Congrats on a well still the D. A moving forward today. So thanks.
Speaker Change: Thanks Scott.
Thank you and it looks like Eric Deloria from Craig Hallum has reconnected them, we will try as line again, Eric Your line is life.
Alright, great. Thank you.
That's better.
Yeah.
So a little bit.
Yeah.
I'll give it a try.
If it doesn't work, we'll just take that question offline.
Because of the day.
If you could provide us.
Sort of an overview on that.
I mean, when you project from your cannabis operators.
I mean.
For a discussion phase two Paraguay.
Turning to backlog and revenue.
What are they looking to.
Kind of understand how quickly you'll be able to have visibility.
Do you know what potential.
Pick up in capital expenditures in the cannabis.
History. Thanks.
Right right right I got most of that perfect first of all it depends on the size right and zoning and where we are where we're located state city and county and in those requirements around the country.
But typically they could take as long as without any delays as long as two years, depending on the size probably as short as nine months on average a year and a half from.
From initial discussions we move into the design stage architecture, and engineering and the cultivation design civil and structural are all part of the engineering side there too.
Once we have a whole set of C. D that they've put out to bid I'm glad it's usually we'll look at the multiple bids in which we're participating and if awarded we immediately move forward. We can be we can cut weeks.
This month's office, we're proactively involved at certain stages, but overall I'd say nine months to two years is a good average with without delays.
And how long would you.
Take to see.
That there is an increase in capex coming you know sort of industry wide.
You know I understand that some of these projects from discussion to completion can take up to two years, but how long will it take you to notice if there's a.
Bonafide capital expenditure increase in the cannabis industry, resulting from the DEA you know would you have.
Speaker Change: Is it is it a few weeks of lead time of.
Speaker Change: No.
Speaker Change: Discussions picking up and leading to pipeline and deposits like is that is that a few weeks or is that could be a discussion phases last.
You know several months that it's it's it's hard to say, if there's a true pick up or not.
I think on the on the Q2 earnings call and looking at backlog at that point.
I'm, a services standpoint, and new contracts that we've signed that'll be a really good indicator.
Speaker Change: And then also from an equipment standpoint.
Equipment, and a strong cannabis market.
Does a tremendous source of revenue for urban grow when you look at 'twenty one.
It was $56 million decreased in $22 million to $33 million as we reported last month in 'twenty three it was down to $13 million and so the backlog that we reported at the end of Q1 for equipment was a million. So watch the the backlog at the end of.
Speaker Change: Of Q2 as well.
That should be strengthening I think the early indicators will be on services and equipment.
But I can tell you as a result of today's announcement I already know, it's stronger we know it's stronger goods.
Good strong discussions with clients and anthem signatures today already.
Yeah.
That's that's very good to hear.
Speaker Change: Mhm.
No more question given my poor connection here.
Gross margin expansion, you've called out increase.
Increased productivity.
Sure.
Increased construction margins.
Right.
Yeah.
Are these projects in Q1.
[noise] themselves too.
Activity or.
And ultimately what I'm wondering is with respect to these productivity levels.
So, let's see here going forward or is this something that.
Just fluctuate quarter to quarter.
Lucky this quarter.
Goodbye.
Yeah.
The deck I'll, let you take that one please.
Alright, Thanks, Brad Eric.
Eric Yeah with regard to.
Do we expect kind of that that same type margin. It. It certainly was a very high margin for us in the in the first quarter of 2020 for don't necessarily expect that it's going to be exactly that high on a go forward basis. It was a very low in the fourth quarter of 2023 years.
We had talked about from a construction project that we had that incurred some additional costs went over budget and we weren't able to pass all of those on to our customer.
Because of a couple of the construction projects, but it did get started in Q1. They are at a very nice margins for us above kind of what we typically see FERC construction project.
So even though we might not expect that the Q1 margin. We experienced is going to continue at that level going forward, we wouldn't expect that to fall off very much.
And as always and we've talked about before from.
From the standpoint of our total gross profit and margin it depends on the revenue mix that we have so you still have to pay close attention to what happens as the equipment or services total revenue number changes over time and that's the impact on the gross margin.
And I'll add I'll add in on the back there a little bit.
It has been almost two years, Eric since we completed the acquisition of the the construction company and so it was there was some legacy projects.
That came with the acquisition.
And that that ended up.
Not being.
What what we would've hoped right. So we call them legacy projects and they're pretty much finished now the project that <expletive> alluded to in the fourth quarter and some surprise costs coming in was with tied to one of those projects.
So that's behind US that's great positive a second in the middle of a 'twenty three we had all of the acquired companies on the same ERP, we've talked about that before and as a result, our R. C. L O and N team, we're able to put some stronger internal controls in place and now we're seeing.
The results.
Speaker Change: All of those moves so high.
Definitely.
Finding the right direction and we don't exclude we weren't lucky in the quarter I guess that the answer to that last question for you.
Yeah, no that all makes sense to me and I'm certainly good to hear that.
Speaker Change: Some of these initiatives like getting everyone on the same ERP system has led to you know some some structural changes in margins, but understand that yeah. That's it would be some degree of fluctuation going forward.
Speaker Change: Very helpful. Thank you for taking my questions.
Speaker Change: Thank you take care.
Speaker Change: Thank you. The next question is coming from Anthony Vendetti from Maxim Group Anthony Your line is live.
Speaker Change: Thanks.
Anthony Vendetti: Just a couple of questions on the backlog of 99 million.
Anthony Vendetti: At the end of March.
I know today, obviously big day to talk about cannabis and and what this impact could mean in terms of future business, but in terms of the backlog.
What percent of that is is cannabis related.
And and.
Anthony Vendetti: What percent, obviously not non cannabis.
The 72%.
Was commercial or non cannabis.
Anthony Vendetti: So I mean, it's sort of deck 76.
Go ahead <expletive>.
Anthony Vendetti: Sorry.
Yes, 76% of it was CEO related and 24% was commercial that's that's pretty consistent with what we reported at the end of December in terms of the split by the factors that we have so even though our.
Recent revenue performance has been a shift of that where we have had substantially more commercial than see a the backlog still continues to be.
More higher percentage on CEO you than it is on commercial partly due just to the size of some of the C. A projects that we have in the backlog.
Okay. That's helpful and then.
Anthony Vendetti: What this could mean.
You know, obviously, you know less stringent less stringent rules should open up investment there's.
The the the tax benefit as well.
What what and I know, it's just happened a couple of hours ago, but.
Anthony Vendetti: Have you heard from any potential customers eager to.
B speed up investments if if indeed this gets just gets passed.
And and maybe elaborate a little bit on what you think the timing is.
For finals like percent consent.
Consent decree to come down and say, okay boom.
Anthony Vendetti: Going to move.
From a schedule one to a schedule III potentially.
To me that the $2 80 E. The removal of two eight years is most definitely the largest benefit to a successful rescheduling.
Anthony Vendetti: Some of the large multistate operators have publicly stated that the annual savings from the removal of 280. He can range from 130 million to $180 million plus so it's it has significant funds that we believe that some of them have also stated publicly that they're looking to.
Anthony Vendetti: Reinvest.
Anthony Vendetti: Those funds into the company with.
Anthony Vendetti: Threshing existing facilities and building out new ones.
So it's a that's definitely the largest benefit there.
Anthony Vendetti: Yeah, the period that it will be open for anywhere from three to five months.
Before the final approval would take place, but it has been.
Anthony Vendetti: As stated publicly that if the DEA supported the department of health.
Anthony Vendetti: It will.
Anthony Vendetti: All indicators are it will absolutely be approved in the long run than not my opinion, but just opinions that I've read so transformational for the industry as for our clients. Yes, just as we have had increased discussions and interest and excitement from clients and flow.
Herder.
With the the ballot.
Dish and for November, but we're having the same today and I just I'm not sure. If you had heard on an earlier answer but we've had a good strong address even had some signatures today as well so it's.
Anthony Vendetti: It'll take time right, there's a lot of excitement today, where we're buying that pool, we didn't want to increase our our guidance or anything at this point, there's so many unknowns and we just wanted to.
Anthony Vendetti: We want to under promise and over deliver but exciting time for the industry and for the urban grow as well today.
Speaker Change: Right right. Okay. So that we do we'd be upside then.
Speaker Change: It wasn't if it goes from a schedule one to schedule three do you think that Expedites change is in the banking regulations as well.
Speaker Change: I don't believe they're related I think any momentum in the in the industry is fantastic from a banking standpoint, you've seen all of that because the FAA bill they thought they could tie safer banking too and that.
Speaker Change: As of late they've said that it won't be connected now that it looks like it would go to the lame duck session later or recession later in the year and that would be the best Avenue to have it passed but I think positive overall cannabis industry sentiment a hell.
Speaker Change: Alps go a long way the people are speaking and Anna.
Speaker Change: I believe from a banking standpoint politicians, they have no option, but to listen.
Speaker Change: So I do see overall it they're working together for a for a better industry for sure.
Speaker Change: Okay, but the separate on the banking thing, Okay, and then just in terms of.
Speaker Change:
Speaker Change: Productivity improvement.
Speaker Change:
Speaker Change: Cost cutting how.
Speaker Change: You know obviously you you decreased expenses, but where are you sort of in that process.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: Halfway through completed.
Speaker Change: Maybe just give us an understanding of where you're at.
Speaker Change: Yeah.
Speaker Change: From a productivity standpoint.
Speaker Change: Tied into some of the reductions in general and administrative expenses last year. When we had line of sight in the middle of last year. When they all were on the same ERP. We realize that that we were we had too many service providers on the team and that's when we started to adjust and and we've.
Speaker Change: Got to right size, now, where we're capturing a large amount of those salaries in Cogs. That's the key on the last call. We had stated that.
Speaker Change: In 2023, we moved over $1.3 million down into salaries are just because of the fact that we weren't as productive as we want it to be so so results in Q1, where we're very strong there in terms of optimization, we don't anticipate at this time, making any further.
Speaker Change: The reductions were right sized right now a year over year from the efforts and the moves we made in 2023, we're expecting to to recognize.
Speaker Change: $8 million and 24 of savings from a G&A standpoint, and in Q1, we've already recognized a $2 $8 million versus Q1 of 'twenty. Three so we feel we're in a great place and.
Speaker Change: We've lowered the breakeven level for the company, which is which is key and we do not anticipate making additional cuts at this at this time now that being said, we're always looking at expenses overall expenses in and shrink trimming where we can.
Speaker Change: Is there anything you'd add to that.
Speaker Change: I think they like that potentially add Anthony is just during the first quarter that continued to be some reductions, but generally when we hit the end of the first quarter that was the that.
Speaker Change: It was where we got to the head count levels, we were looking to get to.
Speaker Change: So I'm just wondering what is your thinking about paying that go on go on further out yeah. There are the first quarter contains a little bit high.
Speaker Change: On the G&A side.
Speaker Change: Would be further reductions expected for Q2, but by the time, we got to the end of the quarter, we were kind of at exactly the levels, where or what can it get to.
Speaker Change: Okay, Great. That's good color. Thanks, guys I'll hop back in the queue appreciate it.
Speaker Change: Thank you and the next question is coming from Erik Peter from SCC Research Eric Your line is live.
Eric Martin Beder: Good afternoon.
Eric Martin Beder: Talk a little bit about something besides the phases here commercial what are you seeing in terms of demand for the commercial business has it continued to be as robust and have you been able to continue to expand the services you can offer.
Eric Martin Beder: For that division.
Eric Martin Beder: We haven't expanded the services at all at this point any further.
Eric Martin Beder: Demand is remains strong.
Eric Martin Beder: The one area, where we're watching closely is the length of time I talked about it in Q4 as well, but the length of time.
Eric Martin Beder: That passes in between when we're being verbally awarded contracts and we're actually getting signatures.
Eric Martin Beder: And so far in Q1, it hasn't gotten worse, but it hasnt gotten better either so that's that's one area that we're watching closely but where the nice news is we're not losing.
Eric Martin Beder: So it would be one thing if we're losing kind of opportunities, but we're not losing so it's just a timing issue.
Eric Martin Beder: Our pipeline remained strong you know we don't publicly speak about the quantity of pipeline, but it remains strong and very qualified for sure.
Eric Martin Beder: And are you seeing when you look at kind of your top accounts here are you seeing them give you larger contracts going forward.
Eric Martin Beder: Saying is they kind of like because I know the commercial is a little bit it's not as much of a one off and maybe sometimes as the cannabis business can be so are you seeing that trend continue.
Eric Martin Beder: We have seen that trend continue over our progress over the last year not in Q1, you know the we then we hit a lot of solid singles in Q1, but no triples, or homeruns and hence the backlog backed off a little bit 10% right sequentially.
Eric Martin Beder: But hitting a lot a lot of add on contracts to existing projects, where they increased the scope.
Eric Martin Beder: And some new smaller projects, but on the larger ones. So we do have some that are close and we believe that we will secure them, but we don't have the signatures yet.
Eric Martin Beder: But no no real material increase in size in Q1 to report yet.
Eric Martin Beder: Sure.
Eric Martin Beder: We get an update on Europe, what are you seeing in terms of trends there I know.
Eric Martin Beder: There's been talk about Germany, what what are you seeing in terms of the European business.
Eric Martin Beder:
Eric Martin Beder: Going forward.
Eric Martin Beder: But overall in Germany, [laughter] slow and steady right at it they're just coming into themselves. They made that announcement a couple of months ago that social license is to start so theres no requirement for the design and build a significant sized facilities overall and in Europe.
Eric Martin Beder: For us.
Eric Martin Beder: The demand is remains weak.
Eric Martin Beder: We talked on the last call about right sizing the organization in Europe.
Eric Martin Beder: Lining the the X.
Eric Martin Beder: <unk> structure with the size of the the opportunity right now but.
Eric Martin Beder: That all being said, we believe we've right sized that there's definitely a business that can be had in Europe, we want to be a part of the European.
Eric Martin Beder: Out of this and also in the future vertical harming market.
Eric Martin Beder: Turning to grow a lot from our Canada standpoint, a lot of the CEO is a multistate operators, who are expanding into the European market have.
Eric Martin Beder: Significant forecast for where that market's going to grow over the next decade. So we know we want to be there that being said.
Eric Martin Beder: In Q1, there was no additional new contracts signed in Europe. However, we did have a nice services contracts.
Eric Martin Beder: Contract signed in Q2, so far so.
Eric Martin Beder: We expect to continue signing contracts, but we don't expect any robust material improvement.
Eric Martin Beder: And the business throughout the remainder of the year.
Eric Martin Beder: Yeah.
Speaker Change: Okay, Alright, thank you and congrats.
Speaker Change: Thank you I appreciate it.
Speaker Change: Thank you there were no other questions at this time and that does concludes today's conference you may disconnect. Your lines at this time and have a.
Speaker Change: Wonderful day, Thank you for your participation.
Speaker Change: Thank you.