Q4 2024 The Cannabist Co Holdings Inc Earnings Call
Speaker Change: Good day, and thank you for standing by. Welcome to The Cannabist Company, Q4, and full-year 2020 for earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will have been hearing an automated message as I see knew your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your-
Speaker Change: Good morning, and thank you for joining The Cannabist Company's fourth quarter and full year, 2024 earnings company's call.
Speaker Change: With me today are Chief Executive Officer David Hart, President Jesse Channon, and Chief Financial Officer Derek Watson.
Speaker Change: Early this morning we issued a press release reporting our fourth quarter and full year 2024 results. A copy of this release is available on the Investors section of our corporate website, where you will also be able to access the replay of this call for up to 30 days.
Speaker Change: Certain remarks we make today regarding future expectations, plans, and prospects for the company constitute forward-looking statements within the meaning of applicable Canadian and U.S. securities laws.
Speaker Change: Actual results may differ materially from those indicated by such forward looking statements as a result of various important factors which we disclose in more detail in the risk factor section of our annual form 10k for the year ended December 31st, 2024.
Speaker Change: Any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent date. While we may update any such forward-looking statements in the future, we specifically disclaim any obligation to do so, except that otherwise required by applicable law.
Speaker Change: Also, please note that on today's call, we will refer to certain non-GAAP financial measures such as Aida and Adjusted Aida These measures do not have any standardized meaning prescribed by Gap and may not be comparable to similar measures presented by other companies The Cannabist Company considers certain non-GAAP measures to be meaningful indicators of the performance of its business in addition to but not as a substitute for our Gap results.
Speaker Change: A reconciliation of such non-GAAP financial measures to their nearest culpable gap measure is included in our press release issued earlier today.
Speaker Change: With that, I will turn the call over to David Hart to get us started. David? Thank you, Lee. And thank you to everyone who has joined us on the call today. A year ago, when Jesse and I were appointed as the new leadership of the company, we set about to build a better business to affect change in the organization and improve our financial stability by achieving a more sustainable economic model.
While we are not yet finished with the turnaround we are a very different company today throughout 2024, we made structural changes to the business and put into place a number of key initiatives to optimize our retail and cultivation assets.
Speaker Change: Monetizing assets that were not efficient in our portfolio rooting out supply chain inefficiencies capitalizing on adult use adoption in markets like Ohio.
Speaker Change: Continuing to improve our capital structure to enhance our ability to grow responsibly over time.
Speaker Change: We made significant changes in our operating footprint, we divested assets in Utah, Florida, Eastern Virginia, and Arizona, We closed underperforming locations in Colorado, Washington, D C and Boston, Massachusetts, and we restructured our New York operations.
Speaker Change: In November we announced the closing of the sale of 14 retail locations in two cultivation facilities in Florida, which were loss, making for our portfolio.
Speaker Change: We are still in the process of closing the transactions for one additional facility and the remaining licensees, Florida upon close of those transactions in Florida, and Finalization of the exited Washington D. C will be operational in 12 markets.
Speaker Change: We had 59 active retail locations at year end compared to 73 active retail locations at the end of the third quarter and 86 at the end of 2023.
Speaker Change: On the operational side, we restructured our wholesale business and engaged in a number of brand partnerships with third party products.
Speaker Change: Adopted new internal processes change reporting lines and a tax supply chain inefficiencies.
Speaker Change: With asset divestitures and several rounds of corporate restructuring, we were also able to substantially reduce corporate overhead.
Speaker Change: During 2024, we've reduced overall head count by more than 20%, resulting in approximately $23 million in annualized savings.
Speaker Change: As a result of these efforts adjusted EBITDA on an apples to apples basis for the 12 remaining markets was essentially flat year over year, despite the challenging pricing environment.
Speaker Change: At this time, we are currently at the midpoint of our eight quarter restructuring plan we have.
Speaker Change: Pleased to report that as of the end of February you are seeing positive developments key accomplishments include the reorganization of operational leadership and associated Kpis.
Clemente should have improved purchasing and pricing standard operating procedures and the ongoing rationalization of the product portfolio with a 50% to 60% reduction in product categories and Skus.
Speaker Change: Onto the balance sheet recognizing.
Speaker Change: Recognizing the need for a comprehensive approach to balance sheet management in the current market environment on February 27th we announced an agreement to extend the maturities of our senior secured debt until December 2028 with options to extend through 2020.
Speaker Change: With 70% support from our net orders we are confident that this process will be completed we anticipate a closing in the first half of this year. This transaction provides one way for us to focus on the optimization of our business as we complete divestitures continue to cut costs and improve the operational and financial profile of the company.
Speaker Change: While a number of these initiatives took longer to complete than initially expected. We made excellent progress over the course of 2024 year carrying momentum into 2025.
Speaker Change: Our operational focus in 2025 years simplification across all areas of the business. This encompasses geographic footprint corporate structure and go to market strategy.
Speaker Change: In February of this year, we closed three underperforming locations in Colorado, bringing us to 56 active dispensaries to date.
Speaker Change: These initiatives are expected to deliver improved gross margins and cash flow throughout 2025.
Speaker Change: Liquidity management remains of Paramount importance and as a central focus for 2025. In addition to the previously announced cost reduction efforts throughout 2024, we're implementing another cost reduction that will deliver over $5 million in annualized cost savings.
Speaker Change: It presents over 10% of our fourth quarter corporate expense run rate additional cost reductions are planned throughout 2025, as we complete our pending divestitures, we anticipate a shift in focus from simplifications operational optimization leading into 2026.
Speaker Change: We continue to operate in a challenging environment with uncertainty of timing of rescheduling ongoing pricing pressures in key markets and challenged liquidity across the sector. However, the canvas industry fueled by patients and customers continues to demonstrate growth industry sales were up 9% year over year, and we continue to see states transition to adult use while others adopt or <unk>.
Speaker Change: Medical programs, despite the uncertainty at the federal level. This industry is here to stay.
Speaker Change: As equity valuations have come under pressure it is incumbent on us to focus on where we can be most impactful.
Speaker Change: Optimize our portfolio product assortments and processes and to streamline our go to market strategies. Our mandate. In 2025 is this continued to simplify our business maintain liquidity improve margins and drive cash flow generation, putting us in a position to succeed in 2026 and beyond.
Speaker Change: With that let me turn the call over to Jesse to discuss our operational results and initiatives in more detail Jesse.
Jesse Channon: Thanks, David picking up where we just left off we are continuing our mission to simplify our business as we've demonstrated we're getting out of any product asset or geography that is no longer strategically advantageous for us and the fun part, we're putting our energy into going from good to great on everything else. We are hyper focused on what customers want when they enter our stores and we are aggressively.
Jesse Channon: Changing our assortment of first and third party brands to meet our customers' needs with fresh flower the appropriate frame assortment varying pack levels and the right pricing, we're seeing some great flower out of our growth and impressive manufactured products from our facilities.
Jesse Channon: Opportunities remain for us to improve throughout the portfolio and to be more nimble in our pricing architecture.
Jesse Channon: As part of the simplification overhaul, we have completed a systematic analysis of brands and Skus in every market. We know that we cannot and should not try to be everything for everyone. So you will see it continue to narrow our assortment to ensure the highest productivity of shelf space improve inventory turns and expanding margins managing fewer skus also create additional efficiencies.
Jesse Channon: The store level and in back of house operations, such as reduced staffing cost as we zero in on labor schedules based on changing transaction volume.
Our efforts to continuously improve our operations rationalize our footprint root out inefficiencies and implement process improvements continue.
Jesse Channon: Please note that we are seeing positive results our top five markets by revenue in alphabetic order, where Colorado, Maryland, New Jersey, Ohio, and Virginia on an EBIT basis again alphabetically. They were Maryland, New Jersey, New York, Ohio, and Virginia, as I mentioned last quarter. The New York market has been moving up in the ranks.
Jesse Channon: In Q4 that market has the largest dollar increase in EBITDA versus the prior quarter.
Jesse Channon: Ohio has continued to demonstrate growth for me adult use transition as those disclosed in the 10-K for the full year. It was the third largest market on a revenue basis behind Colorado and Virginia on the brand front, we're seeing great success with the effects based edible trends with first Washington, Maryland, We've grown our partnership with all the talent, bringing with project in new markets.
Jesse Channon: We will continue to evaluate brand partnerships and lean in or out where it is most strategic.
Jesse Channon: So in summary over the next few quarters, you should expect to see us to continue to make progress on what we've been working towards this past year, focusing relentlessly on positioning ourselves with the most optimal footprint in the best markets with the right products and brand assortment with further optimization of inefficiencies to materialize in 2025 with that let me turn the call over to Derek.
Thank you Jessie and good morning, everyone.
Derek Watson: I'll provide a summary of the key financial results for the fourth quarter and full year 2024 discuss trends in our market and comment on our continuing initiatives to improve profitability and cash flow.
Derek Watson: For the fourth quarter, we achieved $96 million in revenue a decrease of 16% from the third quarter, primarily as a result of asset sales, including Florida operations in Q4, and the sale of Eastern Virginia, and Arizona business late in Q3.
Derek Watson: As we also saw in the third quarter divestitures and other related actions have created some noise in our reported results.
Derek Watson: For the full year revenue decreased 11% to $459 million at that asset base has been proactively reduced for.
Derek Watson: For the full year adjusted gross margin remained flat at 38%.
Derek Watson: Adjusted EBITDA in Q4 with $7 million down from $14 eight in Q3.
Derek Watson: Adjusted EBITDA margin decreased 200 basis points to 12% for the full year in 2024.
Derek Watson: The sequential contraction in adjusted EBITDA and margin is also a result of the sale of our higher margin businesses in Virginia and Arizona.
Derek Watson: Which both closed in the third quarter.
Derek Watson: Our loss, making Florida operations continued to be a drag on adjusted EBITDA in Q4 with the sale of 14 stores in two cultivation sites closing in November and with the full completion of a market exit that still pending with a likely single cultivation sites both in the process of being sold.
Derek Watson: For an Apple to Apple comparison, who will discuss the pro forma results of the 12 remaining markets at year end.
Derek Watson: Excluding the pending divestitures in Florida, and in Washington, DC as we complete our exits in those two markets.
Derek Watson: For the 12 preparing market, we thought gross margin of 37% and adjusted EBITDA margin of 9% in the fourth quarter an improvement over the reported results.
Derek Watson: Compared to Q4 of 2023. These recurring 12 market demonstrated a 200 basis points improvement in both gross margin and adjusted EBITDA margin with adjusted EBITDA up more than 20% over the same period in Q4 2023.
Derek Watson: In the fourth quarter wholesale revenue decreased 20% sequentially, including the impact from our divested markets in Eastern Virginia, and Arizona and represented 16% of total revenue in the quarter compared to 17% in Q3 and 15% in Q2.
Derek Watson: The overhang from Unabsorbed overhead and underutilized production facility remained flat at $4, one percentage point impact on gross margin down from the five percentage point impact we experienced during 2023.
As David mentioned through several rounds of restructuring actions, we've achieved $23 million in annualized cost savings during 2024.
Derek Watson: And we're expecting additional measures in 2025.
Derek Watson: As our geographic footprint is reduced further and our business is simplified we will continue to make commensurate adjustment to reduce spending.
Derek Watson: In the fourth quarter, we achieved positive operating cash flow of $4 3 million and free cash flow of $2 1 million.
Derek Watson: Capex in the quarter was $1 7 million.
Derek Watson: As before we continue to expect capex over the longer term to average around $2 million to $3 million in the quarter, primarily supporting new store opening and enhancements to our manufacturing capabilities.
Derek Watson: As mentioned, we finished the year with 59 active retail locations compared with 73 active locations at the end of the third quarter.
In December we opened our third location in New Jersey, which is currently medical only until we receive regulatory approval to add adult use sales.
Derek Watson: We're driving head developing all six locations in Virginia, and three locations in Ohio in order to reach our maximum license caps and each of these states.
We ended the fourth quarter with $33 6 million in cash up from $31 5 million at the end of Q3 inclusive of a $9 million senior debt interest payments and $2 $5 million in divestiture proceeds during the quarter Lastly, a comment on <unk> and the related tax impact.
Derek Watson: As we've previously discussed if $2 <unk> would no longer apply our current annual income tax liability exclude any tax obligations associated with divestitures would be expected to decrease by around $30 million.
In mid October we submitted an amended tax return and refund claim associated with $2 88 for our 2020 tax year to December $5 million.
Derek Watson: It's fully reserved for in our year end financial statements.
Derek Watson: And we will continue to assess the benefits of filing additional amended tax returns relate to tax years.
Derek Watson: As David and Jesse have highlighted our key financial priorities, the liquidity management rationalizing, our operational footprint and executing on initiatives to improve margins and cash flow.
Derek Watson: We expect continued noise in our results until divestitures the fully complete.
Derek Watson: Subject to the timing of certain regulatory outcome.
Speaker Change: Is that adult use in Delaware.
Speaker Change: New Jersey location flipping to adult use and Ian hump adult use regulations in Ohio.
Speaker Change: As such we're anticipating a high single digit revenue decline sequentially in Q1, a reflection of the comparison to Q4 with divestitures, having been completed during the quarter and the additional store closures in Q1 that David mentioned.
We anticipate improvements in adjusted EBITDA dollars and margin that we move through 2025 and continue to pursue adjusted EBITDA margins above 20% over the longer term.
Speaker Change: With that I will turn the call back to David for final comments David.
David Hart: Thank you Derek as I've said before we're in the midst of simplifying our business to focus on core markets that will drive profitability and help to create a sustainable economic model going forward.
David Hart: Assistant with 2020 quarter, we are focused in 2025 on what is in our control managing liquidity closing on the announced debt agreement by midyear, completing divestitures and driving operational efficiencies in our core portfolio.
David Hart: We'll now take your questions operator, please open the line.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for our first question.
Speaker Change: Our first question is going to come from the line of Aaron Grey with HEB. Your line is open. Please go ahead.
Aaron Grey: Hi, good morning, and thank you for the questions.
Speaker Change: You guys have had a busy.
Speaker Change: And a lot of things going on since we last spoke.
Speaker Change: So I want to kind of touch on high level on a few things there.
Speaker Change: You mentioned, the eight quarter development plan and kind of at the midpoint now obviously, you've done a lot of things over the past four quarters as well.
Speaker Change: <unk> ahead to 225.
Speaker Change: You talked about a lot of things on the call just what are some.
Speaker Change: Key kpis that we should be looking out for over the next four quarters it sounds like the 20% Mark.
Speaker Change: <unk> is more of a longer term target, but still expect enhancement thereafter in the first quarter. So just wanted to get a better sense of some kpis to be looking out for as you go to the second half of the headquarter plan. Thanks.
Speaker Change: Okay.
Hey, Aaron this is David good morning.
Speaker Change: Start and then I'll hand, it over to Derrick. Thanks for me API perspectives you are right. We had mentioned that this is.
Speaker Change: Sort of the middle of the eight quarter process here and I think so.
Speaker Change: From an operational perspective, we.
Speaker Change: Have fewer markets to focus on as a as a leadership team as an organization. So I think you should see improvements.
Speaker Change: At the state level, which shows up in some of the metrics that we report on a quarterly basis, but ultimately it should translate into through the simplification. So youre going to see fewer brands fewer skus on shelf and available on the wholesale market for us and you're going to see continued cost reduction initiatives throughout the balance of 25. So from my perspective, we're looking.
Speaker Change: And yet we defined it as simplification, it's really about focusing on the markets that really drives our business right now and you can we don't go market by market, but you can see where a significant amount of the gross profit and EBITDA is being generated from a number of markets in our portfolio.
Speaker Change: Finding ways to improve those metrics in the markets that have.
Speaker Change: Organic growth like Ohio.
Speaker Change: Virginia and in New York, and obviously capitalizing on adult use opportunities that continue to show up in Ohio, and ultimately with a new store in New Jersey and.
Speaker Change: Full market conversion to adult use in Delaware at some point in 2025, it's Eric I'll hand, it over to you as well.
Eric: Great. Thanks, David and good morning, Aaron.
So, yes, we're not providing specific guidance, but to your point on what we should expect.
Eric: Obviously had a lot of noise in the last two quarters with the impact of the divestitures and as we mentioned on the.
Eric: The remarks, Florida.
Eric: Lossmaking market for us that we've now exited.
Eric: Just getting out of the lock, making market like Florida for Us will.
Eric: Drive some improvements the operational rationalization and simplification.
David and Jesse mentioned.
Eric: It's also going to help us from a margin perspective as well as the divestitures.
Eric: <unk>.
Eric: That's why we've mentioned going through 2025, we should be looking at an improved margin profile.
Eric: And just to help with some of the noise. That's partly why we talked about the 12 remaining markets and the impact of that rather than the reported results just to help you unpack, where we're actually starting from before.
Eric: Before we go on that upper trajectory.
Speaker Change: Okay. That's helpful color I appreciate that second one for me just on New York and that was called out as an outperformer can you speak to some of the expectations there.
Speaker Change: First can you just verify that you've already deployed most of the capex in that market. So you have a lot of ability to grow I believe from the facility that you have there and then secondly, how you plan to expand I believe New York a very.
Speaker Change: There's a lot of need to get it on the graph wont get in front of store owners to expand.
Speaker Change: Wholesale brands because it seems like it's more of a wholesale play so just your expectations for the New York market and how you are looking to execute and continue to build out on that thank you.
David Hart: Aaron This is David I'll start and give it suggests you, but yes, we have we've got the assets in place to execute in New York as we mentioned we had.
Speaker Change: Lease expirations for two of our dispensaries, we have an ongoing.
Speaker Change: Search process to find two two viable locations, we were approved to convert our Brooklyn store to adult use we've not cut the checks to convert that store at this time, we are focused primarily on the wholesale opportunity, which I'll, let jesse collaborate on Jesse.
Speaker Change: Yes, thanks to every payer so the coalfields definitely the focus.
Jesse Channon: The team is in place we put in place.
Jesse Channon: A number of sort of increased efforts from expectations on wholesale coming through Q4 and into this quarter I think we're really happy with what we're seeing right now with the team as far as what the.
Jesse Channon: The increase in penetration looks like at an account level.
Jesse Channon: Across the state, we think there's a really exciting.
Exciting opportunity for us, especially on the flower side to continue sort of a logical expansion.
Jesse Channon: Of the Riverhead facility, putting more plants and getting more sort of good quality flower.
Jesse Channon: In the marketplace. There seems to be continued demand for that an expansion of that opportunity. So as that market continues to grow I think we're well positioned to grow with it.
Jesse Channon: Like we mentioned in the remarks I mean, we.
Jesse Channon: We've already seen some.
Phil: Solid growth there for us as a business Phil.
Phil: Still lots to grow into though so I think the expansion for us in that facility.
Phil: <unk> here than.
Phil: And in other areas and we can continue to see success there.
Phil: Okay, Great I appreciate the color and then I'll go and jump back in the queue.
Phil: Thank you.
Speaker Change: Remainder if you would like to ask a question at this time. Please press star one one and our next question will be from the line of.
Speaker Change: Matt Bottomley with Canaccord Genuity. Your line is open. Please go ahead.
Matt Bottomley: Good morning, everyone just wanted to touch on some of your comments regarding to AE.
Small theme on the back of some of the earnings had already have happened that when we're looking at.
Matt Bottomley: Especially for the years 2020 and before so in 2020 I guess the return would be filed mid to late 2021.
Matt Bottomley: And there is sort of that three year window that would have a lapse at the end of last year. So if there is a cash refund for that year.
Matt Bottomley: Just your assessment in general would that Youll be closed off from any reassessment. So from the fiscal years 2020 than before.
Matt Bottomley: Given this three year window for for the reassessment or is it more complicated than that I'm led to believe.
Derek Watson: Yeah, So derik I'll take that one.
Derek Watson: The you're right on the timing so you've got three years from the date of filing the original return to get an amended return which is why we filed.
Derek Watson: 2020 return.
Derek Watson: In October 2021, and we had three years to complete the amendment, which we did by October of 2024.
Derek Watson: The IRS has theoretically three years too.
Derek Watson: Process that dispute that.
Derek Watson: So there's the three o'clock and another three o'clock.
I think forwarding to what that means for subsequent years.
Derek Watson: Then our 2021 return that we filed in 22 has the three years.
But would anticipate finding that amendment later this year as well as we consider the benefits of that 280 <unk> amendment on all previous years.
Derek Watson: Got it so just to just so I understand so the clock sort of resets when you amend the return for another three year window for the reassessment on the IR site.
That's correct, yes, okay. Okay.
Derek Watson: Okay, sorry, if I was a little more housekeeping I guess the other question I had was more specifically to Colorado. So a couple of store closures.
Derek Watson: Subsequent to period end I don't know if theres really a market there from a from a disposition standpoint, but.
Given that it is not in your top five market and profitability in some of your other comments on some of the other markets like Ohio, and Delaware, where obviously you're investing into growth can you just comment on on where Colorado is strategically for you are you fine if it's.
Derek Watson: If the stores that remain are more kind of steady state or is this something where the capital even if breakeven our time and effort in that market isn't.
Speaker Change: Isn't it useful just given where your turnaround initiatives there.
Yes.
Speaker Change: Yes, David I'll take that one and then I'll hand, it over to Jesse.
Speaker Change: On the ground feedback I would say strategically look it's a big business for US just from a facility count perspective from a revenue perspective, we've done a lot, but we've said this before but we've done a lot over the last two and a half years to optimize that business and continue to make the tough decisions when we need to through lease explorations. We obviously look to see if there is.
There is a buyer for potential facility and if there isn't.
Speaker Change: Lease exploration in one.
Speaker Change: But we've done a lot to rightsize that business Youre correct. It doesn't look.
It's not going to look like a limited license medical program market on the East coast for sure and I think scale matters in that market and there are a few players including us that do have scale, it's still a $1 billion 1 billion to topline market. So it's still a big market generally speaking and so I think it's just about efficiencies in that.
Speaker Change: Marketplace and being very thoughtful about any capital deployment in the market I think we've done a really good job over the last I'll, let I'll, let jesse speak to it over the last four or five quarters to really improve the retail performance in that market for a number of initiatives by the retail leadership team, but I think it's a it's a business that just fundamentally it looks different than some of the the <unk>.
Speaker Change: Operations in some of the opportunities we have on the east coast that are new markets growing medical programs are newly converted adult use markets, but its still a big business and I do think there's consolidation opportunities likely in Colorado, you continue to see licenses fall away.
Speaker Change: The cultivation side. So I think I think we continue to see potentially a supply demand.
Jesse Channon: Rebalancing take place it doesn't happen overnight, but I do think scale matters in a market like Colorado, which we're one of a handful, but Jesse I'll hand, it over to you for some of the on the ground.
Jesse Channon: These data points, you might want to share.
Jesse Channon: Yeah look I think David I think David touched a lot of the important things, but what I would say about Colorado, It's pretty well published right. We know what we're dealing with in that market. There is an enormous amount of maturity a lot of data density that we can sort of base decisions off of I think everyone understands it's it's some of the cheapest legal REIT in the country right I think.
Jesse Channon: <unk> had reported it somewhere around $4.50 per Gram in Q4.
That market has seemed to stabilize a bit and we think that the sort of the commodity pricing in that market is probably going to start to creep up a little bit from that stabilization point theres capacity continues to come offline from.
Jesse Channon: Small and large operators across the state we continue to see a contraction of some of the retail footprint.
Jesse Channon: Not only for ourselves, but for others. All of these things to me feel like it's rationalizing the D.
Jesse Channon: The sort of the supply side of the market a bit and I think that's going to help to ultimately not only stabilized pricing, but probably create opportunities for <unk>.
Jesse Channon: Getting premium on high end manufactured product high end premium flower even in the mid category, where we're I don't think we're going to see as much of a flag.
Jesse Channon: <unk> products fresh flower testing between let's say, 18% to 24% in the market. So I do believe that there is an opportunity for Colorado to continue to see some growth for us operationally as we continue to become more efficient and back of house and as we rationalize the retail footprint that allows us to really lean in and drive disciplined through the.
Jesse Channon: <unk> on the remaining stores, so Colorado big business for us.
Jesse Channon: If we are bit different than some of the other markets that we operate across the country with regards to the margin profile, there, but we still see opportunities for getting getting better in the state.
Jesse Channon: I appreciate that.
Jesse Channon: And if I can just one other quick one just.
Jesse Channon: So I understand from a cadence perspective going forward into 2025 on more consolidated cash flow basis. So.
Jesse Channon: Solid cash flow operationally.
Jesse Channon: Free cash flow for Q4, you're all in year was still an outflow of 2008 and $29 million. It looks like obviously a lot going on particularly in Q3.
Jesse Channon: The earlier parts of the year, but I know, you're not going to give guidance on it but just into 2025 kind of your exit.
Jesse Channon: Where you exited particularly in the last three months of the year going into I know, it's seasonally slower in Q1. If there is any commentary we can get on sort of the volatility expected on both operating and free cash flow.
Speaker Change: <unk> I'll, let you take that one.
Jesse Channon: Sure.
So youre right, we had a strong fourth quarter positive operating cash flow of $4 3 million and free cash flow as well that was positive.
Jesse Channon: Even though Q1 is a low season operationally Q4 is also a relatively low season for us operationally.
Jesse Channon: The momentum we're looking for going forward.
Jesse Channon: Does reflect getting past the noise from the divestitures.
You mentioned there was a busy year that we have.
Jesse Channon: Had behind us with the debt with the restructuring the cost savings the divestitures simplify the footprint. So we're.
Jesse Channon: Looking for 25% to be an improvement once we get past that noise.
Jesse Channon: And then again mentioned the simplification and the operational improvements.
Jesse Channon: Supporting that as well. So Q2 is typically a seasonal operational performance in Q1 and Q3 even higher.
Jesse Channon: That seasonality impact you mentioned will help us as well.
Jesse Channon: Okay. Thanks for all the time guys.
Jesse Channon: Thank you.
Speaker Change: Thank you everyone for joining this will conclude today's question and answer session, Ladies and gentlemen. This will also conclude today's conference call. Thank you for participating and you may now disconnect everyone have a great day.
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