Q4 2024 Cresco Labs Inc Earnings Call
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Unknown Executive: Hello everyone and thank you for standing by. Today's call will be beginning momentarily. We thank you for your patience.
Speaker Change: Hello, everyone and thank you for standing by today's call will be beginning momentarily. We thank you for your patience.
Speaker Change: [music].
Unknown Executive: Good day and welcome to Cresco Labs fourth quarter 2024 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: Good day, and welcome to Costco Labs fourth quarter 'twenty 'twenty four earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the stock he followed by is that right.
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TJ Cole: I would now like to turn the call over to TJ Cole, Senior Vice President, Corporate Development and Investor Relations for Cresco. Please go ahead. Thank you.
Speaker Change: I would now like to turn the call over to T. J code Senior Vice President corporate development and Investor Relations for Crest Guard lapse. Please go ahead.
Speaker Change: Thank you good morning, and welcome to Costco Labs fourth quarter 2024 earnings conference call on the call today, we have Chief Executive Officer, and co founder Charles Box Hill, Chief Financial Officer, James Sure President, Greg Butler, who will be available for the Q&A. Prior to this call. We issued our fourth quarter earnings press release, which has been filed on SEDAR and is available on our Investor Relations.
Charles Bachtell: Good morning and welcome to Cresco Labs fourth quarter 2024 earnings conference call.
TJ Cole: On the call today, we have Chief Executive Officer and Co-Founder Charles Bachtell, Chief Financial Officer Sharon Shuler, and President Greg Butler, who will be available for the Q&A.
Unknown Executive: Prior to this call, we issued our fourth quarter earnings press release, which has been filed on CDAR and is available on our investor relations website. These preliminary results for the fourth quarter and for year 2024 are provided prior to completion of all internal and external reviews and therefore are subject to adjustment into the filing of the company's quarterly financial statement. We plan to file our corresponding financial statements and MD&A for the quarter and year ended December 31st, 2024 on CDAR and EDGAR later this month.
Speaker Change: Website these preliminary.
Speaker Change: <unk> results for the fourth quarter and full year 2024 are provided prior to completion of all internal and external reviews, and therefore are subject to adjustment until the filing of the company's quarterly financial statements.
Speaker Change: Plan to file our corresponding financial statements and D&A for the quarter and year ended December 31, 2024 on SEDAR and Edgar later this week.
Unknown Executive: Before we begin, I want to remind you that statements made on today's call may contain forward-looking information. Actual results, many different materials. The risks, uncertainties, and other factors that could influence actual results are described in our earnings press release and in the annual information form and MD&A filed with the securities regulators. This call also contains non-GAAP measures also outlined in our earnings press release and in the MD&A filed with the securities regulators. Please also note that all financial information on today's call is presented in U.S. dollars, and all interim financial information is unaudited.
Speaker Change: Before we begin I want to remind you that statements made on today's call may contain forward looking information actual results may differ materially.
Speaker Change: The risks uncertainties and other factors that could influence actual results are described in our earnings press release and in our annual information form and MD&A filed with securities regulators.
Speaker Change: This call also contains non-GAAP measures also outlined in our earnings press release and in MD&A filed with the securities regulators.
Charlie: Please also note that all financial information on today's call is presented in U S dollars and all interim financial information is unaudited with that I'll turn the call over to Charlie.
Charles Bachtell: With that, I'll turn the call over to Charlie. Good morning, everybody. And thank you for joining us on our full year 2024 earnings Two years ago, we set a clear goal to streamline operations and generate more cash while maintaining our wholesale and retail leadership. commitment drove every decision we made, finding efficiencies, improving execution, and prioritizing profitability to make the strongest Cresco Labs possible. I want to highlight the exceptional work that our team has done this year. In 2024, we really focused on the quality of our revenue. For the full year, we generated $724 million in top line.
Charlie: Good morning, everybody and thank you for joining us on our full year 2024 earnings call.
Two years ago, we set a clear goal to <unk>.
Charlie: Streamline operations and generate more cash, while maintaining our wholesale and retail leadership.
Charlie: This commitment drove every decision we made finding efficiencies improving execution and prioritizing profitability to make the strongest critical labs possible.
Charlie: I want to highlight the exceptional work that our team has done this year.
Charlie: In 2024, we really focused on the quality of our revenue for the full year, we generated $724 million in topline, while slightly lower year over year, we held the absolute adjusted gross profit dollars flat and we reduced adjusted SG&A by $29 million.
Charles Bachtell: While slightly lower year over year, we held absolute adjusted gross profit dollars flat, and we reduced adjusted SG&A by $29 million. The result was an adjusted EBITDA of $200 million, a $26 million improvement, and most importantly, $132 million in operating cash flow, a $74 million improvement from last year. We truly demonstrated our focus on the quality of the revenue. Demand for cannabis continues to grow. And while price compression persists, lower prices also make cannabis accessible to more consumers than In Q4, price compression across some of our core markets created greater demand than expected, and we found ourselves with supply It's limited our ability to fully capitalize on this momentum in the quarter, but we're rapidly turning on the extra capacity in our facilities to seize the opportunity.
Charlie: The result was an adjusted EBITDA of $200 million of $26 million improvement and most importantly, a $132 million in operating cash flow of $74 million improvement from last year, we truly demonstrated our focus on the quality of the revenue.
Charlie: Demand for candidates continues to grow.
Charlie: And while price compression persists lower prices also make cannabis accessible to more consumers than ever.
Charlie: In Q4 price compression across some of our core markets created greater demand than expected and we found ourselves in the supply constraints.
Charlie: Eliminated our ability to fully capitalize on this momentum in the quarter, but we're rapidly turning on the extra capacity in our facilities to seize the opportunity by unlocking additional production will drive volume growth to offset price decline optimize our footprint and capture greater market share fueling sustained profitable expansion.
Charles Bachtell: By unlocking additional production, we'll drive volume growth to offset price decline, optimize our footprint, and capture greater market share, fueling sustained profitable economy. Profitability is still a key focus in 2020.
Charlie: Profitability is still a key focus in 2025, we will continue to strengthen our cash position by driving productivity in our core markets and prioritizing the quality of revenue.
Charles Bachtell: will continue to strengthen our cash position by driving productivity in our core markets and prioritizing the quality of Now I'll walk you through the three strategic pillars we're executing against to build the strongest and most valuable Cresco Labs for the years ahead. Number one, we're ensuring we have the most strategic focus. We're ready to expand our highly efficient footprint through two pathways. One, investing to reinforce our core markets, and two, strategically entering new markets with favorable regulatory structures and competitive advantage. This balanced approach optimizes capital deployment, ensuring a mix of near-term and long-term returns while diversifying our market exposure.
Charlie: Now I'll walk you through the three strategic pillars, we're executing against to build the strongest and most valuable Chriscoe labs for the years ahead.
Charlie: Number one we're ensuring we have the most strategic footprint.
Charlie: We're ready to expand our highly efficient footprint through two pathways, one investing to reinforce our core markets and to strategically entering new markets with favorable regulatory structures and competitive advantages.
Charlie: Balanced approach Optimizes capital deployment, ensuring the mix of near term and long term returns, while diversifying our market exposure in.
Charles Bachtell: In line with this strategy, last year we strengthened our position in Pennsylvania by adding three new In Florida, we invested in our operations to enhance productivity, deliver higher quality and lower prices, nearly doubling our market share year over year.
Charlie: In line with this strategy last year, we strengthened our position in Pennsylvania by adding three new dispensaries.
Charlie: Florida, we invested in our operations to enhance productivity deliver higher quality and lower prices nearly doubling our market share year over year and 2025. We're building on this success with plans to open additional stores in Pennsylvania, Florida and Ohio.
Charles Bachtell: 2025. We're building on this success with plans to open additional stores in Pennsylvania, Florida and Ohio. Our year of the course strategy prioritized depth over breadth, refining the capabilities that drive cost-effective scale and quality in each of our With these strategies in place, we can extend our success in new markets while maintaining strong margins and profitability. Kentucky is the first of these new markets. strategic addition to our portfolio. The state's newly launched medical cannabis market is backed by common sense regulations, including well-structured cultivation canopy and dispensary licensing frameworks, creating a favorable competitive landscape for long-term success.
Charlie: Our year of the core strategy prioritize depth over breadth refining the capabilities that drive cost effective scale and quality in each of our markets with the strategies in place we can extend our success and in new markets, while maintaining strong margins and profitability, Kentucky is the first of these new markets our strategic ambition.
Charlie: And our portfolio.
Charlie: <unk> newly launched medical cannabis market is backed by common sense regulations, including well structured and cultivation canopy in dispensary licensing frameworks, creating a favorable competitive landscape for long term success, we're proud to be one of only two tier three cultivation licenses in Kentucky, giving us up to 25000 square feet of canopy.
Charles Bachtell: We're proud to be one of only two tier three cultivation licenses in Kentucky, giving us up to 25,000 square feet of canopy. That's more than 20% of the total canopy allowed in the With our proven speed to market capabilities, this license lets us scale efficiently, serve patients quickly, and continuously reinvest in our facilities to meet demand. just as we've done successfully in Illinois, Pennsylvania, and Ohio.
Charlie: That's more than 20% of the total cannot be allowed in the state.
Charlie: With our proven speed to market capabilities. This license lets us to scale efficiently.
Charlie: Third patients quickly and continuously reinvest in our facilities to meet demand just as we've done successfully in Illinois, Pennsylvania and Ohio.
Charles Bachtell: Kentucky is a significant long-term growth opportunity, and we're excited to share more about our plans in the coming quarter. We're building a very solid growth pipeline. While adding to our core is a priority, trust that we will remain patient, ensuring we enter the right markets at the right time and right price. Number two, we remain the leader in branded wholesale product. Throughout the entire year, we demonstrated the strength of our brands across all major categories, including branded flour, concentrates, vapes, and edibles per media. In 2024, we maintained our number one share position in Illinois, Pennsylvania, and Massachusetts, while also driving share growth in Ohio.
Charlie: Talk to us a significant long term growth opportunity and we're excited to share more about our plans in the coming quarters.
Charlie: We're building a very solid growth pipeline, while adding to our core is a priority trust that we will remain patient ensuring we entered the right markets at the right time and right price.
Charlie: Number two.
Charlie: We remain the leader in branded wholesale products.
Charlie: Throughout the entire year, we demonstrated the strength of our brands across all major categories, including branded flower concentrates vapes and edibles for BDSI.
Charlie: In 2024, we maintained our number one share position in Illinois, Pennsylvania, and Massachusetts, while also driving share growth in Ohio.
Charles Bachtell: This performance underscores our ability to execute, compete, and deliver what customers want in all four of our core wholesale markets. By continuously optimizing our cost structure without compromising quality, we're delivering category leading products to customers while actively offsetting price compression through efficiency gains in product innovation. These efforts allow us to stay competitive, protect margins, and drive long-term sustainable growth.
Charlie: This performance underscores our ability to execute compete and deliver what customers want in all four of our core wholesale markets by.
Charlie: By continuously optimizing our cost structure without compromising quality, we are delivering category, leading products to customers, while actively offsetting price compression through efficiency gains and product innovation.
Charlie: These efforts allow us to stay competitive the tech margins and drive long term sustainable growth.
Charles Bachtell: And number three, we're building a highly productive retail platform in the most strategic state. full year, we strengthened our competitive position across our Our dispensaries were already outperforming the industry and we expanded that lead even further from being approximately 20% more productive than the average store in a market to being 30% more productive. Again, this sustained outperformance comes back to Every aspect of our operations, including store experience, inventory management, and customer engagement, is built on the Sunnyside standard, leveraging established processes and proprietary technology to maximize sales. Even in the face of 15 to 25% price compression across our markets, we maintain retail revenue year over year while improving profitability.
Charlie: And number three we're building a highly productive retail platform in the most strategic states.
Charlie: The full year, we strengthened our competitive position across our markets. Our dispensaries, we're already outperforming the industry and we expanded that lead even further from being approximately 20% more productive than the average store in a market to being 30% more productive.
Dan: Dan This sustained outperformance comes back to execution.
Dan: Every aspect of our operations, including store experience inventory management and customer engagement is built on the <unk> side standard leveraging established processes and proprietary technology to maximize sales even in the face of 15% to 25% price compression across our markets, we maintained retail revenue year over year while.
Dan: Improving profitability. This is a phenomenal example of strategy capabilities and execution.
Charles Bachtell: This is a phenomenal example of strategy, capabilities, and execution. This expertise is transferable and can be monetized in both new and underperforming distributions. Like in Pennsylvania, where we more than doubled the productivity of the stores we acquired in 2024. We'll lean on these skills as we identify new expansion opportunities, including distressed and cost effective assets where we can add value quickly. And as we move into new markets.
Dan: This expertise is transferable and can be monetized in both new and underperforming dispensaries like in Pennsylvania, where we more than doubled the productivity of the stores. We acquired in 2024, we'll lean on these skills as we identify new expansion opportunities, including distressed and cost effective assets, where we can add value quickly.
Dan: And as we move into new markets.
Charles Bachtell: In closing, 2024 was the culmination of our team's tremendous effort to refocus on operational excellence and prioritize cash flow above all We successfully reset and repositioned the business for sustainable growth. In 2025, we're extending our focus to strategically deploy capital to create growth and maximize returns for the years ahead. It's a straightforward approach. Execute at the highest level, generate cash, reinvest in high ROI opportunities, and repeat.
Dan: In closing 2024 was the culmination of our team's tremendous effort to refocus on operational excellence and prioritize cash flow above all else, we successfully reset and reposition the business for sustainable growth.
Dan: In 2025, we're extending our focus to strategically deploy capital to create growth and maximize returns for the years ahead.
Dan: Straightforward approach execute at the highest level generate cash reinvest in high ROI opportunities and repeat.
Sharon Shuler: With that, I'll hand it over to Sharon to walk through our Q4 performance and more.
Dan: With that I'll hand, it over to Sharon to walk through our Q4 performance in more detail.
Sharon Shuler: Thank you, Charlie, and good morning, everyone. For my first earnings call with Cresco Labs, I'm excited to talk about a year that characterizes strong execution and celebrates the team's focus on profitability. Over the course of the year, we made a deliberate shift to prioritize cash resulting in $724 million in revenue, a 6% decline year over year, but a more profitable and sustainable This strategy drove meaningful financial improvement with absolute adjusted gross profit dollars essentially flat, adjusted EBITDA growing by 15%. and operating cash flow improving by 126%.
Thank you Charlie and good morning, everyone for my first earnings call with Chrysler Labs, I'm excited to talk about a year that characterized as strong execution and celebrates the team's focus on profitability.
Dan: Over the course of the year, we made a deliberate shift to prioritize cash resulting in $724 million in revenue, a 6% decline year over year, but a more profitable and sustainable mix.
Dan: Strategy drove meaningful financial improvement with absolute adjusted gross profit dollars essentially flat adjusted EBITDA growing by 15% and operating cash flow improving by 126%.
Sharon Shuler: Looking at the quarter in Q4, we generated $176 million in revenue. Retail revenue was flapped sequentially, driven by adult use conversion in Ohio and market share gains in Pennsylvania, which offset the continued pricing pressure in Illinois. Wholesale revenue declined sequentially due to price compressions in Illinois and Pennsylvania. Higher volumes typically offset pricing pressures, but supply constraints this quarter amplified pricing impact on revenue and margin. As Charlie mentioned, our team is currently ramping up production at our production facilities in Kankakee, Illinois and Mount Joy, Pennsylvania, which will drive incremental volume growth in the second half of the year.
Dan: Looking at the quarter in Q4, we generated $176 million in revenue retail revenue was flat sequentially driven by adult use conversion in Ohio and market share gains in Pennsylvania, which offset the continued pricing pressure in Illinois.
Dan: Wholesale revenue declined sequentially due to price compressions in Illinois, and Pennsylvania, higher volumes, typically offset pricing pressures, but supply constraints this quarter amplified pricing impact on revenue and margin.
Dan: As Charlie mentioned our team is currently ramping up production at our production facilities in Kankakee, Illinois, and Mount Jewett, Pennsylvania, which will drive incremental volume growth in the second half of the year.
Sharon Shuler: While ramping up capacity will drive long-term volume growth, we expect some near-term margin pressure in Q1 as production scales. At the same time, we've been executing our full-sale strategy, prioritizing independent retailers over MSOs who are focusing on their own products. We're also proactively limiting sales to customers with potential AR risk. While this creates short-term headwinds, it strengthens our long-term financial position by focusing on sustainable, cash-generating full-sale accounts. The combination of price compression, wholesale pressures, and shifts in our state revenue mix led to an adjusted gross margin of approximately 50% down from last quarter, but in line with previous guidance.
Dan: While ramping up capacity will drive long term volume growth, we expect some near term margin pressure in Q1 as production scale.
Dan: At the same time, we've been executing our wholesale strategy prioritizing independent retailers over Msos, who are focusing on their own products. We're also proactively limiting sales to customers with potential risk. While this creates short term headwinds it strengthens our long term financial position by focusing on sustainable.
Dan: Cash generating wholesale accounts.
Dan: The combination of price compression wholesale pressures and shifts in our state revenue mix led to an adjusted gross margin of approximately 50% down from last quarter, but in line with previous guidance.
Sharon Shuler: On the cost side, adjusted SG&A in the quarter was $54 million, reflecting a 1% year-over-year reduction and essentially flat from last quarter. This rounds out our year of the quarter with nearly $29 million in adjusted SG&A reductions in 2024. During my time here, I've seen firsthand how the Cresco team demonstrates exceptional resourcefulness and agility, consistently balancing a controlled approach to expenses with the appropriate level of investment to support growth. As a result, Adjusted EBITDA reached $200 million for 2024, representing 28% of full-year revenue and a 15% improvement over 2023. In the fourth quarter, the decline in gross profit and the corresponding reduction in operating leverage led to $42 million in adjusted EBITDA, representing 24% of revenue in the quarter.
Dan: On the cost side adjusted SG&A in the quarter was $54 million, reflecting a 1% year over year reduction and essentially flat from last quarter.
Dan: This rounds out our year of the quarter with nearly $29 million and adjusted SG&A reductions in 2024.
Dan: During my time here I've seen firsthand, how the Costco team demonstrates exceptional resourcefulness and agility consistently balancing a controlled approach to expenses with the appropriate level of investment to support growth.
Dan: As a result, adjusted EBITDA reached $200 million for 2024, representing 28% of full year revenue and a 15% improvement over 2023.
Dan: In the fourth quarter the decline in gross profit and the corresponding reduction in operating leverage led to a $42 million and adjusted EBITDA, representing 24% of revenue in the quarter.
Sharon Shuler: Our ability to generate cash remains strong. We delivered $30 million in operating cash this quarter, bringing our full year total to $132 million, a record for us. The cash flow improvement, even on lower revenue, highlights the strength of the strategy and our ability to manage through a dynamic environment. With this cash flow performance, we remain committed to strategic capital allocation, operating efficiently, investing in growth, and strengthening our balance. In Q4, we invested $3 million in CapEx, bringing our full year total to $20 million. At the same time, we retired $40 million of our 2026 note, reinforcing our commitment to reducing debt and fortifying our balance.
Dan: Our ability to generate cash remains strong we delivered $30 million in operating cash flow this quarter, bringing our full year total to $132 million a record for us.
Dan: The cash flow improvement, even on lower revenue highlights the strength of our strategy and our ability to manage through a dynamic environment.
Dan: With this cash flow performance, we remain committed to strategic capital allocation operating efficiently investing in growth and strengthening our balance sheet in Q4, we invested $3 million in capex, bringing our full year total to $20 million at the same time, we retired $40 million of our 2026 note reinforcing our commitment to reducing.
Dan: That and fortifying our balance sheet looking ahead paying down debt and securing favorable refinancing terms our top priority.
Sharon Shuler: Looking ahead, paying down debt and securing favorable refinancing terms are top priorities. We've seen strong demand from both existing and new lenders, and we expect to complete this refinancing in the coming months, which will give us greater financial flexibility.
Dan: We've seen strong demand from both existing and new lenders and we expect to complete this refinancing in the coming months, which will give us greater financial flexibility.
Sharon Shuler: In 2025, execution is key. While we've already kicked off several growth initiatives, we don't expect them to have a material impact in Q1. Still, these investments are the building blocks for sustainable long-term growth. In the near term, pricing pressures and market fragmentation, particularly in Illinois, will weigh on revenue alongside continued pressure in wholesale as we prioritize independent dispensary growth while managing AR revenue. Lower revenue from Illinois and broader price compression will impact margin. On the expense side, SG&A will remain relatively flat in Q1, with modest increases throughout the year as we expand in Ohio, Florida, Pennsylvania, and launch operations in Kentucky that we will look to manage through cost controls, efficiency gains, and profitable growth opportunities in the quarters ahead.
Dan: In 2025 execution of key while we've already kicked off several growth initiatives. We don't expect them to have a material impact in Q1 still these investments are the building blocks for sustainable long term growth in the near term pricing pressures and market fragmentation, particularly in Illinois will weigh on revenue alongside continued pressure in whole.
Dan: As we prioritize independent dispensary growth, while managing our risk.
Dan: Lower revenue from Illinois, and broader price compression will impact margins.
Dan: On the expense side SG&A will remain relatively flat in Q1 with modest increases throughout the year as we expand in Ohio, Florida, Pennsylvania and launch operations in Kentucky that we will look to manage through cost control efficiency gains and profitable growth opportunities in the quarters ahead.
Sharon Shuler: I'm confident in our team's tactical execution, staying laser focused on operational excellence, cash generation, and strategic investment. With strong cash flow, restrained capital allocation, and targeted market expansion, we will drive sustainable growth and build momentum throughout 2025.
Dan: I'm confident in our team's tactical execution, staying laser focused on operational excellence cash generation and strategic investments with strong cash flow restrained capital allocation and targeted market expansion, we will drive sustainable growth and build momentum throughout 2025.
Sharon Shuler: We appreciate your continued confidence in our strategy.
Speaker Change: We appreciate your continued confidence in our strategy and with that I'll turn it back over to Charlie. Thank you Sharon in 2024, we led with cash generation and operational excellence in order to shore up our profitable core.
Charles Bachtell: And with that, I'll turn it back over to Charlie. Thank you, Sharon. In 2024, we led with cash generation and operational excellence in order to shore up our profitable core. We're attacking 2025 with the same discipline where profitability remains front and center. The year ahead is full of opportunity and our growth pipeline is robust. We're strategically allocating resources to deepen our presence in core markets and expand into new Kentucky Marks, our first step in this next phase of the. And we're excited to bring Cresco Labs to the state. We have extensive experience building markets from the ground up and understand how to make inroads for the broader industry.
Speaker Change: We're attacking 2025 with the same discipline, where profitability remains front and center. The year ahead is full of opportunity and our growth pipeline is robust.
Speaker Change: We are strategically allocating resources to deepen our presence in core markets and expand into new markets.
Speaker Change: <unk> marks our first step in this next phase of expansion and we're excited to bring <unk> to the state. We have extensive experience building markets from the ground up and understand how to make inroads for the broader industry, we're ready to flex those muscles and launch our competitive capabilities in the state.
Charles Bachtell: We're ready to flex those muscles and launch our competitive capabilities.
Charles Bachtell: A big thank you and congratulations to the Cresco team on an excellent year, and I couldn't be more excited to tackle these opportunities in 25 together.
Speaker Change: Big Thank you and congratulations to the <unk> team on an excellent year and I couldnt be more excited to tackle these opportunities and twenty-five together.
Unknown Executive: With that, I'll open the call for questions. Thank you. We will now begin the question and answer session.
Speaker Change: With that I'll open the call for questions.
Speaker Change: Thank you we will now begin the question and answer session.
Unknown Executive: As a reminder, if you would like to ask a question today, please do so now by pressing start followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press start followed by two to withdraw yourself from the queue.
Speaker Change: As a reminder, if you would like to ask a question today. Please do so now by pressing star followed by the number one on your telephone keypad.
Speaker Change: Change your mind or do you feel like your question has already been onset you can press star followed by two to withdraw yourself from Mackay.
Luke Hannan: Our first question comes from Luke Hannan with Canaccord Genuity. Please go ahead, Luke. Thank you, and good morning, everyone. I just wanted to come back to the discussion. I think if I heard correctly, there was less volume than you would have liked to have had on hand. And as a result, there were some sales that you didn't pick up during the quarter. Can you help frame up sort of what the magnitude of that was? And then related to that, you talked about ramping up cultivation to help meet that higher demand and it's going to be an H2 volume growth story.
Speaker Change: Our first question comes from Luke Hannan with Canaccord Genuity.
Speaker Change: Go ahead Mike.
Luke Hannan: Yeah. Thank you and good morning, everyone I just wanted to come back to the discussion in Q4, I think if I heard correctly. There was less volumes than you would have liked to have had on hand and as a result, there was some sales that you didnt pick up during the quarter can you help frame up sort of what the magnitude of that was and then related.
To that you talked about ramping up of cultivation to hell.
Luke Hannan: <unk> got higher demand and it's going to be an age to volume growth story. Similarly can you help us think about what the magnitude of that contribution will be thank you.
Luke Hannan: Similarly, can you help us think about what the magnitude of that contribution will be?
Luke Hannan: Yeah.
Charles Bachtell: Good morning. Thanks, Luke. And this is Charlie. Sort of quantifying the volume in Q4, somewhat related to what we saw with the price compression aspect of it, there's correlation there. So we did have, the good thing, I would say, is in Illinois MPA, we have existing facilities that to date have had underutilization associated with them that we can turn on. And we had increased demand in these states that related to the price compression, got a little in front of us. So the good thing is the plans are already in place to bring that production back online.
Charlie: Good morning, Thanks, Luc so and this is Charlie.
Speaker Change: You sort of quantifying the volume in Q4.
Speaker Change: Somewhat related to what we saw with the price compression aspect of it theres correlation there. So we did have the good thing I would say is in the Illinois, NPA, we have existing facilities.
Speaker Change: That.
Speaker Change: To date have had underutilization associated with them that we can turn on and we had plans to do it. This just got.
Speaker Change: The increased demand in these states that related to the price compression.
Speaker Change: Got a little in front of us. So the good thing is the plans are already in place to bring that production back online.
Charles Bachtell: And we will see the benefit of it again, to what extent hard to quantify for future quarters, just know it'll make us better able to compete as we typically do in the in the quarters ahead.
Speaker Change: And we will see the benefit of it again to what extent hard to quantify.
Speaker Change: For future quarters, just know it will make us better able to compete as we typically do.
Speaker Change: In the quarters ahead.
Speaker Change: Okay. Thanks.
Speaker Change: And then also if we can go back to share and I think you had mentioned.
Luke Hannan: If we can go back to Sharon, I think you had mentioned, and Charlie, you may have touched on this as well, that there's a certain, we'll call it pullback when it comes to some of the wholesale customers that you're working with in order to manage that AR risk. How exactly are you looking at that? I imagine it's in the form of delinquency rates. Can you give us an idea of where exactly that sort of stands right now?
Speaker Change: You may have touched on this as well that there is a certain we'll call it pull back when it comes to some of the wholesale customers that youre working with in order to manage that risk. How exactly are you looking at that I imagine it's in the form of delinquency rates could you give us an idea of where exactly that sort of stands right now.
Sharon Shuler: and Sharon will take that one. Yeah, sure.
Speaker Change: And Sharon I'll take that one yeah sure. So if you look at our AR balance you'll actually see we're down roughly 6% quarter over quarter. We actually if you look at the major accounts that make up that balance we have plans in place with several of those large.
Sharon Shuler: So if you look at our AR balance, you'll actually see we're down roughly 6% quarter over quarter. We actually, if you look at the major accounts that make up that balance, we have plans in place with several of those large customers at this time. But it's definitely something that we've been hyper focused on, and feel really strongly that we'll continue to reduce that balance over the coming months.
Speaker Change: Customers at this time, but it's definitely something that we've been hyper focused on and feel really strongly that will continue to reduce that balance over the coming months.
Speaker Change: Okay.
Luke Hannan: I'll pass the line here just on Kentucky. I may have missed this in the prepared remarks, but how quickly can that that be scaled? And I guess more specifically, when can we expect more meaningful contributions in the PNL? I imagine it's an H2 story, but happy to answer. if there's any differences of opinion on that. Yeah, we're excited about Kentucky. It's it's really one of the first New States, like launching a new program from scratch new medical program from scratch and in quite some time. So you're right, there's going to be contributions, we'll see some in 2H, but really more of a 26 and on growth story.
Speaker Change: And last one and then I'll pass the line here just on Kentucky.
Speaker Change: May have missed this in the prepared remarks, but how quickly can that be scaled.
Speaker Change: I guess more specifically when can we expect some more meaningful contributions in the P&L I imagine, it's an H two story, but happy to hear if there's any differences of opinion on that.
Speaker Change: Yes, we're excited about Kentucky, it's it's really one of the first.
Speaker Change: New states like launching a new program from scratch, New medical program from scratch and in quite some time.
Speaker Change: So youre right theres going to be contributions will see some in <unk>, but really more about 2006 and on growth story with any new market you have to establish the infrastructure.
Charles Bachtell: With any new market, you have to establish the infrastructure. We'll of course take a phased approach like we typically do to be able to bring some product to market quickly, but markets will ramp as infrastructure from the production side, from the retail side and patient adoption ramps up too. So excited about the future for Kentucky, but definitely more of a 26-27 growth story.
Speaker Change: We will of course take a phased approach like we typically do to be able to bring some products to market quickly, but markets will will ramp.
As infrastructure from the production side from the retail side and patient adoption ramps up too. So excited about the future for Kentucky, but definitely more of a 'twenty six 'twenty seven growth story.
Speaker Change: Yeah.
Luke Hannan: Great. Appreciate it.
Speaker Change: Okay I appreciate it thank you very much.
Andrew Semple: Our next question comes from Andrew Semple with Ventum Finance. Andrew, please go ahead. Good morning, thanks for taking my question here.
Speaker Change: Our next question comes from Andrew Semple with Ventas financial Andre. Please go ahead.
Andrew Semple: Good morning, Thanks for taking my question here I will say on the Kentucky.
Andrew Semple: I'll stay on Kentucky and the topic of Kentucky, and maybe just ask about the capital that might be required to scale in that market. And maybe if you're able to provide any color on the acquisition price page to establish that relationship. And then finally, if you could also maybe speak to how the economics of that arrangement will work and whether you'd be able to consolidate that on your financial statement.
Andrew Semple: The topic of Kentucky, and maybe just ask about.
Andrew Semple: The capital that might be required to.
Andrew Semple: The scale in that market and maybe if you're able to provide any color on the acquisition price paid to establish that relationship.
Andrew Semple: Finally, if you could also maybe speak to how the economics of that arrangement will work.
Andrew Semple: And whether you'd be able to consolidate that on your financial statements.
Charles Bachtell: So maybe just a more broad kind of economic update on on the upcoming Kentucky opportunity. Sure, Andrew, so I might take it in reverse order, will be consolidated with the financials. The relationship was established through the application process. So from a cost of acquisition standpoint was part of the part of the application process. And then as far as. CAPEX associated with it. Again, it'll be a scaled, ramped up approach as other infrastructure and investment and adoption comes online through Kentucky. So, incremental in 2025 and more to come as the program ramps up. Understood. Okay.
Andrew Semple: Ah.
Andrew Semple: More broad.
Andrew Semple: Kind of economic update on on the upcoming Kentucky all opportunity.
Andrew Semple: Sure Andrew So it may take it in reverse order.
Andrew Semple: <unk> will be consolidated with the financials. The relationship was established through the application process.
Andrew Semple: So from a cost of acquisition standpoint, it was part of the <unk>.
Part of the application process and then as far as.
Andrew Semple: Capex associated with it again, it will it'll be a scaled ramped up approach as other infrastructure and.
Andrew Semple: In investment and adoption comes online through Kentucky. So.
Andrew Semple: Incremental in 2025 and more to come as the program.
Andrew Semple: Ramps up.
Andrew Semple: Understood Okay.
Luke Hannan: And then maybe turning to the margin profile, you previously guided or indicated that 50% is a reasonable target over the longer term. Though in prepared remarks, you mentioned there might be some ongoing margin pressure with ramping up cultivation facilities.
Andrew Semple: And then maybe turning to the margin profile you previously guided or indicated 50% is a reasonable target over the longer term.
Andrew Semple: So in the prepared remarks, you mentioned there might be some ongoing margin pressure was.
Andrew Semple: Ramping up of cultivation facilities in Illinois, and Pennsylvania, just wondering how youre feeling about the 50% level for all of 2025, whether that's still a reasonable target.
Charles Bachtell: Just wondering how you're feeling about the 50% level for all of 2025, whether that's still a reasonable target, you know, given you'll, you will have some opportunities for March In the back half of the year, how do you feel about that level for the full year? No, long term and full year, no change. Position is still there. We might feel some pressure in Q1 and Q2 before some of these additional initiatives start to contribute. But again, we manage the company for the long term. The quarter-to-quarter noise, it's inherent in the industry and it's dependent on specific footprints, confident long-term view, and that's how we manage the company.
Andrew Semple: You will have some opportunities for margin enhancement in the back half of the year, how do you feel about that level for the full year.
No long term and full year no change position is still there we might feel some pressure in Q1 and Q2 before some of these additional initiatives start to contribute but again, we manage the company for the long term.
Andrew Semple: Quarter to quarter noise, it's inherent in the industry and it's dependent on specific footprints confident in long term view and Thats, how we manage the company.
Luke Hannan: Great, that's helpful. I'll get back into queue. Thanks for taking my question.
Speaker Change: Great. That's helpful I'll get back into queue. Thanks for taking my questions.
Andrew Semple: Okay.
Aaron Grey: Our next question comes from Aaron Grey with Alliance Global Park. Aaron, please go ahead. Hi, good morning, and thank you for the questions. And congrats in Kentucky, and definitely seem to have more of a tone of returning to the offensive here that we're hearing.
Aaron Grey: Our next question comes from Aaron Grey with Alliance Global partners.
Speaker Change: Please go ahead.
Speaker Change: Hi, good morning, and thank you for the questions and congrats in Kentucky, and I'm definitely seem to have more of a tone of returning to the offensive here that we're hearing so on that note.
Aaron Grey: So on that note, you know, didn't want to touch a little bit more in terms of CapEx initiatives, you alluded to, you know, needing to meet more demand and supply constraints in markets like Illinois and Pennsylvania, or those more modest investments, obviously, you've been in those markets for a while, or more material investments for expansion there. So any color on that, and then just how you're thinking about, you know, CapEx initiatives, in terms of whether or not deploying that to more in existing markets, maybe New York's even more attractive, or if you think that's better to put into new markets like you're doing with Kentucky.
Speaker Change: Wanted to ask a little bit more in terms of Capex initiatives, you alluded to you know needing to meet more demand and supply constraints in markets like Illinois, and Pennsylvania are those more modest investments obviously, you've been in those markets for a while or more material investments for expansion. There. So any color on that and then just how youre thinking about capex initiatives in terms of.
Speaker Change: Whether or not deploying back to more in existing markets.
Speaker Change: New York is even more attractive or do you think thats better to put into new markets like Youre doing with Kentucky. Thank you.
Charles Bachtell: Thank you. Thanks. Morning, Aaron. So as it relates to Illinois and PAA, to your point, those are relatively light touch because they're existing facilities. In the course of the last couple of years, as productivity of these states and demand has developed, it was just good management for us to actually turn off some of the capacity that we had. So it's turning that back on. So incremental and modest investments needed to do that.
Speaker Change: Okay.
Speaker Change: Thanks, Good morning Erinn.
Speaker Change: As it relates to Illinois, and PAA to your point those are relatively light touch because their existing facilities.
Speaker Change: In the course of the last couple of years.
Speaker Change: As as productivity of these states and demand.
Speaker Change: Has developed to it was just good management for us to actually turn off some of the capacity that we have so it's turning that back on so incremental.
Speaker Change: And modest investments needed to do that.
Charles Bachtell: As it relates to Kentucky, just to hit on again, we'll take a phased approach there. We're very excited about it. That license, as I said in the prepared remarks, it allocates or it's allocated over 20 percent of the available canopy in the state. So we really like the opportunity that it gives us, but we'll manage the CapEx investment to be in line with the development of that marketplace itself.
Speaker Change: As it relates to.
Speaker Change: Kentucky just to hit on again, we will take a phased approach there. We're very excited about it that license as I said in the prepared remarks.
Speaker Change: It allocates its allocated over 20% of the available cannot be in the states. So we really like the opportunity that it gives us, but we will manage the capex investment to be in line with the development of that.
Speaker Change: Marketplace itself, and then as far as <unk>.
Charles Bachtell: And then as far as states like New York, it's going to be a continuing evaluation. The way that we allocate and deploy capital is going to be based on the highest likelihood of the highest return. And New York still has the issue of the fee associated with it. So we're encouraged by the development of the overall market in New York. We'll continue to monitor it, but we still feel like there are other opportunities for the deployment of capital that have better returns. Okay, great. Thanks for calling there, Charlie.
Speaker Change: States like New York, it's going to be a continuing evaluation.
Speaker Change: The way that we allocate and deploy capital is going to be based on the.
Speaker Change: The highest likelihood of the highest return and new York's still has the issue of the fee associated with it. So we're encouraged by the development of the overall market in New York will continue to monitor it but we still feel like there are other opportunities for the deployment of capital that have better return.
Speaker Change: Okay, great. Thanks for that color there Charlie and then just in terms of.
Aaron Grey: And then just in terms of you know, potential federal reform, you've always had, you know, strong polls on DC. So just anything you've had, you know, in terms of your conversation, I know you went down for the inauguration as well.
Speaker Change: Potential federal reform, you've always had a strong pulse on D. C. So just anything that you've had.
Speaker Change: Terms of your conversation I know you went down for the inauguration as well. So any color you can provide in terms of anticipation for potential reform or any conversations that you've had around that with lobbyists or otherwise. Thank you.
Charles Bachtell: So any color you could provide in terms of anticipation for potential reform or any conversations that you've had around that with lobbyists around the world. Sure, what I would say... is the I still remain so confident in the story that cannabis has to tell. It's such a common sense story. You know, you're at the point where 40 out of 50 states have legalized cannabis for one reason or another. And we're at the point where we've just been waiting for a common sense audience to take a common sense approach to it. And if I look at the lay of the land ahead of us, you know, the obligations on us to make sure that we tell the cannabis story in a way that the current administration can hear it and see it for what it is, which is it just needs a common sense approach brought to it from a reform perspective.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: What I would say.
Speaker Change: Is the.
Speaker Change: I still remain so confident in the in the story that cannabis.
Speaker Change: Has to tell it.
Speaker Change: It's such a common sense story.
Speaker Change: At the point, where 40 out of 50 states have legalized cannabis for one reason or another.
Speaker Change: And.
Speaker Change: We're at the point, where we've we've just been waiting for a common sense audience to take a common sense approach to it.
Speaker Change: And if I look at the lay of the land ahead of us.
Speaker Change: The obligations on us to make sure that we tell the cannabis story in <unk>.
That the current administration.
Speaker Change: Can can hear it and see it for what it is which is it just it just needed a common sense approach brought to it from a reform perspective so.
Aaron Grey: So like you said, I was down there earlier this year. You've seen the efforts from the industry and the leading participants to bring associations together to really mature in our approach to D.C. to get the reform that the industry needs. So we'll continue to do it and optimistic about the outlook, but the obligations on us to deliver. Okay, great. Thanks for the commentary then. I'll go ahead and jump back into the queue.
Like you said.
Speaker Change: He was down there earlier this year you've seen the efforts from the from the industry.
Speaker Change: The leading participants to bring associations together to really mature in our approach to D C to.
Speaker Change: To get the reform that the industry needs. So we'll continue to do it.
Speaker Change: And optimistic about the outlook, but the obligations on us to deliver.
Speaker Change:
Speaker Change: Okay, great. Thanks for the commentary and then I'll jump back into the queue.
Frederico Gomes: Thanks, Aaron. Our next question comes from Frederico Gomes with ACB Capital. Please go ahead. Good morning and thanks for taking my questions. talking about capital location, you mentioned you're looking at high ROI opportunities. We've seen some other companies in the industry investing in the hand derived market. So just curious if that's something that you look at as a potential capital location alternative.
Darren: Thanks Darren.
Federico: Our next question comes from Federico <unk> with ACB capital. Please go ahead.
Federico: Hey morning, guys. Thanks for taking my questions.
Just talking about capital allocation, you mentioned, you're looking at high.
Federico: ROI opportunities.
Federico: We've seen.
Federico: Some other companies in the industry investing in the hemp derived CBD market. So just curious if that's something that.
Federico: You look at as a potential.
Federico: Location alternative.
Charles Bachtell: Good morning. So, you know, as we as we stated in the prepared remarks that we see opportunities for capital deployment into new markets that we're not in yet. Um And we were intent on moving forward with these great opportunities. But also, like we said, we're going to be very diligent and we're going to make sure that we make the right decisions at the right states at the right time to deploy that capital. But we are we are excited about the opportunities that are out there as far as it relates to the hemp issue. Again, we see we see opportunities that the intoxicating hemp area are are providing for not only current operators, but for consumers.
Federico: Good morning, So as we as we stated in the prepared remarks that we see opportunities for capital deployment into new markets that we're not in yet.
Federico: And we were intent on moving forward with these great opportunities, but also like we said we're going to be very diligent and we're going to make sure that we make the right decisions at the right states at the right time to deploy that capital, but we are we are excited about the opportunities that are out there as far as it relates to the hemp issue.
Federico: Again, we see we see opportunities that the intoxicating him area are are providing for not only current operators, but for consumers and I know Greg you have got.
Gregory Butler: And I know, Greg, you've you've got a position on this, too, to share. Yeah, good morning. I think if it comes to hemp, you know, obviously we're very on one side excited about hemp, bringing new consumers into the category, which helps drive trial. Obviously, more difficult when it comes back to that business versus our traditional business. We are confident that our brands would do really well in hemp and we have a point of view on how our brands would enter hemp. The fundamental issue we still have with the hemp business, though, is can you make good margin in it with the current infrastructure and the current structural realities of hemp?
Speaker Change: Position on this tradition, yes, good morning.
Speaker Change: I think if it comes to hemp, obviously were very one sided excited about him.
Speaker Change: Bringing new consumers into the category.
Speaker Change: It helps drive trial, obviously more difficult when it comes back to that business versus our traditional business.
Speaker Change: We are confident that our brands, we do really well on him.
Speaker Change: And we have a point of view on how our brands would enter him. The fundamental issue, we still have with the him business. Though is can you make good margin in it with the current infrastructure in the current structural realities of him and give him a reorder Charlie's point to the next dollar of investment.
Gregory Butler: And given where we are to Charlie's point to the next dollar investment, as we see more operators, whether it's operators in states or store operators looking to find new strategic partners for growth. We think the next best dollar for us is to really go towards adding states that are driving the majority of the growth that's happening in the market today or building on more infrastructure in those states that we operate. They have a leading market position and no drive good margin. So every time we look at the hemp opportunity, it's interesting. It's exciting. There's growth there from a consumer perspective.
Speaker Change: We see more operators, whether it's operators in states, where store operators looking to find new strategic partners for growth. We think is the next best dollar for US is to really go towards adding states that are driving material and the majority of the growth that's happening in the market today or.
Speaker Change: Building on more infrastructure in those states that we operate today have a leading market position and no drive good margin. So every time, we look at the hemp opportunity. It's interesting. It's exciting there is growth there from a consumer perspective.
Gregory Butler: But financially, I think there are things that are closer into us that makes more sense right now.
Speaker Change: Financially I think there are things that are closer in to us It makes more sense right now.
Frederico Gomes: Perfect. Thanks for the caller.
Speaker Change: Perfect. Thanks for the color.
Frederico Gomes: And then second question, just on M&A, you know, as you look to enter new potential markets, just curious how valuations are looking right now, how's the potential pipeline that we've seen in the public markets? Obviously, valuations have come down, just curious if your, you know, opportunity to deploy capital into M&A to enter new markets has improved recently and how do you think that looks compared to 2024? Thanks. Sure, the opportunities are there, because as you're seeing, there's challenges that are inherent in the industry. And whether or not organizations are built to to be able to manage through it, and execute at the level that's needed today, create opportunities.
Speaker Change: And then second question just on M&A.
Speaker Change: As you look to enter.
Speaker Change: Potential markets.
Speaker Change: Curious how valuations are looking right now on the potential pipeline, we've seen in the public markets, obviously valuations have come down so just curious if your.
Speaker Change: Opportunity to deploy capital into M&A to enter new markets has improved recently and how do you think that looks like there are two types of important things.
Speaker Change: Sure.
Speaker Change: Opportunities are there because as youre seeing theres challenges that are inherent in the industry.
Speaker Change: And whether or not organizations are built.
Speaker Change: To to be able to manage through it and execute at the level that's needed today.
Speaker Change: Create opportunities.
Charles Bachtell: And, you know, what we're proud of is what we've done over the last two years to be able to put ourselves into a position to take advantage of these opportunities as they become available, the operational cash flow that we've been able to generate from this business is exactly what we've been focused on for the last two years, is to give ourselves the resources and the operational structure and the team members and the systems that are needed in order to maximize the opportunities that are going to present themselves that lead to this long term approach to success in the space.
Speaker Change: And what we're proud of what we've done over the last two years to be able to put ourselves into a position.
Speaker Change: To take advantage of these opportunities as they become available the operational cash flow that we've been able to generate from this business is exactly what we've been focused on for the last two years is to give ourselves the resources.
Speaker Change: The operational structure and the team members and the systems that are needed in order to maximize the opportunities that are going to present themselves that lead to this long term approach to success in this space. So theres definitely opportunities that are making themselves available in states that were not in yet and we are in a very good position.
Frederico Gomes: So there's definitely opportunities that are making themselves available in states that we're not in yet. And we're in a very good position to be able to capitalize on Thank you.
Speaker Change: To be able to capitalize on those.
Speaker Change: Thank you.
Bill Kirk: The next question comes from Bill Kirk with Roth Capsule Partners. Please go ahead, Bill. Yeah, good morning.
Speaker Change: The next question comes from Bill Kirk with Roth Capital Partners.
Speaker Change: Please go ahead bill.
Speaker Change: Yes. Good morning. This is Nick on for Bill. Thanks for taking the questions first one for me I just wanted to follow up on the wholesale side with the new dispensaries that have come online kind of across the board in the past 12 months to 18 months here. Just wondering if you could provide an update on your current penetration level in some of your key markets versus maybe your goals throughout 2025.
Nick: This is Nick on for Bill. Thanks for taking the questions. First one for me, just wanted to follow up on the wholesale side with the new dispensaries that have come online kind of across the board the past 12 to 18 months here. Just wondering if you could provide an update on your current penetration level in some of your key markets versus maybe your goal throughout 2025, just how you're weighing the wholesale growth opportunity, given the amount of new doors out there.
Speaker Change: How youre weighing the wholesale growth opportunity given the amount of new doors out there would be helpful. Thank you.
Gregory Butler: Greg will take this one.
Speaker Change: And Greg will take this one hey, good morning, Nick Youre, absolutely correct, we are seeing new door growth.
Gregory Butler: Hey, morning, Nick. You're absolutely correct. We are seeing new door growth across most of our core states. On one hand, it's a good thing for the industry. It's making it easier for shoppers to get access to cannabis, to get traffic. It also increases competition, and that's really what we're seeing. As Charlie mentioned earlier, one of the biggest drivers of price depression is coming, or at least started, at the retail front, whether that's retailers are willing to run a store at a lower margin or retailers are competing with each other to win valuable foot traffic. That's really the macro driver of what's happening in price compression right now.
Speaker Change: Most of our core states on one hand.
Speaker Change: It's a good thing for the industry, it's making it easier for shoppers to get access to candidates.
Speaker Change: It also increases competition and that's really what we're seeing.
Speaker Change: As I mentioned earlier, one of the biggest drivers of price compression is coming or at least started at the retail front, whether that retailers are willing to run a store at a lower margin or retailers are competing with each other to win valuable foot traffic.
Speaker Change: That's really the macro driver of what's happening in price compression right now, but as Charlie mentioned, probably not going to slow down over the next couple of quarters. As these doors are using price as a lever to help build up their base.
Gregory Butler: As Charlie mentioned, probably not going to slow down over the next couple of quarters as these doors are using price as a lever to help build up their base.
Gregory Butler: From a penetration perspective in our wholesale business, one of the things we're really proud about is the performance of our brands. We still have some of the top performing brands in the states that we operate in. Our penetration rates in those doors are hitting our goals. So we're getting in, we're getting the assortment we like, we're seeing really strong velocities on our brands. And so from a sales perspective, really encouraged that when our brands get on the shelf, not only do we see velocities behind it, but it's a pretty good profit story for the retailer as well.
Speaker Change: Penetration perspective in our wholesale business.
Speaker Change: One of the things we're really proud about is the performance of our brands. We still have some of the top performing brands in the states that we operate in our penetration rates in those doors are hitting our goals. So we're getting in we're getting the assortment. We like we're seeing really strong velocities on our brands and so from a sales perspective really incur.
Speaker Change: <unk>.
Speaker Change: Our brands get on the shelf not only do we see velocities behind it but.
Speaker Change: But it's a pretty good profit story for the retailer as well the one thing we're just watching what are the two things that they are watching is how much price is being used as a levered to win traffic and then two as Sharon mentioned, we just have to be very careful where they are.
Gregory Butler: The one thing we're just watching, one of the two things that they're watching is how much price is being used as a lever to win traffic. And then two, as Sharon mentioned, we just have to be very careful where they are. We've got a lot of customers that are in essence, borrowing by not paying AR. And even though those are good customers, and our brands are performing well on their shelves, we're not in a position to extend credit to new doors as we go forward. And so one thing we're going to manage really closely here.
Speaker Change: We've got a lot of customers that are.
Speaker Change: In essence borrowing by not paying a R and even though those are good customers and our brands are performing well on their shelves.
Speaker Change: We're not in a position to extend credit.
Speaker Change: Two new doors as we go forward and so one thing we're going to manage really closely here.
Speaker Change: Okay.
Nick: That's great. I appreciate that color.
Speaker Change: That's great I appreciate that color second one from me just on the loyalty program grew up to about 373000. This quarter Thats encouraging sequential growth is that program fully rolled out across all your markets. Currently can you just provide a little color on what you've seen also in terms of basket size and economics from these loyalty users. Thank you.
Gregory Butler: Second one for me, just on the loyalty program, you're up to about $373,000 this quarter. That's encouraging sequential growth. Is that program fully rolled out across all your markets currently? Can you just provide a little color on what you've seen also in terms of basket size and economics from these loyalties? Yeah, I think from a loyalty perspective, what everything we're everything we're doing at Sunnyside right now, we're really pleased with, I think, its ability to continue to drive share gains and above fair share performance is a demonstration of what that team has been able to build.
Speaker Change: Yes, I think from a loyalty perspective, what everything with everything we're doing in Sunny side right now, we're really pleased with I think.
<unk> ability to continue to drive share gains and above fair share performance is a demonstration of what that team has been able to build.
Gregory Butler: Loyalty, we still think there's room to grow with loyalty, both in expansion and also getting more of our shoppers to continue to use loyalty. So it'll be a big push for us because of what you just said. It gives us really incredible data on shopper behavior, which we're able to use to help drive increased baskets. So things that we're doing right now, which you've probably seen, which is helping with our basket sizes, is win back offers to any customer we may have lost due to a new store opening across the street, basket building offers. So starting to get into predictive modeling of if you tend to buy one form, how do we add a different form into that basket to try to get you to grow?
Speaker Change: Loyalty, we still think there's room to grow with loyalty.
Speaker Change: With an expansion and also getting more of our shoppers to continue to use loyalty. So there'll be a big push for us because of what you just said it gives us really an incredible data on shopper behavior, which we are able to use to help drive increased baskets.
Speaker Change: Things that we're doing right now, which you've probably seen which is helping with our basket sizes is win back offers to any customer. We may have lost due to our new store opening across the street basket building offers so starting to get into predictive modeling of if you tend to buy one form how do we add a different form into that that tried to get you to.
Gregory Butler: Because one of the biggest assets we have is... We have a really strong customer base in our stores that are coming in frequently. In fact, I think they're probably going to come in more frequently as we see what happens in the next couple of months with the economy. But I think the trend that I'd expect to see in cannabis is more frequent trips, maybe smaller baskets because they're trying to make their weekly paycheck, sorry, bi-weekly paycheck or weekly spending go further. So loyalty is key for us. It's going to be something you're going to see more about as we go forward.
Speaker Change: To grow because one of the biggest assets we have is.
Speaker Change: We have a really strong customer base in our stores that are coming in frequently in fact, I think they're probably going to come in more frequently as we see what happens in the next couple of months with the economy, but I think the trend that I'd expect to see in cannabis is more frequent trips.
Speaker Change: Smaller baskets, because they're trying to make their weekly picture, sorry, biweekly paycheck a weekly spending go further.
Speaker Change: So loyalty is key for us.
Speaker Change: It's going to be something.
Speaker Change: More of US as we go through to the board.
Nick: Great, that's it for me. I'll jump back in. Thank you.
Speaker Change: Great. That's it for me I'll jump back in the queue. Thank you.
Speaker Change: Thank you at this time, we have no further questions on peloton, Nicole over to Charlie <unk> CEO for closing remarks.
Charles Bachtell: At this time we have no further questions and so I'll turn the call over to Charlie Bachtell, CEO, for closing remarks. I want to thank everybody for joining us today, again want to reiterate the giant thank you and congratulations to the Cresco team for an incredible 2024 and we'll talk to everybody in a couple of months. Thank you. Thank you everyone for joining us today.
Speaker Change: I want to thank everybody for joining us today again want to reiterate the giant thank you and congratulations to the <unk> team for an incredible 2024, and we will talk to everybody in a couple of months. Thank you.
Speaker Change: Thank you everyone for joining us today. This concludes your call and you may now disconnect your lines.
Unknown Executive: This concludes your call and you may now disconnect your line.
Speaker Change: [music].
Unknown Executive: [music]