Q2 2025 Curaleaf Holdings Inc Earnings Call
Good afternoon, and welcome to the <unk> Holdings, Inc. Second quarter 2025 conference call all participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions to ask a question you May Press Star then one and you touched on fed.
To withdraw your question. Please press Star then two please note that this event is being recorded I would now like to turn the conference over to Camilo Lyon Chief Investment Officer. Please go ahead.
Good afternoon, everyone and welcome to securely Holdings second quarter 2025 conference call.
Today, I'm joined by Chairman and Chief Executive Officer, Boris Jordan, and Chief Financial Officer.
Before we begin I'd like to remind everyone that the comments on today's call will include forward looking statements within the meaning of Canadian and United States Securities laws, which by their nature involve estimates projections plans goals forecasts and assumptions, including the successful integration of acquisitions and are subject to risks and uncertainties that could cause actual result.
<unk> or outcomes to differ materially from those expressed in the forward looking statements on a certain material factors or assumptions that were applied in drawing a conclusion or making a forecast in such statements.
These forward looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. We undertake no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise, except as required by applicable law.
Additional information about the material factors and assumptions, forming the basis of the forward looking statements and risk factors can be found in the company's filings and press releases on SEDAR and Edgar.
During today's conference call in order to provide greater transparency regarding Chile's operating performance, we will refer to certain non-GAAP financial measures and non-GAAP financial ratios.
Adjustments to GAAP results.
Such non-GAAP measures and ratios do not have a standardized meaning under U S. GAAP.
Any non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by U S. GAAP to now be considered measures of chili's liquidity and are unlikely to be comparable to non-GAAP financial measures provided by other companies any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable.
<unk> U S GAAP financial measure under the heading reconciliation of non-GAAP financial measures in our earnings press release issued today and available on our Investor Relations website at IR Dot Shirley Dot com.
With that I'll turn the call over to chairman and CEO Boris Jordan course, Thank you come Hello, Good afternoon, everyone and thank you for joining us to discuss our second quarter of 2025 results.
Over the past 10 years, we've strategically built purely into a global cannabis leader now operating in 17 U S States plus seven plus 15 countries worldwide.
With our infrastructure in place and our asset base established we're sharpening our focus on product quality customer service and supply chain excellence to ensure every customer receive the best possible experience every time in every store.
From the outset rapidly growing the business has been central to my vision, recognizing that scale would be essential to navigating the inevitable volatility of the cannabis industry.
Current pricing pressures are affecting the entire sector sub scale operators are bearing the brunt.
Exiting markets and shedding assets at an accelerating pace.
Ongoing industry rationalization strengthens our long term position as we continue investing in growth initiatives and capitalize on emerging opportunities.
In the second quarter, we generated revenue of $315 million up one 5% compared to the first quarter consistent with our guidance of low single digit growth.
Price compression across most of our markets cap domestic sales were roughly flat compared to the first quarter, while our international segment continued to impress with another solid quarter of 17% sequential growth.
Adjusted gross margin of 49% decreased 130 basis points from the first quarter due to higher levels of promotional activity, particularly around 420 holiday compared to the first quarter.
Generated $66 million and adjusted EBITDA, resulting in a 21% EBITDA margin with international accounting for 260 basis points of margin drag for now we've made the strategic decision to keep those two businesses consolidated as momentum around federal reform and potential.
280 relief from rescheduling continues to build.
Heading into Europe.
That said if meaningful reform fails to materialize, we are prepared to pursue alternative paths such as spinning out these businesses to unlock significant value that we believe is not currently reflected in our valuation as neither of these businesses are subject to.
We ended the second quarter with cash of $102 million after paying $47 million in interest and principal debt payments and generated $9 million in operating cash flow from continuing operations.
In the U S. Our primary focus for the past few quarters has been to manage pricing headwinds and stabilize the domestic business through an unrelenting pursuit of producing consistent high quality flower improving customer service level, enhancing our marketing and branding and optimizing our supply chain and.
In the second quarter, we achieved stabilization of sales were essentially flat compared to the first quarter sequential growth in Massachusetts, Ohio, Florida, Pennsylvania, and New Jersey was offset by pressure as the balance of our continue.
Continued our cultivation facilities were offset by an underwhelming and promotional for 'twenty holiday that landed on Easter impacting the results.
That said, we made meaningful advancements in our product portfolio April was a pivotal month for purely innovation engine marked by the launch of several strategically developed products aimed at enhancing our competitive position and fueling long term growth.
In New York, we introduced <unk>, our proprietary aqueous cannabis extraction of oil which has received exceptional early feedback unlike traditional discipline oils.
Evolution of oil the deliverance of ultra clear ultra pure product with minimal plant material offering a smoother more refined consumer experience. We view this as a disruptive advancement in the cannabis world category, and we expect strong consumer adoption as awareness and trial increase.
In parallel we rolled out our new cylindrical style <unk> across six major markets, New York, New Jersey, Florida, Arizona, Massachusetts, and Illinois anthem is already outperforming expectations and we are accelerating production to meet surging demand while scaling to add additional states.
According to a pudding sell through data.
<unk> is the fastest growing pre roll brand in New York building on the strong brand momentum we are expanding into a full scale pre roll line with a clear goal of establishing it as a national market share leader as part of this expansion, we will launch amphibole, our new line of infuse pre rolls in late September.
Across key markets, including New York, New Jersey, Illinois, and Arizona.
Our innovation pipeline is backed by industry, leading R&D and continues to reinforce our brand leadership.
<unk> remained the number one big brand in the U S. During quarter, two while grassroots our premium flower offering was a top III flower brand according to BBSI.
These gains reflect ongoing improvements in our cultivation practices supported by our genetics program specifically over the past 15 months, we have overhauled our genetics library to deliver high quality consistent flower across our state footprint.
The acquisition of Dark heart nursery highly regarded west coast Genetics lab, we completed a couple of years ago.
And our hearts and quarter two we saw overwhelming success in the markets, where we first began harvesting. These genetics states, such as New York, Florida, Arizona and Utah.
As these strengths continue to rollout across additional market in quarter, three we see strong momentum building.
Flower remains the cornerstone of the cannabis category and we are laser focused on ensuring purely delivers the best in class quality consistency and assortment.
Our progress to date gives us confidence our ability to win in this critical product segment and we're just getting started.
Operating as a fully legal medical business purely for international functions much like a pharmaceutical company.
US greater flexibility to capitalize on the strategic investments we've made over the past four years. This structure continues to deliver scale advantages and brand momentum is clearly demonstrated by a robust second quarter results and with the segment generated $41 million in revenue and a 17% sequential increase.
A 62% year over year growth driven by robust demand in Germany, and the UK.
In Germany, we continue to see healthy patient growth one year after the government passed the.
Catchy cannabis act, removing cannabis as a narcotic and streamlining patient access official data from the German regulator shows that 43 tons of dried flower was imported into Germany in quarter. Two 2025, a four fold increase over quarter two of 2024, while pricing pressures to become more prevalent in the market.
The team has navigated these dynamics well by leading with our premium for 'twenty flower brand complemented by our mid tier.
And value offerings.
Last year's introduction of Koala, our value flower brand is performing above expectations and in the second quarter was boosted by addition of new Schrader options in the U K. The team did a fantastic job of adding new patients to our platform through our pure leaf clinic, where we're focused on delivering high levels of service and product.
Polity to participate.
In addition, the U K business benefited from the new wholesale partnerships and ensuing quarters.
Pure leaf international achieved three significant milestones this quarter that further solidify our global leadership position.
First we completed the buyout of our minority partner and now own 100%.
Surely for international this moves simplifies our structure increases operational flexibility and reinforces our long term commitment to global expansion, we think our partner for their collaboration and continued support of purely position.
We are pleased to announce we have received a license to enter Turkey, providing us a first mover advantage in the countries nascent medical market, Turkey with a population of 87 million people represents a large and underpenetrated opportunities subject to the finalization of the scope of the secondary regulations, we aim to commercialize our brand portfolio in the market within <unk>.
26, we will provide more detail as rules and timelines become clear.
Third we achieved EU medical device registration certification for our World first medically certified liquid candidates inhalation device.
This is a significant regulatory breakthrough that establishes a new standard for inhaled candidate medicines in Europe designed to deliver consistent manner doses. The devices currently the only handheld solution legally permitted under EU medical device regulations.
We're watching the device in the U K this month with plans to expand into key European and Australian markets as regulators as well as regulations evolve.
This innovation positions clearly at the forefront of a differentiated pharma grade delivery platform that addresses growing global demand.
Precision cannabis therapies.
Our international strategy continues to deliver results driven by disciplined execution and a focus on scalable high growth markets recently.
Recent milestones, including new market entries product launches and regulatory wins are not just symbolic they translate directly into near and long term revenue opportunities in fact.
<unk> internationals current total addressable market, including the UK, Germany, Poland, Australia, New Zealand and now Turkey rivals that of the U S. While these are primarily medical markets that are earlier in their development curve. The long term growth potential is significant.
To support the momentum we're seeing today.
We're expanding cultivation capacity to a more asset light model than in the U S. Prioritizing leased infrastructure over owned assets to maintain flexibility and maximize returns on invested capital.
Surely if international is now on pace to be one of our top three revenue contributors by yearend. We expect this segment to play a significant and growing role in our long term value creation strategy.
Our hemp business continues to gain momentum driven by a clear strategy focused on expanding distribution and increasing access to low dose sessional products that resonate with both core consumers and new entrants to the category this quarter.
We successfully launched formula in brick and mortar retail and made it available on door dash further broadening our omnichannel reach in addition to total wine and door dash, we deepened our distribution footprint across key markets, including Connecticut, Indiana, Kentucky, New Jersey, Georgia, Ohio, Illinois, We're also optimizing our.
Supply chain by bringing beverage fulfillment in house at our Kentucky facility and initiatives that enhances production control and expect it to drive stronger margin capture moving forward.
To provide an update on our upcoming definitely finished.
Over the past several months, we've engaged with a broad range of investors, including public and private credit funds as well as regional banks. The initial response has been highly encouraging with strong.
It could have interest in constructive dialogue, we remained focused on securing the most favorable outcome procure align with our long term capital strategy.
We are on track to complete the refinancing by year end and are confident it will enhance our financial flexibility and support our growth priorities.
This earnings call marks my one year anniversary as CEO and I am proud of the meaningful progress we've made through our return to our roots program over.
Over the past 12 months, we've laid critical groundwork to strengthen the business. We said in cargo yields elevating flower quality across our network expanding gross margins, reducing costs and fueling growth in key areas, including International and New York, Ohio, and our emphasis on <unk>.
Price compression remains a headwind and many of our markets driven in large part by the rapid expansion of the loosely regulated hemp sector, which benefits from Interstate commerce, low operating cost and freedom from the $2 80 tax burden, we remain confident in the long term trajectory of the cannabis industry.
That's why.
We continue to invest in the five core pillars of sustainable success people product quality R&D distribution and customer experience.
Domestically, we've upgraded cultivation facilities improve their flower quality implemented automation and made meaningful progress on our retail build outs.
Internationally, we've expanded production capacity entered new markets and broadened our brand portfolio to support. This next phase of growth. We've also made key additions to our leadership team.
Recently, we welcomed four senior executives, who bring deep experience from best in class consumer and retail organizations.
<unk> joins us as president in our newly created role overseeing revenue innovation and brand critical drivers of top line growth.
Brings a strong background from albertson's, Pepsico and <unk>.
Scott Crawford, our new head of merchandising comes to us from Baldor foods, fresh direct and whole foods offering deep expertise and category management.
And Miller now leading brand marketing brings brand building experience from Dr. Shaw and William Grant stops and Helen Shan, our new head of digital joins us from <unk>, USA, Pepsico and Mackenzie with a mandate to enhanced consumer engagement and drive our digital transformation.
These hires reflect our disciplined focus on leadership excellence and position us to execute with great precision drive margin expansion that unlock long term shareholder value.
Global consumer demand for cannabis is not only robust it's accelerating with the right team strategies infrastructure in place purely is uniquely positioned to lead and capture the next wave of industry growth with meaningful momentum building around federal reform and the potential for rescheduling combined with many strategic initiatives underway.
I have never been more confident in our future as we enter the next phase with a stronger foundation made possible by the relentless dedication of our 5000 global employees to our entire team. Thank you with your continued focus and execution I believe truly is exceptionally well positioned to lead the next era of cabinets.
With that I'll turn the call over to our CFO Ed Kraemer Ed.
Boris.
Total revenue for the second quarter was $315 million.
A one 5% sequential increase compared to the first quarter and an 8% decrease compared to the same period last year.
Strength in our International segment, Ohio, Missouri in Utah was offset by pricing pressure in Pennsylvania, and New Jersey and Illinois.
Our domestic retail metrics showed signs of stabilization in the second quarter as transactions were flat units per transaction increased 1%, while AUR decreased 3% compared to the first quarter.
By channel retail revenue was $229 million compared to $264 million in the second quarter of 2024.
A decline of 13% year over year.
Partially offset by strength in wholesale which increased 8% year over year to $83 million.
Representing 26% of total revenue and driven by growth in the international, Missouri and Ohio.
By geography domestic revenue declined 14% compared to the same period last year, largely driven by price compression as both flower and vape pricing was down mid teens.
Conversely International was again the standout performer as revenue grew by 62% year over year, driven primarily by Germany and the UK.
We continue to strategically leverage our cultivation facility in Portugal, which enables us to supply high quality flower at scale across multiple markets.
By introducing mid tier and value tier flower offerings in our portfolio, we have effectively managed to fend off price compression in our key markets, while expanding our reach across patient segments.
These results underscore the strength and resilience of our international platform as well as our ability to scale profitably and diverse regulatory environments.
Our second quarter adjusted gross profit was $154 million, resulting in a 49% adjusted gross margin and.
An increase of 120 basis points compared to the prior year period.
The primary drivers of this expansion, where continued cultivation of productivity and efficiency gains.
And an increase in vertical mix, partially offset by price compression and higher promotions.
Sequentially adjusted gross margin contracted by 130 basis points, primarily due to the.
Product mix dynamics from international as higher than anticipated demand for our value flower in Germany weighed on the segment's margins.
We expect the segment's product makes some gross margin to normalize.
In the fourth quarter as we return to selling a balanced assortment of high end mid tier and value flower.
SG&A expenses were $105 million in the second quarter, a decrease of $4 million from the prior year ago period core SG&A was $102 million also a $4 million decrease from the prior year.
Year over year decrease in our core SG&A, primarily reflects reductions in payroll and marketing expenses as we're laser focused on.
Managing all elements of our cost structure.
Core SG&A was 32, 5% of revenue in the second quarter of 160 basis point increase compared to the prior year due to the reduced sales base.
Second quarter net loss from continuing operations was $51 million or a loss of <unk> <unk> per share adjusted net loss from continuing operations was $48 million or a loss of <unk> <unk> per share.
Second quarter, adjusted EBITDA was $66 million, a decrease of 10% compared to last year, while adjusted EBITDA margin was 21% a decrease of 40 basis points versus last year. Our international segment was 100 was a 180 basis point drag on total EBITDA margins in the quarter, primarily due to the.
Aforementioned product mix dynamics.
As I previously mentioned, while international margins will fluctuate from quarter to quarter, we anticipate international margins to rebound in the back half of the year.
Separately and as expected our hemp business weighed on our total EBITDA margins by 80 basis points as we continued to invest in marketing brand building and product development.
Turning to our balance sheet and cash flow.
We ended the quarter with cash and cash equivalents of $102 million.
Inventory decreased $2 million or 1% compared to the same period last year comprised of a 6% reduction in domestic inventory, partially offset by 62% growth international inventory to support robust demand.
Capital expenditures in the second quarter were $15 million for 2025, we continue to expect capital expenditures to be approximately $50 million with investments focused on international facility expansion.
Infrastructure and new store openings.
In the second quarter, we generated operating cash from continuing operations of $9 million driven by changes in working capital as we saw an increase in wholesale sales in the last month of the quarter, coupled with material reduction of payables and accrued liabilities scouts.
We expect a meaningful improvement in operating cash flow in the second half of the year in line with our historical pattern of stronger cash generation in the back half.
Our outstanding debt was $561 million after the quarter end period, we opportunistically repurchased $3 $2 million of our 2026 notes at an 875% discount during.
During the quarter, we reduced our acquisition related debt by $7 million, we will continue reducing various components of our debt throughout the year, while maintaining ample liquidity to support our operations and growth objectives.
The consumer is facing many macro headwinds and while our demand for cannabis as strong pricing pressure have not abated.
As such for the third quarter, we expect total revenue to be flat to up low single digits sequentially from the second quarter and with that I'll turn the call back over to the operator to open the line for questions.
Thank you and ladies and gentlemen, we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two we currently ask you. Please limit yourself to one question and one follow up and you may re queue for additional questions.
This time, we will pause momentarily for the first question.
And our first question will come from Aaron Grey with Alliance Global Partners. Please go ahead.
Yeah.
Hi, good evening and thank you for the questions.
So first question for me just wanted to touch on international specifically in Germany.
Color you could offer in terms of the growth youre seeing in that market and also in terms of.
We are seeing in terms of the pricing tier I believe you may actually increase in terms of value products, perhaps some conversation around some pricing pressure starting to come in Germany. So any color around those dynamics and also from the regulatory front.
The term any kind of.
Risks you might see in terms of some proposals that have been made are restricting telmex another washington the market. Thank you.
Thanks, Patrick for that question.
And Germany has been very very strong I think we outlined those growth rates in the call.
We don't see them abating here in the third quarter, and we see them continuing into.
The fourth quarter as well, obviously, Germany is still very underpenetrated.
Around 1%, we've seen medical markets like this easily.
Up to 48% depending on the program.
Structure of the program. So we anticipate continued growth.
The next several years in the German market.
The patient patient pool continues to expand that had been proposals by the conservative government terrain.
The telemedicine platforms, we don't believe that that will actually happen. We think there may be some limitations put on and for instance, not being able to use.
European Union platform, but only being able to use German platforms, however that could be a violation of EU rules and so it'll be very difficult. It's too early to tell right now, where we think Germany will end up we'll know probably.
Where in October and November, but thats not going to change the growth trajectory that does not make change even if there was a negative.
More negative response, when we anticipate that all that would do would push out the growth a little bit longer because people have to go back to a medical clinics to get there.
Our prescriptions rather than online.
As I said earlier everything we're seeing we think that there'll be pretty minor changes that won't be a major change to the trajectory has been obviously all the Canadian growers.
Well as African growers, South American growers are buying to get into this market. There's a lot of product that's entering the market and so.
We've seen definitely some price compression.
In that market.
It's been about 35% year over year price compression, however, purely being on one of the largest operators if not the largest we have a very diversified portfolio, where we're playing in the premium segment and we're the largest player in the premium segment. We're also playing in the mid segment and the lower cycling in the market. So we're capturing all aspects of the market and we.
So far our margins have held up reasonably well and we continue to believe that those margins will actually expand into the second half of the year on year.
Okay. That's great can I really appreciate that commentary second question from me just round happens could you speak to some of the marketing initiatives.
We plan to help drive velocity, given that you have more marketing levers available for him.
Available for cannabis D.
Do you see the opportunities that were available this summer.
Key ops to increase bringing drive growth given the seasonality that we've seen.
Other categories that would probably be similar to him drinks. Thank you yes.
On the cusp of finding some pretty interesting marketing transactions were also on the coastal side.
Sponsorship deals.
Marketing for hemp products and self service is almost the same for any other.
Our drinks that are out there and so the options are very wide and very big obviously, they do cost quite a bit of money. So we want to be very careful to pick the right ones, but we are looking at some very very interesting sponsorship and.
And marketing.
Cooperations here over the next several months that will be coming up it's too early to announce anything now.
We feel very good we can use all obviously all of the social media channels and we can use also we're starting to talk to a sports teams and other things. So we do think that this product will continue to get widely accepted and as I said My view as I said many years ago, I think that the beverage will be at least 50% of the <unk>.
Canada segment, but it will take five to 10 years to get there.
Okay, great, Thanks, Ed Glen and jump back into the queue.
Yes.
And our next question will come from Bill Kirk with Roth Capital Partners. Please go ahead.
Hey, good afternoon everybody.
I wanted to I wanted to ask about New York.
With the OCM, saying some formulary approved sites are now Noncompliant and I guess, while we're there it looks like they pause the seed to sale implementation deadline.
Yesterday, I guess, so what's the status of that program, what's the status of some of these licenses.
And in the products, that's been coming from California.
I think on the storefront.
60 stores are affected by this.
The state has come under tremendous pressure.
Believe the state we will also be sued.
Because it's obviously a mistake.
Right.
And the $250000 that theyre offering these stores to relocate its just way too low.
And we think that they will change the legislation to allow these stores to be located where they are just going to take them a little bit of time, they have to get back into session to do it I don't think its a difficult lift and I think the lawsuits will be such that almost be forced to do so I personally believe the state will move on the issue of the stores because it was a mistake.
They've made it not a fault of any of the store owners.
But it does represent 60 stores out of I think it's almost 450 stores that are open now in the stage and more openings.
On the seed to sale.
The state obviously under pressure over the issue of the stores.
And the acquisition of.
A metric of bio track, which is the system that we have met.
New York and a lot of the smaller players not being ready as made a decision to postpone the seed to sale program with seed to sale tracking system. We're obviously very upset by that.
That's something that we feel with takeout.
Illicit product Thats in the system right now, we will be making a statement on that shortly.
Probably taking legal action with the state on that issue.
In order to keep their keep them to implementing the program. The original implementation was.
It's supposed to be finished by October middle of October, which would have made the whole system. The whole tracking system are working by call. It early November which would've probably removed most of the illicit products that are in the system now.
Or are there going to come out on timing is.
Unknown at the moment and.
And we're going to continue the pressure on the stake in order to implement the system. We know the state is committed to doing it many of the smaller players in the in the state just weren't ready to do it and they are using the excuse of the takeover.
Biotech by metrics to give people more time.
We're going to keep their feet to the fire and make sure that they do what they promised they were going to do with the program.
Okay. Thank.
Thank you for that and then.
Switching switching to Turkey since that's obviously, a potentially large market could you give us a sense of how you see that market structure developing there from.
From what I understand their programs there'd be setting up a little bit more I guess nationalistic than other international market is that a fair characterization and what would that mean would you have to maybe produce there or would they be accepting of products from other other countries.
Havent setup there.
The final rules, yet, but we have been involved from day one in that program.
Clearly fled.
The initiatives there, it's obviously a massive opportunity to 87 million people just to put things into perspective, Germany is 84 million people there.
They are looking at this as purely a medical market, yes, they are going to.
At least in the early part of the development of the program the ARPA required to produce the products in.
In Turkey, Turkey has a good climate, Turkey grows a tremendous amount of hemp today.
Have a good climate for growing cannabis.
And it'll be easy to formulate with.
We're hoping that they will allow us to buy hemp products to formulate our products. We can bring in our technologies in order to do it it's much more medical in structure than the U S.
As most of the European market.
But it will be I believe 16 licenses issued in purely was one of the 16 licenses at the moment I believe the only foreign issued licenses at the moment.
And our next question will come from Federico Gomez with <unk> capital markets. Please go ahead.
Hi, good evening, thanks for taking my questions.
I just wanted to go back to a comment.
That you made on the prepared remarks here that.
That you could spin out.
Your international business or your hand business to unlock some value if we don't see that.
Federal reform on the peer license soon so could you talk more about that.
How long would you be willing to wait for that regulatory change in the U S. Before you would make that decision and how do you envision that happening and how much value could be unlocked here, we can't discuss the numbers in the value I cannot say that the.
Met with bankers and the value of our European businesses.
As a.
Basically a biotech or pharma business.
Would be substantial.
And it's definitely not recognized in any way today and devaluation of purely.
When we would make that decision I really think will depend on.
What we get here during this calendar year.
On reform if the U S moves ahead with the reform and obviously, we're pretty close to that process and feel good about it.
Then we would keep it consolidated at this point in time.
We don't get four.
4 million United States of those businesses, both the emphasis and the.
Medical business in Europe would obviously be probably better off.
Ah spun out from under purely because of the.
The value because that's attributed to those businesses and the growth profile of those businesses and the fact that none.
None of those businesses are subject to $2 81 of our competitors has already done that spinning up the hemp business that they have.
At the moment have decided to keep the consolidated we think the company is better together, especially if we get the critical risk model that we're looking for however, if it's not there then we would work.
Work with advisors and bankers on looking at the best option for shareholders and spinning spinning up those businesses as separate entities.
Okay, great. Thanks for that second question, just on Australia, I know that you launched some new products there recently.
Could you talk about that market how are those products performing at what sort of growth.
In Australia.
We just just launched our product portfolio in Australia, it's too early to speak about.
The.
Individual.
Trees there.
We've just broken out the overall European revenue as you know so we're not going to talk about individual countries, but I can say, though that we see a huge opportunity with over $1 billion market right now.
We see a lot of opportunities in Australia.
Are eager to continue with the expansion.
Going vertical in that vertical.
We are growing but we are integrated and we're buying a wholesaler, we're looking at becoming a local distributor of our products in that marketplace. So we're currently looking at licensing and other things.
Distributing through third parties, but also distributing ourselves and controlling our own brands and that's something that we're looking at.
On the cusp of executing on that shortly.
And our next question will come from Russell Stanley with Beacon Securities. Please go ahead.
Good afternoon, and thanks for taking my question, so maybe coming back to Turkey, and understanding I think you said the secondary market regulations or so.
Finalized, but wondering if you can compare what patient access is likely to look at look like compared to for example, Germany and secondly, I guess when you when you think.
Or what the timeline might be to first revenue.
We think that.
Again, it's a little bit early to tell I would say somewhere in that we would hope.
That program will get launched somewhere around the third quarter, obviously, we've got to build our facilities, there, which we'll start doing very shortly.
Order to build our processing facilities are proposed to make product uplift in 87 million people I think it is.
It's probably.
As all these medical market starts out slow there is an education process you have to educate doctors on the doctors have to work with patients.
But it's a big any candidates is a widely used product in Turkey and so.
So we are pretty optimistic about it.
And as I've said in my prepared comments with Turkey coming online, we now have an international Tam in markets.
That rivals that of the United States. So.
Obviously.
Early stage I Wouldnt want to.
Any make any dramatic predictions on it but if you remember in our Germany took a while to get to 150000 patients and then all of a sudden with some reforms.
It is now.
Over 1%.
I think it's over 1 million patients now $1 2 million patients in Germany.
As of this quarter and so we've gone in one year from 150000 to $1 2 billion.
A small degree of reform.
Turkey, I think we'll start out like Germany, and like the UK slow as we go through the education process and then it will accelerate overtime, but its 87 million people limited licenses.
We're pretty excited about it.
Thanks for that and maybe coming back to Germany apologize if I missed it but can you elaborate on what transpired there with respect to the sales mix in Q2, and I guess more importantly, I guess what drives the rebalance later this year. Thank you.
I think the only thing that happened clearly in the sales mix was that.
Because of permitting and moving products don't forget we do grow.
We are also a byproduct in Canada, we move it to two.
So Germany. We also are growing product. Unfortunately, we're moving it through sometimes when you have export.
Holdups I think some of the Canadian companies I mentioned that.
More of our mid and lower tier product got permits to go into Germany versus our higher tier products and so.
We werent able to get as much of our higher margin product in Germany. However, we did get those permits on the last day of the quarter. So this quarter, we have all that product now in market.
And overall, though as I have said that there's been a lot of mid and lower tier product to enter the German market and so there's been quite a bit of price pressure at that level. However, the premium product continues to hold very well and we're the largest operator in the.
Premium segment in Germany, So feel pretty good about where we are.
And our next question will come from Jesse <unk> with <unk> Securities. Please go ahead.
Hey, good evening, just staying on the international business can you talk about.
Amount of headroom that you ultimately see in that business for driving margins, even higher just as you further integrate your supply chain.
Now listen it's all about scale now for us as we as we get to scale, obviously, our margins get better and.
We're expecting margin expansion in the second half of the year, we think we're going to close out the year around 45% gross margin.
From about 34% last year.
Okay. That's helpful. And then just as a follow up in your prepared remarks, you talked about.
Some of the rationalization and describe what youre seeing in the U S market can you speak to how that landscape evolves over the past six months.
Sorry about U S U S pricing.
No our U S U S competitive environment more with respect to distressed assets in the news that I shouldnt.
I've been saying this for some time the price pressures in the United States have nothing to do with the regulator.
The price pressures in the United States has to do with two things one.
And two is the illicit market, which there's very little enforcement, where historically has been very little enforcement with the Trump administration, we've seen a lot more enforcement in the illicit market. We believe we will continue to see that so that will put pressure on the illicit grows and the illicit products that are sold in the market and on the hemp side listen we're waiting for some.
Guidance from the federal government, where they're going to end up on there, but as a hedge to the reason we went into the market.
So that we can at least.
Produce products that are federally compliant and be able to distribute them on a national basis.
But hemp is the real cause of the problem, particularly the synthetic products that are coming through.
Are the real cause of what we're seeing is price compression in the regulated market regulated market.
Are you still testing costs.
Yes.
Tax cost regulatory costs, all the types of costs, you're doing there and the standard CPG business.
<unk>.
That market has very very different cost because it doesn't have state by state.
Manufacturing cost does not state by state growing cost that doesn't have any of the tax cost it doesn't have any of the testing.
We have to do in the in the regulated market.
So it's very difficult to compete against that product and that product is permeating into almost every day in every store around the country and that's what's been the real price pressure on the regulated cannabis sector.
Don't believe myself that that will be allowed to continue I do believe that there will be regulation in the health sector and I do believe that will happen over the next 12 months.
Don't believe they'll shut it down which I think is the.
I think but I do think that there'll be regulation of hemp products, particularly synthetic products and particularly flowerpots. Today people are claiming are compliant, but really arent compliance.
So I think we will.
We'll get regulation.
Federal reforming the regular and the <unk>.
Regulated part of the business and so I think things will hopefully start getting better in terms of price compression in the regulated market.
In the meantime, it's forced all of us to get better at what we're doing and we continue to get better.
Yes.
And as a reminder, if you would like to ask a question. Please press Star then one our next question comes from Pablo <unk> with me, Nick and Associates. Please go ahead.
Yes. Good evening, everyone. This is muhammed on for Pablo moving.
Moving back to Germany, do you have an estimate for <unk> market share in Germany, and can you remind us of your plants by the 45, 45% stake that you do not own a $4 1 million.
We will be buying in that space that we have both a put call option on that so that stake will be bought as we bought.
The.
The stake in <unk>.
International business, which represented 31% earlier this year will be.
<unk> stake as well.
First quarter next year.
And.
Sorry, what was the other question on Terminix our market share.
It's very difficult to tell it's not public information there, but we recommend a market share of somewhere between 15, 5%.
Thank you second question about Florida.
Florida will have a bell recreational sales by November 2026.
Listen I think that.
Tim and truly if we're doing a gallant effort in.
Getting the signatures and.
And we also know that.
Mid term elections are better for cannabis reform, we had this very similar problem, Arizona, where we sell the first round.
We also had a 60% hurdle threat.
Fresh Holden.
We were able to get a test.
Midterm elections, two years later, so given that I'm.
I'm cautiously optimistic we'll be able to get it done as long as we can get all the signatures to get it on the balance.
But I think truly <unk>.
Rivers are better to ask that question issues on top of that issue and that issue completely.
And this will conclude our question and answer session I would like to turn the conference back over to Ryan for any closing remarks.
Thanks, everyone for joining us today, we will catch up again in 90 days.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
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