Q4 2024 Curaleaf Holdings Inc Earnings Call
Good day and welcome to the cure leaf holdings fourth quarter and fiscal year ended 2024 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone and to withdraw your question. Please press Star then two please.
Please note that this event is being recorded.
Speaker Change: I would now like to turn the conference over to Camilo Lyon Chief Investment Officer. Please go ahead good.
Speaker Change: Good afternoon, everyone and welcome to secure leaf holdings fourth quarter and year end 2024 conference call.
Speaker Change: Today, I'm joined by <unk>, Chairman and Chief Executive Officer, Boris Jordan.
Speaker Change: And Chief Financial Officer, Ed Kramer.
Speaker Change: Before we begin I'd like to remind everyone that the comments on today's call will include forward looking statements within the meaning of Canadian and U S securities laws, which by their very nature.
Speaker Change: <unk> estimates projections plans goals forecasts and assumptions, including the successful integration of acquisitions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward looking statements on certain material factors or assumptions that were applied applied in drawing a conclusion or making a forecast in.
Speaker Change: Such statements.
Speaker Change: These forward looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. We undertake no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise, except as required by applicable law additional information about the material factors and assumptions.
Speaker Change: Since forming the basis of the forward looking statements and risk factors can be found in the company's filings and press releases on SEDAR and Edgar.
Speaker Change: During today's conference call in order to provide greater transparency regarding Chile's operating performance, we will refer to certain non-GAAP financial measures and non-GAAP financial ratios that involve adjustments to GAAP results.
Speaker Change: Such non-GAAP measures and ratios did not have a standardized meaning under U S. GAAP.
non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by U S. GAAP should not be considered measures of purely liquidity and are unlikely to be comparable to non-GAAP financial measures provided by other companies.
Speaker Change: Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable U S. GAAP financial measure under the heading reconciliation of non-GAAP financial measures in our earnings press release issued today and available on our Investor Relations website at IR Dot cheer leaf dot com.
Speaker Change: With that I'll turn the call over to chairman and CEO, Boris Jordan Force.
Speaker Change: Thank you Camilo good afternoon, everyone and thank you for joining us to discuss our fourth quarter and full year results 2024 was a pivotal year procure leaf mark by decisive actions to reset our business and strengthen our foundation for long term growth.
Speaker Change: Despite an industry wide average price compression of 14% our diversified geographic footprint helped stabilize revenue versus 2023, demonstrating the resilience of our strategy. In 2024 revenue was 134 billion flat to last year adjusted gross margin increased by 160 basis points to 48% driven by.
Speaker Change: Successful initiatives to improve the efficiency and productivity in our operations adjusted EBITDA for the year was $301 million also flat to last year in the fourth quarter, we generated revenue of $331 million up slightly sequentially and down 4% over last year price compression was most pronounced.
Speaker Change: Comps in our larger markets of Pennsylvania, Illinois, and New Jersey, which had an outsize impact on revenue.
Speaker Change: That said, we remain focused on enhancing our profitability as was evident in our fourth quarter adjusted gross margin of 48%, marking a 150 basis point increase over prior year fourth quarter, adjusted EBITDA was $76 million, resulting in a 23% EBITDA margin. We ended the year with $107 million in <unk>.
Speaker Change: Cash on the balance sheet and generated operating and free cash flow from continuing operations of $163 million and $70 million respectively.
<unk> demand remains healthy as seen by the rapid expansion of the <unk> market and the persistence of the illicit market helps legal status has made cannabis more accessible and affordable operating free from that heavy burdens of regulations and taxation experienced in the regulated market. Meanwhile, excessive federal regulations.
Speaker Change: Stalled legislative efforts have stifled the natural growth of the regulated industry. However, with a new administration in place there is renewed optimism for meaningful reform that could unlock the regulated industries full potential.
Speaker Change: Since stepping into the CEO role last August I have taken a deep dive into every facet of the company and see tremendous opportunities ahead, while the road to excellent takes time I'm confident that with the right team in place currently fits firmly on the path to expanding its leadership position my first priority was to amplify our <unk>.
Speaker Change: Strength diagnosed the challenges and stabilize the business. Our goal we have successfully achieved now we're focused on executing the core elements of the return to our roots program introduced last quarter, which is already taking shape and will be a key driver of our performance in 2025.
Speaker Change: The roots initiative is designed to reignite organic growth enhanced margin and cash flow generation and strengthen our balance sheet by reducing leverage.
Speaker Change: I want to underscore that the foundation of this program is my team's unwavering focus on improving our flower quality.
Speaker Change: <unk>, our flower offering with new and proprietary strange will spark far reaching benefits to all aspects of our business and this is where I see the greatest opportunity to drive profitable growth in the face of pricing headwinds during the last two years, we effectively strengthened our value flower offerings to meet consumer demand for lower priced options as <unk>.
Speaker Change: <unk> is a top four brand now.
Speaker Change: This led to an imbalance in our portfolio as we lacked a strong presence in the premium flower category, particularly in two of our largest markets beginning in the second quarter, we will reestablish balanced by significantly expanding our premium flower offerings.
Speaker Change: Let's dive into the three pillars of our roots initiatives organic.
Speaker Change: Growth our strongest growth engines in 2024 International in New York, and Ohio are poised to lead our growth efforts in 2025. The investments we've made over the past three years in our international segment began paying dividends last year as evidenced by impressive 73% growth, surpassing the $100 million revenue milestone.
Speaker Change: Our dominant position in Germany positioned us to leverage the country's expanded medical program, which launched last April by optimizing the strong awareness of our high end brand for 'twenty, we fully capitalized on the accelerating demand for medical cannabis last fall, we added to our portfolio with the introduction of our mid.
Speaker Change: Priced at value flower brands, surely wala, which have made which have been met with enthusiastic consumer response.
Speaker Change: In the UK, we further solidified our number one market share position by expanding our offering of high quality safe and tested brands with the introduction of grassroots and find flower a proprietary technology allowed us to provide unmatched customer service, helping to expand our patient base significantly.
Speaker Change: Our UK clinical research team had an exceptionally impactful year publishing 15 internationally peer reviewed studies that harness real world clinical data and winning three awards. Our lab based research program aimed at improving the efficacy of the medicines, we offer our patients has progressed towards internal.
Speaker Change: Clinical study designed to be equivalent to a phase one trial.
Speaker Change: Our research covering critical topics like neuropathic pain, and 80 billion market globally is advancing scientific understanding and increasing awareness of the therapeutic benefits of cannabis on a global scale the.
Speaker Change: The acquisition of NGC a premier Canadian.
Speaker Change: Canadian indoor flower supplier granted us access to three new markets, Australia, New Zealand and Canada, furthering our international reach we have high aspirations for our international business in 2025 and beyond.
Speaker Change: In New York, and Ohio, our teams executed a well orchestrated plan to capitalize on the adult use conversion in both markets. The New York team manage the adult use conversion well through our retail and wholesale channels. We opened two adult use stores and two medical stores, but maintained our focus on expanding our wholesale penetration, which at year end stood at <unk>.
50% the team's dedication effort drove an impressive 50% growth in the state for the year led by strong triple digit growth in wholesale we expect the market will continue to develop at a solid pace in 2025, and we will be sure to build on our leadership position in our home state.
Speaker Change: Ohio's adult use cannabis sales commenced last August and our team was fully prepared to welcome new customers as a result, the Ohio team delivered an impressive 96% growth in the second half of 2024 compared to the previous year. This achievement is even more notable given the challenges posed by the overly restrictive and outdated.
Speaker Change: <unk> that prohibit marketing.
Speaker Change: Looking forward, we expect to see continued solid growth this year and the Buckeye state fueled by the addition of three new stores in the first half of 2025, followed by another three in the second half.
Speaker Change: I'm excited to share a glimpse into our product and innovation pipeline leading into 2020.
Speaker Change: First is our new cylindrical style pre roll brand anthem anthem is the pre roll that connects cannabis to the classic American lifestyle. Thus far we have not played in the pre rolled category to a meaningful degree however, anthem will be the vehicle with which we intend to dominate the category.
Speaker Change: From high quality curated flower blends to impeccable packaging design no detail has been overlooked in fact, we have been sampling the product in New York and New Jersey ahead of our formal launch in April and the early reception has been superb to quarter retail partner anthem is a game changer for the.
Speaker Change: The last few years, we have been refining our groundbreaking ace oil processing technology and advanced aqueous extraction method designed to deliver the cleanest clearest and smoothest oil on the market over the next two weeks, we'll be launching <unk> across multiple markets with deployments in New York, New Jersey, Massachusetts, and Florida and.
Speaker Change: More on the horizon with Aces Revolutionary technology, we are poised to set a new industry standard in the vape category by redefining quality and purity and oil production, we believe <unk> will be a disruptive technology and the distillate market.
Speaker Change: Last year, we successfully launched our hemp derived THC line of Celsis and gummies.
Speaker Change: Marking another major milestone for our business.
Speaker Change: We were the first to partner with door Dash and we recently secured placement in over 100 total wind locations across nine states, including Florida, Texas, North Carolina, South Carolina, Arizona, New Jersey, with even more states expected to follow in the coming months. We have also partnered with Austin city limits as the exclusive provider of THC beverages, serving.
Consumers looking to enjoy live music acts.
Speaker Change: Without a hangover.
Speaker Change: Feedback on our soldiers has been fantastic while the hemp category is still in its infancy. The momentum is undeniable the robust demand signals from both customers and distributor distributor partners reinforce our confidence in its long term potential.
Speaker Change: We are actively expanding our distribution network with carefully selected partners and we will announce new collaborations as they unfold.
Speaker Change: Beyond expanding our distribution footprint. We're also testing innovative category extensions in our beverage line to complement our sensors. We are launching our next slide of drinks called Formula X within the next two weeks a fast acting flavor filled 10 milligram THC experience with the added boost of caffeine for the daytime Festival go.
Speaker Change: Or extreme sports fan.
Speaker Change: To the nighttime E kamer.
Speaker Change: Though the current revenue contribution is modest we have ambitious expectations for the role our hemp line will play in driving future growth.
Speaker Change: Market is rapidly evolving offering significant opportunities without the regulatory constraints of the traditional cannabis industry.
Speaker Change: Stay tuned we will have more to share in the coming quarters.
Speaker Change: Optimizing our margins and cash flow generation at our core we understand the long term success requires becoming the lowest cost producer, while delivering the highest quality products at scale.
Speaker Change: Over the past year, we've made significant strides in achieving this balance by holding our operational efficiency as a result, our average yields per square foot increased by an impressive 19%.
Speaker Change: All while enhancing potency Budd structure and density these gains are driven by a comprehensive overhaul of our sapienza across all cultivation facilities, ensuring that the highest quality standards are consistently maintained and.
Speaker Change: In addition, we implemented packaging automation and upgraded lighting across multiple locations both of which have contributed to lower Cogs. The impacts of these efforts are just starting and we anticipate greater efficiencies and cost reductions throughout 2025.
Speaker Change: On the retail front, we commenced a SKU rationalization program to streamline our product offerings, simplifying the buying process and driving higher sales velocity, while reducing slow moving inventory.
Speaker Change: Beyond inventory optimization, we see substantial opportunities to refine our merchandising pricing and promotional strategies within our dispensaries further strengthening margins and cash flow generation. While we are still in the early stages of these initiatives. The results. So far are encouraging these strategies are essential levers to counter.
Speaker Change: Ongoing price compression and industry challenge that shows no signs of easing by.
Speaker Change: By staying proactive and data driven we are positioning ourselves for sustained profitability and growth.
Speaker Change: Reducing inventory remains a top priority not only.
Speaker Change: To enhance margins, but also to accelerate our cash conversion cycle, while our domestic inventory remained flat year over year, we are committed to making significant process and streamlining our stock levels and operating with greater efficiency. This year. Our focus is on driving meaningful reductions ensuring a leaner more agile inventory approach.
Speaker Change: <unk> that supports both profitability and financial flexibility.
Speaker Change: De levering the balance sheet.
Speaker Change: As I've stated before we remain laser focused on driving cash generation and strategically deploying excess cash flow to reduce our balance sheet debt last year, we strengthened our balance sheet by reducing outstanding notes and acquisition related debt by $60 million. Our approach remains disciplined and opportunistic we will continue to capitalize on favorable opportunities.
Speaker Change: To deliver de lever the balance sheet in advance of our refinancing, which we expect to complete in the second half of the year.
Speaker Change: <unk>, our financial position remains a top priority as we drive towards long term stability and growth.
Speaker Change: Lastly, we took the opportunity to upgrade leadership, where needed ensuring that we have the right team in place to drive the business forward with every new hire we have strengthened our organization and enhancing our ability to execute at the highest level <unk>.
Speaker Change: Collectively these changes have helped rebase the business positioning us for sustained growth and long term success.
Speaker Change: I want to express my deepest gratitude to our exceptional global team for their unwavering dedication in achieving these outstanding results. The complexity of our business demands nothing less than full commitment and each of you have risen to the challenge. The success is a true testament to our collective effort and I deeply appreciate your relentless drive competitive spirit and hard.
Speaker Change: Work together, we're not just building a company we are shaping <unk> into the global leader in cannabis with that I'll turn it over to our CFO Ed Kraemer.
Ed Kraemer: Thanks Boris.
Ed Kraemer: Total revenue for the fourth quarter was $331 million, representing slight growth over the third quarter and a 4% decrease compared to the same period last year.
Ed Kraemer: Strength in the International New York, and Ohio was offset by pressure in Arizona, and New Jersey and Connecticut.
Ed Kraemer: National revenue grew by 70% year over year, driven primarily by Germany, and the U K, coupled with our entry into other international markets.
Ed Kraemer: By channel retail revenue was $247 million compared to $277 million in the fourth quarter of 2023, a decline of 11% year over year, partially offset by strength in wholesale which increased 23% year over year to $82 million, representing 25% of total revenue.
Ed Kraemer: The surge in wholesale was driven by robust door expansion, coupled with strong sell through and Reorders, and New York, and Ohio market share gains and surely for international and increased quality of product availability of our brands for 2024 total revenue was $134 billion.
Ed Kraemer: That to prior year retail revenue of $1 billion decreased 6%, while wholesale revenue of $304 million increased 25%.
Ed Kraemer: We opened a total of seven stores, including five in Florida, two in New York and relocated one in Arizona.
Ed Kraemer: Touching on our market share select continues to be the number one brand in the market. According to BSA as we continue to offer innovation to our customers and overall our brand portfolio enjoys the number two market share position, but we are not satisfied.
Ed Kraemer: By priorities prioritizing a greater mix of premium flower in our assortment, we will drive significant benefits across our entire business strengthening our market share and overall competitive position.
Ed Kraemer: While we continue to experience price compression in many of our states. The work we have done to improve efficiencies in our cultivation facilities more than offset that margin pressure.
Ed Kraemer: To this point, our fourth quarter adjusted gross profit was $159 million, resulting in a 48% adjusted gross margin an increase of 150 basis points compared to the prior year period. In addition to strong cultivation productivity and efficiency gains and increase in vertical mix and disciplined labor expense controls were the primary drivers of the <unk>.
Ed Kraemer: <unk> expansion. These gains were partially offset by price compression in certain states.
Ed Kraemer: For the year, our adjusted gross profit was $644 million, resulting in a 48% adjusted gross margin an increase of 160 basis points compared to the prior year.
Ed Kraemer: <unk> expenses were $101 million in the fourth quarter, an increase of $3 million from the year ago period core SG&A was $96 million.
Ed Kraemer: An increase of $5 million from the prior year.
Ed Kraemer: Year over year increase in our core SG&A, primarily reflects international expansion the launch of our <unk> Division and new store openings in Florida, and New York Core SG&A was 29% of revenue in the fourth quarter, a 280 basis point increase compared to the prior year due to the aforementioned investments coupled with lower revenue for the year SG&A and <unk>.
Ed Kraemer: Ne was $422 million and 404 5 million respectively.
Ed Kraemer: As a percent of sales force G&A was 30%.
Ed Kraemer: Fourth quarter net loss from continuing operations was $72 million or a loss of <unk> 11 per share. Excluding one time noncash impairments of $80 million related to certain lease and facility impairments. Adjusted net income from continuing operations was $12 million or a gain of <unk> <unk> per share.
Ed Kraemer: For 2024 net loss from continuing operations was $216 million or a loss of <unk> 31 per share excluding onetime noncash impairments adjusted net loss from continuing operations was $117 million or a loss of <unk> 16 per share.
Ed Kraemer: In the fourth quarter, adjusted EBITDA was $76 million, a decrease of 9% compared to last year and an increase of 1% sequentially fourth.
Ed Kraemer: Fourth quarter adjusted EBITDA margin was 23% a decrease of 110 basis points versus last year, and an increase of 10 basis points sequentially.
Ed Kraemer: Our international segment profitability is improving however margins remain below the corporate average and thus weighed on fourth quarter EBITDA by 130 basis points. In addition, our hemp business weighed on the EBITDA margins by 50 basis points.
For the year adjusted EBITDA was $301 million and adjusted EBITDA margin was $22 four a decrease of 20 basis points compared to the prior year.
Ed Kraemer: Now turning to our balance sheet and cash flow.
Ed Kraemer: We ended the quarter with cash and cash equivalents of $107 million inventory increased $5 million or 2% compared to last year's fourth quarter due to growth in our international segment, our domestic inventory was down slightly compared to last year.
Ed Kraemer: Capital expenditures in the fourth quarter were $28 million, bringing the total spend for the year to $93 million. The incremental expenditures were driven by investments in led lighting automation to support the rollout of our new pre roll brand anthem and facility upgrades, primarily in Florida, a market, where we have significantly underrepresented in.
Ed Kraemer: Premium flower segment.
Ed Kraemer: These investments will support our growth initiatives around our flower program in the Sunshine state as well as the deployment of our technology. Some of these investments have already begun yielding improvements across our facilities and our key driver to the enhanced margins, we just beginning to realize.
Ed Kraemer: For 2025, we expect capital expenditures to be roughly half of 'twenty four levels.
Ed Kraemer: The primary buckets of investments include international automation relocation and renovation of existing stores, coupled with new dispensary openings in select locations and it infrastructure.
Ed Kraemer: For the full year.
Ed Kraemer: 2024, we generated operating and free cash flow from continuing operations of $163 million and $70 million respectively.
Ed Kraemer: Our outstanding debt was $569 million.
Ed Kraemer: During the year, we reduced our acquisition debt by $45 million and repurchased $50 million of our boss, we intend to further reduce various components of our debt by a similar amount of approximately $60 million this year, while maintaining ample liquidity to support our operations and growth objectives.
For the first quarter due to normal seasonality, we expect that revenue to be down mid single digits sequentially sequentially from the fourth quarter and with that I'll turn the call back over to the operator to open the line for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Ed Kraemer: If you are using a speakerphone please pick up your handset before pressing the keys.
Ed Kraemer: Anytime a your question has been addressed and you would like to withdraw your question. Please press Star then two.
Ed Kraemer: In the interest of time, please limit yourself to one question.
Ed Kraemer: We'll now pause momentarily to assemble our roster.
Speaker Change: And your first question today will come from Aaron Grey with Alliance Global Partners. Please go ahead.
Speaker Change: Good evening and thank you for the question.
Speaker Change: So first question for me or question from me wanted to touch on International Boris You mentioned aspiration for 2025 and beyond.
Speaker Change: One of the leaders there today, but there's a number of potential changes that could come including potential changes with the government in Germany. So it'd be great. If you could touch on the outlook for international where do you see the most opportunities and then also if you're seeing increased competition within the environment as we're seeing more and more operators increasingly target those markets. Thank you.
Thank you Aaron.
Speaker Change: So I'd like to start with Germany.
Speaker Change: Moment, and obviously, it's a political environment. So it's always very difficult to predict but at the moment from what we're seeing there will be no change to the medical program in Germany.
Speaker Change: It's been mentioned by several of the politicians on both parties that are negotiating a government right now so both the <unk> and.
Speaker Change: And the Greens, both said that they want to maintain.
Speaker Change: The current status quo in the medical program. So we don't.
Speaker Change: Anticipate any change of course again as I said, it's a political environment and things can always.
Speaker Change: Move around but at the moment it looks as though we're not expecting to change medical program. They will however, we believe they will probably have some changes to the adult use timetable in other words I think it will be slowed down substantially from our perspective, that's actually a positive we prefer the medical program as it stands now so from that perspective, we're happy.
Speaker Change: Overall competition is rising in Europe.
Speaker Change: A tremendous amount of flower coming out of out of Canada, that's being shipped over so theres definitely price competition. However, we've actually expanded margin even in that situation in Europe quite substantially.
Speaker Change: From from earlier.
Speaker Change: 2023, and 'twenty early 2024 to the end of 2024, and we expect margins to continue to expand in Europe in 2025 for several reasons. One is our product offerings are at the upper end of which is the higher margin product and more importantly.
Speaker Change: Hum.
Speaker Change: Our scale right, so as our scale and revenues.
Speaker Change: Obviously, we're picking up some of the fixed costs.
Speaker Change: We have in the business and so as this business continues to grow we anticipate that the margins will continue to improve in Europe.
Speaker Change: Okay, great. Thanks for that I'll jump back in the queue.
Frederic Gomez: And your next question today will come from Frederic go Gomez with ATB capital markets. Please go ahead.
Frederic Gomez: Hi, good evening and thanks for taking my question a question on the hemp derived market.
Frederic Gomez: Thank you very bullish on that market.
Frederic Gomez: We're also seeing all the msos against investing in that market do you believe that this standoff regulated cannabis companies investing in enhanced capabilities and launching product is going to continue.
Frederic Gomez: Does it make sense to make.
Frederic Gomez: Make any positions in the hemp derived space. Thanks.
Frederic Gomez: I missed the second part of the question.
Frederic Gomez: If it makes sense to make any acquisitions in the hemp derived space brands or capabilities.
Frederic Gomez: So.
Frederic Gomez: So one our view is that.
Frederic Gomez: There is still some risk in the hemp derived market given that the farm Bill was only extended by one year and so we know that there will be debate around the farm Bill later this year, we anticipate that they will try to finalize.
Frederic Gomez: The new farm, Bill, which will be a five year.
Frederic Gomez: La is reviewed every five years and so we're taking a cautiously optimistic view right now but cautiously in other words, we don't know how this will end up again, it's a political process.
Frederic Gomez: We have to see how the political process pays out the good piece of news is I think that at the moment the beverage side of the house Bill looks as though it will likely be okay.
Frederic Gomez: Largely because there's a tremendous amount of players there's a lot of vested interests a lot of lobbying on that side of it including very large companies I'm sure you saw some of the comments from the CEO of Boston Brewing and others about the hemp derived market.
Frederic Gomez: Comments bye bye.
Frederic Gomez: By some of the distributors, saying that it is now accounting for 5% to 10% of their business and so it's a very substantial part of the market and it's growing it's one of the fastest growing segments in beverage in the United States right now it's a matter of fact I think it is the fastest growing segment in beverage, it's even overtaken non out so I think that beverage is likely to be okay.
Frederic Gomez: And the farm Bill now however, some of the other products.
Frederic Gomez: Or there'll be worst synthetics and other products are being used in that in that market like the vape market and others frankly, we think that there may be some rollback, there and we would be supportive of that because we think some of these unregulated companies are using products.
Frederic Gomez: These different or ingredients in some of these products that are.
Frederic Gomez: Shouldn't be used and should be.
Frederic Gomez: Legislated a regulated out and so we think that it'll be bifurcated, we think that on the one hand, we think beverage will make it on the other hand, we think that some of that.
Frederic Gomez: Some other products may be restricted out of the market in terms of acquisitions I think that at the moment, we think the markets wide open a lot of the big distributors are looking forward to our products.
Frederic Gomez: And like our products because we are a large company we can supply them on a regular basis, we're only using natural derived products no synthetics and our products at all where age gating and so they want to see players like us in the marketplace.
Frederic Gomez: And so we feel like organic growth right. Now is okay. We're launching new products. As we said we were going to be launching formula acts and energy drink. We have some other products coming in the second quarter as well and so we intend to have a full line of beverages launched across across the marketplace and so at this moment, we're not looking at any acquisitions also committing capital in that environment.
Frederic Gomez: We don't have a farm final farm Bill.
Frederic Gomez: Probably not the smartest thing for us to do right now and so we're doing this organically and we're focusing on organic growth in this segment until we have more visibility into legislation around the farm Bill.
Frederic Gomez: Great. Thank you very much for the call.
Speaker Change: And your next question today will come from Russell Stanley with Beacon Securities. Please go ahead.
Russell Stanley: Good afternoon. Thanks for taking my question, maybe shifting to New York, Congrats and I'll clarify I wondering if you could talk about how wholesale margins are performing and how they're trending data need to be price competitive.
Speaker Change: Thank you for your competition.
Speaker Change: Scalable cloud capacity as soon as quite lumpy or how you're handling this call. Thanks.
Russell Stanley: So it's a great question Russell because in fact, its a very moving target at the moment. So I would say that for most of 2023, sorry 2024, the market had fairly strong margins in large demand.
Russell Stanley: And so we saw pretty good penetration and growth in our wholesale business in New York, even against some headwinds are focused on the fact that you know we were the ones who sued the state to get us into the program and so there was some.
Russell Stanley: Some of the card licensees.
Russell Stanley: We're disappointed with the.
Russell Stanley: The msos coming into that marketplace, but we've gotten over that and we're working with all of them and working very very cooperatively with all of them.
Russell Stanley: And so I'm I'm bullish on the New York market I think the New York market will continue to expand the state has announced that they will move to a seed to sale model sometime in the third quarter that will obviously change the picture because what we saw in February was a massive dump of 30000 pounds of fully pack.
Russell Stanley: California flower into the regulated market in New York as a matter of fact, we expect the study to be issued where we financed the study together with some of the other companies about this illegal trade about whats going on where California product is arriving into New York getting stamped by New York wholesalers and allowed to be entered into the <unk>.
Speaker Change: Graham, which obviously hurts the regulated program because this is nonregulated candidates coming out of California, and other parts of the country, Oklahoma, and California and being sold in the regulated program because of a lack of seed to sale regulation now once that seed to sale regulations enacted in the third quarter, we anticipate that it'll be more difficult.
Speaker Change: For them or virtually impossible for that kind of flower to enter the marketplace. However, we're not waiting for the third quarter and we're moving on this now we're making the regulators are aware of this and we're certainly.
Speaker Change: Hello, Jeff Televising this widely to anyone that would listen that you've got this illicit product thats entering the regulated market in New York, but otherwise the New York market is very healthy and continuing to expand.
Speaker Change: Your next question today will come from Matt Bottomley with Canaccord Genuity Genuity. Please go ahead, yes. Good evening, everyone just wanted to touch on.
Speaker Change: The potential for whether it's an administrative catalyst or or things that might impact sector sentiment just given that since Trump appointment appointees came in I think it's largely been disappointing to some investors expectations.
Speaker Change: Obviously, he was pretty pro cannabis.
Speaker Change: Running four.
Speaker Change: For President this year. So I'm just curious if you think.
Speaker Change: With the new D. I had in sort of these delayed hearings now potentially to the springer or after if theres sort of anything for investors to maybe keep keep track of that might be underappreciated and how that might impact at all.
Speaker Change: So your timing of our refinancing just depending on where we are overall sentiment is at that point.
Speaker Change: This is my position on this hasn't changed.
Speaker Change: Not want to speculate.
Speaker Change: My position is very simple right President Trump now.
Speaker Change: During his campaign indicated the three things that he would support that was adult use in Florida that was banking and rescheduling.
Speaker Change: I believe that President Trump will support and all those three things now obviously with Florida, that's past us now, but with the other two my personal belief is that he will supported that he will.
Speaker Change: Ministration will push it forward.
Speaker Change: And obviously, we're working with the administration, we're not planning our business around it but we do I do certainly believe that he will follow through on his commitments. So far it seems as though he is following through on most of his commitments.
And I believe you will fall through on this one the timing of which is very difficult to tell because these things take time.
Speaker Change: <unk>.
Speaker Change: As a cabinet members have literally especially the ones involved in cannabis have just been ceded within the last week, maybe 10 days. So I think it will take some time for them to get to this issue given all the other issues that they have.
Speaker Change: Thanks Mark.
Speaker Change: And your next question today will come from Bill Kirk with Roth Capital Partners. Please go ahead.
Bill Kirk: Good evening everybody.
Bill Kirk: Could you talk about the competitive marketplace in Florida, particularly.
Bill Kirk: Then after the failed initiative.
Bill Kirk: Have you seen from folks to maybe put some capital in the ground in hopes of a better about results and then on the political side in Florida, There's already been a number of changes Governor C coming up what do you see as maybe the next steps for the state to continue toward adult use.
Bill Kirk: So I think that the.
Bill Kirk: Market is quite stable as a matter of fact, we are seeing some growth in the Florida market at the moment largely driven by the fact that with two factors one is seasonality so fourth quarter and first quarter always a strong in Florida due to snow birds and a lot of activity in the Florida market from tourism this time of year.
Bill Kirk: And so that does give a boost to the Florida market.
Bill Kirk: Secondly, we have not seen the price competition as aggressive as we were planning for after the failed adult use everybody seems to be holding pricing reasonably well. There is some player in some of the smaller players may be at a discount a little bit more but overall I would say that the Florida market is showing signs of health.
Bill Kirk: Low low single digit growth over the.
Bill Kirk: The fourth quarter and going into the early part of the first quarter. So overall Florida's looks pretty good in terms of what happens next I think it's too early to tell.
Speaker Change: Governor just anthos is stepping down we know that one covenant to Santos is there we're not expecting any favorable rulings of any kind on cannabis there may be some negotiations around some aspects of medical but the industry continues to want to get adult use through and so there is an initiative to try to get adult use through in 2020.
Bill Kirk: And we will continue to work in that direction.
Speaker Change: Thank you boss.
Speaker Change: And your next question today will come from Eric <unk> with Craig Hallum Capital Group. Please go ahead.
Alright, Thank you for taking my question.
Speaker Change: For the push into premium flower it sounds like some nice improvements on yields thus far just wondering what else remains to be done for this for.
Speaker Change: This push into premium here, it's just a matter of building up inventory at this point or are there any more.
Speaker Change: More investments planned for 2025 on this front.
Speaker Change: No actually we're going to be bringing down capex quite substantially really most of the automation most of the lighting equipment modifications systems have been upgraded during 2024.
Speaker Change: And as it does most of the genetics are now in the grow houses.
Speaker Change: And are being grown and so it's a matter of building up inventory to get into that market and thats. A very good question because literally in two of our largest markets 200 plus million dollar revenue markets, we were largely absent in that category.
Speaker Change: <unk>.
That was.
Speaker Change: Our miss in the previous team.
Speaker Change: Team, it's something that we discovered during our deep scrums in terms of where we're positioned and thats the highest margin business and so we believe that that will transform our business in those two states in particular, some other states we have pretty good we have good positioning and premium but overall, we are really really focused on that.
Speaker Change: <unk> segment, and increasing it and we think premiums should account for somewhere around 20% to 25% of our revenue in our largest states and as I said, our two largest had zero premium.
Speaker Change: Offerings and so now we will be introducing those in early April.
Speaker Change: Great. Thanks for the question.
Speaker Change: And your next question today will come from Pablo <unk> with <unk> Associates. Please go ahead.
Speaker Change: Thank you Luca if I may have I want to ask a two part question, but first in terms of our international and wholesale that was down 5% sequentially inputs in Germany were up 50% in the fourth quarter. If you can just give some context to the decline.
Speaker Change: Are there supply chain issues or just increased competition that would help and then separately maybe for Ed go ahead sorry.
Speaker Change: It was purely FX.
Speaker Change: Okay purely FX alright.
Speaker Change: Just got four reported maybe Boris I'm just looking at you are dead right you've talked about refinancing you have $100 million due in 25 $460 26.
Speaker Change: I'm, just wondering about how the banks or the potential lenders or those that we need to refinance for you.
Speaker Change: How are they going to think about the tax that I know that most companies are following the same blueprint right delay.
Speaker Change: Delaying.
Speaker Change: Filing is it normal corporation delay.
Speaker Change: Turning to AE, but that that is still on the books and the one thing thats not create problems when it comes down to refinancing the other day.
Speaker Change: Sure.
Speaker Change: Hey, Pablo good question I'm going to defer the second part the board he'll talk about the more macro refi that we've all been working on but on the $101 million a lot of that youre going to see in the Q to Q1 numbers are going to be substantially lower some of the things that had been paid off literal.
Speaker Change: Literally it's a cut off at the end of the year and some of these things have been done in January so youre going to see that that number would be substantially lower on the current liabilities at the end of Q1 and.
Speaker Change: And we're going to continue to pay down acquisition debt.
Speaker Change: We anticipate somewhere between $65 million to $75 million.
Thats going to be reduced going into the end of this year on the acquisition side. So we're continuing to deleverage as we did last year the balance sheet and getting rid of all of the acquisitions that we've had back from the 2020 'twenty one 'twenty two 'twenty three period on the overall refi frankly, we're seeing very very strong.
Speaker Change: <unk> demand.
Speaker Change: We are not in the market yet because we have a call premium until June 30th and so we really can't be in the market until July would that issue, but we have started to talk to investors. We have started to talk to banks and at the moment of course are subject to macro environment. The debt market is strong and we are.
Speaker Change: Seeing very very strong support for a refinancing of our debt.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: We will conclude our question and answer session I would like to turn the conference back over to Camilo Lyon for any closing remarks.
Camilo Lyon: Thanks, everyone for dialing in and we will talk to you again in early May I have a great night.
Speaker Change: Yes.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [music].