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 to withdraw your question. Please press Star and then two.
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.
Speaker Change: Afternoon, everyone and welcome to securely holdings fourth quarter and year end 2020 for our conference call.
Speaker Change: Today, I'm joined by <unk>, Chairman and Chief Executive Officer, Boris Jordan.
Ed Kramer: <unk> Chief Financial Officer, Ed Kramer.
Ed Kramer: 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.
Ed Kramer: <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.
Ed Kramer: Such statements.
Ed Kramer: 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.
Ed Kramer: 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.
Ed Kramer: During today's conference call in order to provide greater transparency regarding <unk> operating performance, we will refer to certain non-GAAP financial measures and non-GAAP financial ratios that involve adjustments to GAAP results.
Ed Kramer: non-GAAP measures and ratios did not have a standardized meaning under U S. GAAP.
Ed Kramer: Any 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.
Ed Kramer: 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.
Ed Kramer: 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 yield 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: First 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.
Speaker Change: Adam as demand remains healthy as seen by the rapid expansion of the hemp 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, excess of 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 shortly is firmly on the path to expanding its leadership position. My first priority was to amplify our <unk>.
Speaker Change: Frank's 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: Updating 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 five.
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.
Speaker Change: Organic 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 an impressive 73% growth surpassing the $100 million revenue.
Milestone 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.
Speaker Change: Mid priced and value flower brands purely 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 untested 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 our UK clinical research team had an.
Speaker Change: Separately 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 through an internal clinical study designed to be equivalent.
Speaker Change: Two 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.
Speaker Change: The acquisition of NGC a premier.
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 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>.
Speaker Change: 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 roll category to a meaningful degree however, anthem will be the vehicles 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've 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 them.
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 ace across multiple markets with deployments in New York, New Jersey, Massachusetts, and Florida and <unk>.
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 are expected to follow in the coming months. We have also partnered with Austin city limits as the exclusive provider of THC beverages, serving.
Speaker Change: Consumers looking to enjoy live music acts.
Speaker Change: Without a hangover.
Speaker Change: Feedback on our soldiers who has been fantastic while the home 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 seltzer as we are launching our next line 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 Gamer.
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 that 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 balanced 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 sop pizza across all cultivation facilities, ensuring that the highest quality standards are consistently maintained.
Speaker Change: In addition, we implemented packaging automation and upgraded lighting of course 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 the inventory optimization, we see substantial opportunities to refine our merchandising pricing and promotional strategies within our dispensaries.
Speaker Change: 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 counteract 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: 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: 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.
Speaker Change: 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 work together, we are not just building a company we're shaping purely into the global leader in cannabis with that I will.
Speaker Change: Turn it over to our CFO Ed Kraemer at Thanks Boris.
Ed Kramer: 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 Kramer: Strength in the International New York, and Ohio was offset by pressure in Arizona, and New Jersey and Connecticut.
Ed Kramer: National revenue grew by 70% year over year, driven primarily by Germany, and the U K, coupled with our entry into other international markets.
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 Kramer: 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 flat to prior year retail revenue of $1 billion decrease.
Ed Kramer: 6%, while wholesale revenue of $304 million increased 25%.
We opened a total of seven stores, including five in Florida, two in New York and relocated one in Arizona.
Ed Kramer: 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're not satisfied.
Ed Kramer: By prioritizing 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 Kramer: 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.
Ed Kramer: Pressure.
Ed Kramer: 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 Kramer: Expansion. These gains were partially offset by price compression in certain states.
Ed Kramer: 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 Kramer: SG&A expenses were $101 million in the fourth quarter, an increase of $3 million from the year ago period core SG&A was $96 million, an increase of $5 million from the prior year.
Ed Kramer: The 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 of course.
Ed Kramer: G&A was $422 million and 404 5 million respectively as.
Ed Kramer: As a percent of sales scores G&A was 30%.
Ed Kramer: 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 Kramer: For 2024 net loss from continuing operations is $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 Kramer: And our fourth quarter, adjusted EBITDA was $76 million, a decrease of 9% compared to last year and an increase of 1% sequentially.
Ed Kramer: Fourth quarter adjusted EBITDA margin was 22% a decrease of 110 basis points versus last year, and an increase of 10 basis points sequentially.
Ed Kramer: 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.
Ed Kramer: 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 Kramer: Now turning to our balance sheet and cash flow.
Ed Kramer: 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 Kramer: 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 Kramer: In premium flower segment.
Ed Kramer: 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 Kramer: For 2025, we expect capital expenditures to be roughly half of 'twenty four levels.
Ed Kramer: 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 Kramer: For the full year.
Ed Kramer: 2024, we generated operating and free cash flow from continuing operations of $163 million and 70 million respectively.
Ed Kramer: Our outstanding debt was $569 million.
Ed Kramer: 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.
Ed Kramer: For the first quarter due to normal seasonality, we expect 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.
Speaker Change: 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.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: Anytime your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: In the interest of time, please limit yourself to one question.
Speaker Change: 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 you know 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.
Speaker Change: Thank you Aaron.
Speaker Change: So I'd like to start with Germany.
Speaker Change: Momentum and obviously as the 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.
Speaker Change: In Germany.
Speaker Change: Ben.
Speaker Change: <unk> 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 it 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 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: Our scale right, so as our scale and revenues are.
Speaker Change: Rise, obviously, we're picking up some of the fixed costs that 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.
Speaker Change: And your next question today will come from Fred Rico Gomez with ATB capital markets. Please go ahead.
Speaker Change: Hi, good evening, Thanks for taking my question.
Speaker Change: On the hemp derived market it seems like you're very bullish on that market.
Speaker Change: We're also seeing other msos against investing in that market do you believe that this standoff regulated candidates company going back being enhanced.
Speaker Change: Abilities.
Speaker Change: <unk> products continue and second does it make sense to make.
Speaker Change: Make any positions in the hemp derived space. Thanks.
Speaker Change: I missed the second part of the question.
Speaker Change: If it makes sense to make any acquisitions in the hemp derived space.
Speaker Change: <unk> capabilities.
Speaker Change: So so.
Speaker Change: So one our view is that.
Speaker Change: 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 a new farm bill which will be a five year.
Speaker Change: 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.
Speaker Change: And 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.
Speaker Change: 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 them derive market comp.
Speaker Change: Comments bye bye.
Speaker Change: 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.
Speaker Change: And the farm Bill now however, some of the other products.
Speaker Change: 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.
Speaker Change: These are different or ingredients in some of these products that shouldnt be used and should be a law.
Speaker Change: Slated a regulated out and so we think that it'll be a bifurcated, we think that on the one hand, we think beverage will make it on the other hand, we think that some of that.
Speaker Change: 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.
Speaker Change: And like our products because we're 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.
Speaker Change: And so we feel like organic growth right now is okay. We're <unk>.
Speaker Change: 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 an environment, where we don't have a farm final farm Bill.
Speaker Change: 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.
Speaker Change: 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 how wholesale margins are performing and how they're trending data need to be price competitive.
Speaker Change: Thank you your competition as far as smaller scale and more cloud capacity as soon as quite lumpy or how you're handling this call. Thanks.
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.
Speaker Change: And so we saw.
Speaker Change: 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.
Speaker Change: Some of the card licensees.
Speaker Change: We're disappointed with the.
Speaker Change: 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.
Speaker Change: 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 pass.
Speaker Change: 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 regulation is 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 regulator aware of this and we're certainly.
Jeff: Hello, Jeff.
Jeff: Televising this widely to anyone that would listen that you've got this illicit product that's 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.
Speaker Change: Good evening, everyone. Just wanted to touch on you know the potential for you know, 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 and obviously he was pretty pro cannabis.
Speaker Change: Running for <unk>.
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 there's sort of anything.
Speaker Change: Investors should maybe keep keep track of that might be underappreciated and how that might impact at all.
Speaker Change: You know 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: Wanted to speculate.
Speaker Change: My position is very simple right President Trump now.
Speaker Change: During this campaign indicated the three things that he would support that was adult use.
Speaker Change: 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.
Speaker Change: The other two I my personal belief is that he will supported that he will his administration will push it forward.
Speaker Change: And obviously, we're all 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 is always following through on most of his commitments.
Speaker Change: 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: As is.
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.
Bruce: Thanks Bruce.
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 sales initiative.
Speaker Change: Have you seen from folks to maybe put some capital in the ground in hopes of a better about result, 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.
Speaker Change: So I think that the current market is quite stable as a matter of fact, we're seeing some growth in the Florida market at the moment are largely driven by the fact that with two factors one is seasonality so fourth quarter and first quarter always.
Speaker Change: Our strong in Florida, due to snow birds and a lot of activity in the Florida market from tourism this time of year.
Speaker Change: And so that does give a boost to the Florida market.
Speaker Change: 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 theres. 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.
Speaker Change: Low to low single digit growth over the.
Speaker Change: 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 while the covenant. The 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.
Speaker Change: 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.
Eric: Great. Thanks for taking my question.
Eric: 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.
Eric: This push into premium here, it's just a matter of building up inventory at this point or are there any more.
Eric: More investments planned for 2025 on this front.
Eric: No actually we're going to be bringing down capex quite substantially really most of the automation most of the lighting equipment modification systems have been upgraded during 2024.
Eric: And as it does most of the genetics are now in the grow houses.
Eric: And are being grown and so it's a matter of building up inventory to get into that market and that's 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.
Eric: That was.
Eric: Our miss in the previous team.
Eric: <unk>, 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.
Eric: <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.
Eric: Offerings and so now we will be introducing those in early April.
Eric: 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 looking for EMEA 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 with over 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 that would help and then separately maybe for Ed go ahead sorry.
Speaker Change: It was purely FX.
Speaker Change: Okay purely effects alright.
Speaker Change: Just go forward reported maybe Boris I'm just looking at you are dead right you've talked about refinancing you have 100 million due in 25 416 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 thank all the docs that I know that most companies are following the same blueprint right delay.
Speaker Change: Delaying.
Speaker Change: Filing at the normal Corporation delay.
Speaker Change: Turning to AE, but that that is still on the books and the one thing that's like VA problems when it comes down to refinancing the other than thanks.
Speaker Change: Pablo Good question I'm going to defer the second part the Boarish 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.
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 we're going to continue to pay down acquisition debt, we anticipate somewhere between $65 million to $75 million.
Speaker Change: It's going to be reduced going into the end of this year on the acquisition debt.
Speaker Change: <unk> 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 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 with that issue, but we have started to talk to investors. We 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: Being very very strong support for a refinancing of our debt.
Speaker Change: Thank you.
Speaker Change: Yes.
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 have a great night.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Camilo Lyon: [music].