Q2 2026 Green Thumb Industries Inc Earnings Call

August 4, 2026

Operator: Good day, thank you for standing by. Welcome to Green Thumb Industries' Q2 2026 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would like to now hand the conference over to your first speaker today, Andy Grossman, EVP, Capital Markets. Please go ahead.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Speaker #1: I would now like to hand the conference over to your first speaker today, Andy Grossman, EVP, Capital Markets. Please go ahead.

Speaker #2: Thank you, Angelina. Good afternoon, and welcome to Green Thumb's second quarter 2026 earnings call. I'm here today with founder and CEO Ben Kovler. President Anthony Georgiadis and Chief Financial Officer Matt Faulkner.

Andy Grossman: Thank you, Angelina. Good afternoon, welcome to Green Thumb's Q2 2026 earnings call. I'm here today with founder and CEO, Ben Kovler, President Anthony Georgiadis, and Chief Financial Officer Matt Faulkner. Today's discussions and responses to questions may include forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. These risks and uncertainties are detailed in the earnings press release issued today, along with reports filed with the United States Securities and Exchange Commission and Canadian securities regulators, including our most recent annual report filed on Form 10-K. This report, along with today's earnings release, can be found under the Investors section of our website. Green Thumb assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call.

Andy Grossman: Thank you, Angelina. Good afternoon, welcome to Green Thumb's Q2 2026 earnings call. I'm here today with Founder and CEO, Ben Kovler, President Anthony Georgiadis, and Chief Financial Officer Matt Faulkner. Today's discussions and responses to questions may include forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. These risks and uncertainties are detailed in the earnings press release issued today, along with reports filed with the United States Securities and Exchange Commission and Canadian securities regulators, including our most recent annual report filed on Form 10-K. This report, along with today's earnings release, can be found under the Investors section of our website. Green Thumb assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call.

Speaker #2: Today's discussions and responses to questions may include forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements.

Speaker #2: These risks and uncertainties are detailed in the earnings press release issued today, along with reports filed with the United States Securities and Exchange Commission and Canadian securities regulators, including our most recent annual report filed on Form 10-K.

Speaker #2: This report, along with today's earnings release, can be found under the Investors section of our website. Green Thumb assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call.

Speaker #2: Throughout the discussion, Green Thumb will refer to non-GAAP financial measures, including EBITDA, normalized EBITDA, and adjusted EBITDA. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in our earnings press release, and SEC and Cedar Plus filings.

Andy Grossman: Throughout the discussion, Green Thumb will refer to non-GAAP financial measures, including EBITDA, normalized EBITDA, and adjusted EBITDA. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in our earnings press release and SEC and SEDAR+ filings. Please note that all financial information is provided in US dollars unless otherwise indicated. Thanks, everyone. Now, here's Ben.

Speaker #2: Please note that all financial information is provided in US dollars unless otherwise indicated. Thanks, everyone, and now here's Ben.

Speaker #3: Thanks, Andy. Good afternoon, everyone, and thank you for joining Green Thumb's second quarter 2026 earnings call. Before we get into the numbers, I want to take a step back.

Ben Kovler: Thanks, Andy. Good afternoon, everyone, thank you for joining Green Thumb's Q2 2026 earnings call. Before we get into the numbers, I want to take a step back. We're nearly 12 years into the Green Thumb story, building the company from scratch with no roadmap, no playbook, no guarantee of anything. Yet quarter after quarter, year after year, we show up and build brands Americans love. We take care of our team, manage the balance sheet, and do the work. That's the Green Thumb story. Simple, but not easy. We built a company to stand on its own without waiting for federal reform. That discipline is paying off. Medical cannabis is now on Schedule III of the Controlled Substances Act. The first domino has fallen. The DEA's broader rescheduling hearing wrapped in mid-July, we expect a decision on the rest of cannabis later this year.

Speaker #3: We're nearly 12 years into the Green Thumb story, building the company from scratch with no roadmap, no playbook, no guarantee of anything. Yet, quarter after quarter, year after year, we show up and build brands Americans love.

Speaker #3: We take care of our team, manage the balance sheet, and do the work. That's the Green Thumb story: simple, but not easy. We built the company to stand on its own without waiting for federal reform.

Speaker #3: That discipline is paying off. Medical cannabis is now on Schedule III of the Controlled Substances Act—the first domino has fallen. The DEA's broader rescheduling hearing wrapped in mid-July, and we expect a decision on the rest of cannabis later this year.

Speaker #3: This is, in fact, real progress. The direction is clear, even if the timing isn't. When the next domino falls, Green Thumb will be ready with the brands, the balance sheet, and the team to meet the moment.

Ben Kovler: This is, in fact, real progress. The direction is clear, even if the timing isn't. When the next domino falls, Green Thumb will be ready with the brands, the balance sheet, and the team to meet the moment. That work is already underway. As we shared on our last call, we've registered some of our state-licensed medical cannabis operations with the DEA, and site inspections have begun. This is important because this makes these operations federally legal. We're also preparing to uplist Green Thumb on a US exchange as the path opens. We anticipate listing the business in full, not in part, and we have open dialogues with both major exchanges. We didn't get to where we were going by waiting, and we won't start waiting now. The state-level environment is more dynamic than it's been, including changes in Virginia and Texas. Here's the bottom line.

Speaker #3: That work is already underway. As we shared on our last call, we've registered some of our state-licensed medical cannabis operations with the DEA, and site inspections have begun.

Speaker #3: This is important because this makes these operations federally legal. We're also preparing to uplift Green Thumb on a US exchange as the path opens.

Speaker #3: We anticipate listing the business in full, not in part, and we have open dialogues with both major exchanges. But we didn't get to where we were going by waiting, and we won't start waiting now.

Speaker #3: The state-level environment is more dynamic than it's been, including changes in Virginia and Texas. But here's the bottom line: Green Thumb is in a strong position.

Ben Kovler: Green Thumb is in a strong position. Our business generates cash, and we carry a strong balance sheet, which means we engage the capital markets on our terms. As the environment changes, we won't be reacting to it. We'll be moving on it from a position of strength. That strength starts with the results. Let's turn to the quarter. Q2 revenue came in at $307 million, up 5% year over year. Normalized EBITDA was $84 million, or approximately 28% of revenue. Cash flow from operations was $29 million. There's real momentum here, and we're proud of the stability we've built despite ongoing price compression and competition. Our results demonstrate this as we see early signs of potential price stabilization in some markets. We ended the quarter with $284 million in cash on the balance sheet, and that's over $1 a share.

Speaker #3: Our business generates cash, and we carry a strong balance sheet, which means we engage the capital markets on our terms. And as the environment changes, we won't be reacting to it.

Speaker #3: We'll be moving on it from a position of strength. And that strength starts with the results. So let's turn to the quarter. Second quarter revenue came in at $307 million, up 5% year over year.

Speaker #3: Normalized EBITDA was $84 million, or approximately $28% of revenue. Cash flow from operations was $29 million. There's real momentum here, and we're proud of the stability we've built despite ongoing price compression and competition.

Speaker #3: Our results demonstrate this, as we see early signs of potential price stabilization in some markets. We ended the quarter with $284 million in cash on the balance sheet, and that's over a dollar a share.

Speaker #3: But beyond the numbers, the bigger story this year has been state-level regulatory progress, positive developments in Virginia and Texas, get us excited about future growth.

Ben Kovler: Beyond the numbers, the bigger story this year has been state-level regulatory progress. Positive developments in Virginia and Texas get us excited about future growth. Together, these two states represent broader access for roughly 12% of the country's population. In both, we already have a head start. Anthony will walk through some of those highlights, the takeaway is simple. Careful planning and a deep understanding of each market's dynamics means we are ready. That same discipline shapes our current approach to growth through tuck-in deals and steadily expanding retail footprint. We're keeping a close eye on hemp policy with the federal ban set to take effect on 12 November of this year, you never know. Interestingly, Ohio offers a preview of what could happen across the country.

Speaker #3: Together, these two states represent broader access for roughly 12% of the country's population. And in both, we already have a head start. Anthony will walk through some of those highlights, but the takeaway is simple: careful planning and a deep understanding of each market's dynamics means we are ready.

Speaker #3: That same discipline shapes our current approach to growth, through tuck-in deals and a steadily expanding retail footprint. We're keeping a close eye on hemp policy, with the federal ban set to take effect on November 12 of this year.

Speaker #3: But you never know. Interestingly, Ohio offers a preview of what could happen across the country. Following the state's own ban on intoxicating hemp, Ohio's regulated market has grown more than 10% based on state-level data.

Ben Kovler: Following the state's own ban on intoxicating hemp, Ohio's regulated market has grown more than 10% based on state-level data. Consumers are moving into the regulated market, we expect hemp demand to keep shifting into cannabis as the ban takes hold. In other words, if the ban takes place, it favors operators with scale, brands, and shelf space already in place. This backdrop matters for one of the fastest-growing categories, THC beverages. In our view, beverages are a distinct category from intoxicating hemp products, we think regulators and industry participants are starting to see the same thing. We remain big believers in the category, we are optimistic that this transition will eventually carve out a lasting place for THC beverages in the mainstream market.

Speaker #3: Consumers are moving into the regulated market, and we expect hemp demand to keep shifting into cannabis as the ban takes hold. In other words, if the ban takes place, it favors operators with scale, brands, and shelf space already in place.

Speaker #3: This backdrop matters for one of the fastest-growing categories: THC beverages. In our view, beverages are a distinct category from intoxicating hemp products. And we think regulators and industry participants are starting to see the same thing.

Speaker #3: We remain big believers in the category, and we are optimistic that this transition will eventually carve out a lasting place for THC beverages in the mainstream market.

Speaker #3: They're already showing up at major events and venues across the country, including Lollapalooza and the United Center, and at retailers like Circle K, Target, and Total Wine.

Ben Kovler: They're already showing up at major events and venues across the country, including Lollapalooza and the United Center, and at retailers like Circle K, Target, and Total Wine. We're paying close attention to the consumer trends, particularly through our investment in RYTHM Inc. On that note, there's a potential change coming to how RYTHM Inc. appears in Green Thumb's financials in our results. On 10 August, RYTHM shareholders will vote on a proposal that, if approved, would result in Green Thumb consolidating RYTHM into our financial statements as early as 10 October 2026. Presenting the combined economics in one place rather than under the equity method that we use today. Nothing will change economically, but our reported results will look different once they include RYTHM. You can find more information on this potential change for RYTHM Inc.

Speaker #3: We're paying close attention to consumer trends, particularly through our investment in Rhythm Inc. On that note, there's a potential change coming to how Rhythm Inc. appears in Green Thumb's financials.

Speaker #3: In our results. On August 10th, Rhythm shareholders will vote on a proposal that, if approved, would result in Green Thumb consolidating Rhythm into our financial statements as early as October 10th, 2026.

Speaker #3: Presenting the combined economics in one place, rather than under the equity method that we use today. Nothing will change economically, but our reported results will look different once they include Rhythm.

Speaker #3: You can find more information on this potential change for Rhythm Inc. in the proxy filed by Rhythm with the SEC on July 9th, 2026, on sec.gov and available on the Rhythm website.

Ben Kovler: You can find more information on this potential change for RYTHM Inc. in the proxy filed by RYTHM with the SEC on 9 July 2026 on sec.gov and available on the RYTHM website. We believe Green Thumb has created significant value that the market is not currently reflecting. Structural issues in this industry are real, we never let the things we can't control define the things we can. We are building this company for the next decade or decades, not the next quarter or year. That conviction is why we allocate capital towards repurchasing shares at these levels. During the quarter, we bought back the equivalent of about 8 million shares at an average price of just over $6. Since Q4 2023, we've repurchased approximately 29.5 million shares at an average price of $7 per share, which represents more than $200 million return to shareholders in a tax-efficient manner. That's roughly 13% of the shares outstanding.

Ben Kovler: in the proxy filed by RYTHM with the SEC on 9 July 2026 on sec.gov and available on the RYTHM website. We believe Green Thumb has created significant value that the market is not currently reflecting. Structural issues in this industry are real, we never let the things we can't control define the things we can. We are building this company for the next decade or decades, not the next quarter or year. That conviction is why we allocate capital towards repurchasing shares at these levels. During the quarter, we bought back the equivalent of about 8 million shares at an average price of just over $6. Since Q4 2023, we've repurchased approximately 29.5 million shares at an average price of $7 per share, which represents more than $200 million return to shareholders in a tax-efficient manner. That's roughly 13% of the shares outstanding.

Speaker #3: We believe Green Thumb has created significant value that the market is not currently reflecting. Structural issues in this industry are real, but we never let the things we can't control define the things we can.

Speaker #3: We are building this company for the next decade, or decades, not the next quarter or year. That conviction is why we allocate capital towards repurchasing shares at these levels.

Speaker #3: During the quarter, we bought back the equivalent of about $8 million shares at an average price of just over $6. And since Q4, 2023, we've repurchased approximately $29.5 million shares, at an average price of $7 per share, which represents more than $200 million return to shareholders in a tax-efficient manner.

Speaker #3: That's roughly 13% of the shares outstanding, so each remaining share represents a 13% bigger portion of the business. So we'll continue to do exactly what we said we would do: grow the business, take care of our team, return capital to shareholders when it makes sense, and pounce when the opportunity presents itself.

Ben Kovler: Each remaining share represents a 13% bigger portion of the business. We'll continue to do exactly what we said we would do, grow the business, take care of our team, return capital to shareholders when it makes sense, and pounce when the opportunity presents itself, all while the environment catches up to the value we've created and continue to build. We are deeply committed to creating long-term value for all of our stakeholders, and that will always be the Green Thumb story. With that, I'll turn the call over to Anthony.

Speaker #3: All while the environment catches up to the value we've created and continue to build. We are deeply committed to creating long-term value for all of our stakeholders, and that will always be the Green Thumb story.

Speaker #3: With that, I'll turn the call over to Anthony.

Speaker #1: Thanks, Ben. The second quarter was a productive one. The company generated $307 million of revenue, an $84 million in normalized EBITDA, representing 5% year-over-year top-line growth.

Anthony Georgiadis: Thanks, Ben. The Q2 was a productive one. The company generated $307 million of revenue and $84 million in normalized EBITDA, representing 5% year-over-year top-line growth. Unpacking the results, retail revenue grew just under 4% versus the prior year period, with strong contributions from Minnesota, Connecticut, and Florida. Same-store sales on a base of 103 stores were down approximately 1%, a modest step down from the 0.5% decline we reported in Q1. Pricing compression remained a headwind, particularly in Massachusetts, New Jersey, and Pennsylvania, our teams continued to navigate it effectively through operational discipline, creative product merchandising and pricing, brand strength, and our omni-channel platform. On the CPG side, gross revenue also grew just under 4% year-over-year, led by Minnesota, Ohio, New Jersey, and New York.

Speaker #1: Unpacking the results, retail revenue grew just under 4% versus the prior-year period, with strong contributions from Minnesota, Connecticut, and Florida. Same-store sales on a base of 103 stores were down approximately 1%, a modest step down from the 0.5% decline we reported in Q1.

Speaker #1: Pricing compression remained a headwind, particularly in Massachusetts, New Jersey, and Pennsylvania. Our teams continue to navigate it effectively through operational discipline, creative product merchandising and pricing, brand strength, and our omnichannel platform.

Speaker #1: On the CPG side, gross revenue also grew just under 4% year-over-year, led by Minnesota, Ohio, New Jersey, and New York. We continue to lean into our wholesale business, and we're pleased with our market share performance across Illinois, Pennsylvania, Ohio, Maryland, and Minnesota.

Anthony Georgiadis: We continue to lean into our wholesale business, and we're pleased with our market share performance across Illinois, Pennsylvania, Ohio, Maryland, and Minnesota, where we retain the number one position in each state. Turning to capital allocation, we deployed $20 million into the business during the quarter, approximately $5 million in retail CapEx supporting store relocations and build-outs in Pennsylvania, Virginia, and Florida, and $15 million on the wholesale side for capacity expansions and maintenance needs. With Virginia's adult use launch in mid-2027, we're actively evaluating the right level of incremental investment into that market. Full year 2026 CapEx guidance remains approximately $80 million. A quick note on recognition. During the quarter, GTI was named a Time Magazine's list of America's Best Companies.

Speaker #1: We retain the number one position in each state. Turning to capital allocation, we deployed $20 million into the business during the quarter. Approximately $5 million in retail capex supporting store relocations and build-outs in Pennsylvania, Virginia, and Florida, and $15 million on the wholesale side for capacity expansions and maintenance needs.

Speaker #1: With Virginia's adult-use launch in mid-2027, we're actively evaluating the right level of incremental investment in that market. Full-year 2026 capex guidance remains approximately $80 million.

Speaker #1: A quick note on recognition. During the quarter, GTI was named a Time Magazine's list of America's Best Companies. Selected for more than 7,200 eligible companies across every industry, and scored on employee satisfaction, financial performance, and sustainability practices, we were the highest-ranked cannabis company on the list.

Anthony Georgiadis: Selected from more than 7,200 eligible companies across every industry and scored on employee satisfaction, financial performance, and sustainability practices, we were the highest ranked cannabis company on the list. A genuine honor for our team. On the regulatory front, Virginia and Texas represent two extremely compelling near-term growth catalysts. In Virginia, adult use legislation has been signed and takes effect 1 July 2027. As a reminder, we're one of five licensed medical operators in the state and currently operate 6 RISE dispensaries and 2 cultivation facilities. We've been investing and planning ahead of this transition, drawing on the playbook we recently executed in Minnesota, Maryland, and Ohio. The opportunity is immense. Approximately 9 million residents in meaningful geographic proximity to North Carolina, Kentucky, and Tennessee, states where cannabis access remains extremely limited. In Texas, we were awarded a conditional license under the Compassionate Use Program on 1 April.

Speaker #1: A genuine honor for our team. On the regulatory front, Virginia and Texas represent two extremely compelling near-term growth catalysts. In Virginia, adult-use legislation has been signed and takes effect July 1st, 2027.

Speaker #1: As a reminder, we're one of five licensed medical operators in the state and currently operate six Rise dispensaries and two cultivation facilities. We've been investing and planning ahead of this transition, drawing on the playbook we recently executed in Minnesota, Maryland, and Ohio.

Speaker #1: The opportunity is immense. Approximately $9 million residents and meaningful geographic proximity to North Carolina, Kentucky, and Tennessee, states where cannabis access remains extremely limited.

Speaker #1: In Texas, we're awarded a conditional license under the Compassionate Use Program on April 1st. During Q2, we focused on completing background checks, state paperwork, refining our real estate strategy, and thinking through how to enter the program in a differentiated and scalable way.

Anthony Georgiadis: During Q2, we focused on completing background checks, state paperwork, refining our real estate strategy, and thinking through how to enter the program in a differentiated and scalable way. Texas has a GDP of approximately $3 trillion, the eighth largest global economy, and if the state follows through on expanding its Compassionate Use Program, the long-term upside is significant. We're excited to bring our brands and our enterprise scale model to the Lone Star State. Subsequent to quarter end, we had a few notable milestones. In New Jersey, we successfully transitioned our previous medical-only RISE Paramus dispensary to include adult use sales, a multiyear effort that's a real credit to our government affairs team. In addition, we opened RISE Hanover in Pennsylvania, adding to our retail store portfolio that exceeds 120 stores. Stepping back, the macro backdrop hasn't changed.

Speaker #1: Texas has a GDP of approximately $3 trillion, the eighth largest global economy, and if the state follows through on expanding its compassionate use program, the long-term upside is significant.

Speaker #1: Work started to bring our brands and our enter-open scale model to the Lone Star State. Subsequent to quarter end, we had a few notable milestones.

Speaker #1: In New Jersey, we successfully transitioned our previous medical-only Rise Paramus dispensary to include adult-use sales. A multi-year effort that's a real credit to our government affairs team.

Speaker #1: In addition, we opened Rise Hanover in Pennsylvania, adding to our retail store portfolio that exceeds $120 stores. Stepping back, the macro backdrop hasn't changed.

Speaker #1: Federal legislative uncertainty, pricing compression, and consumer discretionary pressure remain near-term business headwinds. We remain confident that our team, operational discipline, brand strength, and capital position provides us with the ability to navigate these headwinds while still investing in our team and future growth opportunities.

Anthony Georgiadis: Federal legislative uncertainty, pricing compression, and consumer discretionary pressure remain near-term business headwinds. We remain confident that our team, operational discipline, brand strength, and capital position provides us with the ability to navigate these headwinds while still investing in our team and future growth opportunities. As noted in our press release, we made deliberate incremental investments in our team this quarter that pressured near-term EBITDA margins. Of all the investments we make across the business, the ones into our team have some of our highest intrinsic returns. One more thing before I hand it over to Matt. For those of you in the Philadelphia area, we'd love to see you at our RYTHM Bud Ball on 26 August. As a reminder, our RYTHM Bud Balls have become one of our favorite ways to celebrate the cannabis community through music and culture.

Speaker #1: As noted in our press release, we made deliberate incremental investments in our team this quarter that pressured near-term EBITDA margins. Of all the investments we make across the business, the ones into our team have some of our highest intrinsic returns.

Anthony Georgiadis: Of all the investments we make across the business, the ones into our team have some of our highest intrinsic returns. One more thing before I hand it over to Matt. For those of you in the Philadelphia area, we'd love to see you at our RYTHM Bud Ball on 26 August. As a reminder, our RYTHM Bud Balls have become one of our favorite ways to celebrate the cannabis community through music and culture. After big nights in New York with Ferg and Chicago with Chance the Rapper, we're bringing the magic to the City of Brotherly Love. The acts haven't been publicly announced yet. It's going to be a banger, and we hope to see you there. Matt, over to you.

Speaker #1: One more thing before I hand it over to Matt. For those of you in the Philadelphia area, we'd love to see you at our Rhythm Bud Ball on August 26th.

Speaker #1: As a reminder, our Rhythm Bud Balls have become one of our favorite ways to celebrate the cannabis community through music and culture. After big nights in New York with Ferg, in Chicago with Chance the Rapper, we'll bring in the magic to the city of Brotherly Love.

Anthony Georgiadis: After big nights in New York with Ferg and Chicago with Chance the Rapper, we're bringing the magic to the City of Brotherly Love. The acts haven't been publicly announced yet. It's going to be a banger, and we hope to see you there. Matt, over to you.

Speaker #1: The acts haven't been publicly announced yet, but it's going to be a banger. And we hope to see you there. Matt, over to you.

Speaker #2: Thanks, Anthony, and hello, everyone. From a top-line perspective, revenue increased 5% year-over-year, driven in large part due to adult-use sales launch in Minnesota, along with net CPG growth and new store contributions.

Matt Faulkner: Thanks, Anthony, and hello, everyone. From a top-line perspective, revenue increased 5% year-over-year, driven in large part due to adult use sales launch in Minnesota, along with net CPG growth and new store contributions. Pricing pressures continue to weigh on the top line, even as we see solid demand. Looking forward, we expect Q3 sequential revenue to be flat due to the pricing environment. Gross profit for Q2 was $138 million, or 45% of revenue, compared to $146 million, or 50% of revenue year-over-year. The decrease in gross margin was driven by $17.5 million of brand licensing fees incurred in the current period. On a normalized basis, margin saw a slight improvement over last year. Turning to OPEX, selling, general, and administrative expenses for Q2 were $118 million, or 38% of revenue, compared to $107 million, or 36% of revenue for Q2 last year.

Speaker #2: Pricing pressures continue to weigh in the top line, even as we see solid demand. Looking forward, we expect third quarter sequential revenue to be flat due to the pricing environment.

Speaker #2: Gross profit for the second quarter was $138 million, or 45% of revenue, compared to $146 million, or 50% of revenue, year-over-year. The decrease in gross margin was driven by $17.5 million of brand licensing fees incurred in the current period.

Speaker #2: On a normalized basis, margins saw a slight improvement over last year. Turning to opex, selling, general, and administrative expenses for the second quarter were $118 million, or 38% of revenue, compared to $107 million, or 36% of revenue for the second quarter last year.

Speaker #2: The increase in total expenses was primarily attributable to overall compensation and benefit costs, along with increased costs associated with opening, acquiring, and operation of retail stores.

Matt Faulkner: The increase in total expenses was primarily attributable to overall compensation benefit costs, along with increased costs associated with opening, acquiring, and operation of retail stores. SG&A, excluding depreciation, amortization, one-time transaction costs, and stock-based comp, which we refer to as normalized operating costs, approximated $84 million compared to $74 million in Q2 of last year. The increase year-over-year is mainly attributed to the deliberate changes to our compensation structure this quarter, as Anthony mentioned, along with other targeted investments in the business. A normalized EBITDA of $84.3 million, or 27.5%, was down slightly from last year of 28.2%, due to the OPEX investments previously referenced. On the bottom line, we delivered GAAP net income of $4.9 million, or $0.02 per basic and diluted share. This compares to a loss of $0.6 million, or $0.01 per share in the prior year.

Speaker #2: SG&A, excluding depreciation, amortization, one-time transaction costs, and stock-based comp—which we refer to as normalized operating costs—approximated $84 million, compared to $74 million in the second quarter of last year.

Speaker #2: The increase year-over-year is mainly attributed to the deliberate changes to our compensation structure this quarter as Anthony mentioned, along with other targeted investments in the business.

Speaker #2: On normalized EBITDA of $84.3 million, or $27.5%, was down slightly from last year of $28.2 due to the opex investments previously referenced. On the bottom line, we delivered gap net income of $4.9 million, or $0.02, per basic and diluted share.

Matt Faulkner: A normalized EBITDA of $84.3 million, or 27.5%, was down slightly from last year of 28.2%, due to the OPEX investments previously referenced. On the bottom line, we delivered GAAP net income of $4.9 million, or $0.02 per basic and diluted share. This compares to a loss of $0.6 million, or $0.01 per share in the prior year. The current year includes some benefit from 280E relief for medical cannabis, while the prior year included a loss recorded from the IP sale. We remain committed to maintaining this financial flexibility so we can invest opportunistically in growth while managing risk. With that, I'll turn the call over to the operator for questions.

Speaker #2: This compares to a loss of $0.6 million, or $0.01, per share in the prior year. The current year includes some benefit from 280(e) relief from medical cannabis, while the prior year included a loss recorded from the IP sale.

Matt Faulkner: The current year includes some benefit from 280E relief for medical cannabis, while the prior year included a loss recorded from the IP sale. We remain committed to maintaining this financial flexibility so we can invest opportunistically in growth while managing risk. With that, I'll turn the call over to the operator for questions.

Speaker #2: We remain committed to maintaining this financial flexibility so we can invest opportunistically in growth while managing risk. With that, I'll turn the call over to the operator for questions.

Speaker #3: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question you will need to press *11 on your telephone and wait for your name to be announced.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Kenric Tyghe from Canaccord Genuity. Please go ahead.

Speaker #3: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Kenrick Taihi from Canaccord Genuity.

Speaker #3: Please go ahead.

Speaker #4: Thank you, and good evening. I wonder if we could just dive into the margin profiling culture, just in the context of the flat revenue expectation in Q3.

Kenric Tyghe: Thank you, good evening. I wonder if we could just dive into the margin profile in quarter, just in the context of out of the flat revenue expectation in Q3. Obviously, pricing pressures are still there, but you did also call out sort of in select markets, some of the moderation promotional intensity. When we look to that gross margin kind of ex the licensing fees, how do you see that evolving here in the H2?

Speaker #4: Obviously, pricing pressures are still there, but you did also call out sort of an inselect market, some of the moderation promotional intensity. So when we look to that gross margin kind of exceed the licensing fees, how do you see that evolving here in the second half?

Speaker #2: Yeah, thanks for the question. This is Matt. So when you look at pricing, it's a little bit of the unknown. We've seen pricing pressures continue there, and while there might be some signs of easing in a few select markets, there still is pricing pressures across that's going to weigh on the top line.

Matt Faulkner: Yeah. Thanks for the question. This is Matt. When you look at pricing, it's a little bit of the unknown. We've seen pricing pressures continue there, and while there might be some signs of easing in a few select markets, there still is pricing pressures across that's going to weigh on the top line. As it relates to margin, the licensing fees, once that was moved to a fixed licensing fee, this was the first full quarter of the fixed fee structure. The licensing fees will be consistent in Q3 compared to Q2.

Speaker #2: As it relates to margin, the licensing fees, once that was moved to a fixed licensing fee, this was the first full quarter of the fixed fee structure.

Speaker #2: So the licensing fees will be consistent in Q3 compared to Q2.

Kenric Tyghe: Great. Thank you. If I could just pivot quickly to Virginia, obviously very topical. Given your footprint there and as strong as it's believed to be, could you speak to within the Virginia market, for how long that market could be expected to be supply-constrained and potential biomass availability or other constraints as we look to ramp? I think we're all just trying to handicap the H2 2027 on a launch without getting too far over our skis, given some of your competitor commentary on those dynamics.

Speaker #4: Great. Thank you. If I could just pivot quickly to Virginia, obviously very topical. Can you speak to given your footprint there and the strongest belief to be, could you speak to within the Virginia market, for how long that market could be expected to be supply-constrained and potential biomass availability or other constraints as we look to ramp?

Speaker #4: I think we're all just trying to handicap the second half here of '27 on a launch, without getting too far over our skis, given some of your competitor commentary on those dynamics.

Speaker #1: Yeah, Kenrick. This is Anthony here. Great question. So let's just analyze the setup here. We've got you have some of the incumbents that have some existing capacity.

Anthony Georgiadis: Yeah, Kenric. This is Anthony here. Great question. Let's just analyze the setup here. You have some of the incumbents that have some existing capacity, we're one of the five medical operators, and then you have potentially new capacity coming on through the incremental licensing. The additional licensing step has not yet taken place, so that remains kind of a question mark. Again, this is in the backdrop of a planned 1 July 2027 launch. Call it within 12 months at this point, just under. From the Green Thumb side, we completed a capacity expansion through a second facility about 18 months ago. Candidly, we thought that adult use was going to happen sooner, so we did the build-out kind of in anticipation of that. One of the things we're doing right now with the team is kind of assessing, do we have enough capacity?

Speaker #1: We're one of the five medical operators. And then then you have potentially new capacity coming on through the incremental licensing. The additional licensing step has not yet taken place.

Speaker #1: So that remains kind of a question mark. And again, this is in the backdrop of a planned July 1, 2027 launch. So call it within 12 months at this point.

Speaker #1: Just under. From the Green Thumb side, we completed a capacity expansion through a second facility. About 18 months ago, candidly, we thought that adult use was going to happen sooner.

Speaker #1: And so we did the build-out, kind of in anticipation of that. One of the things we're doing right now with the team is assessing: do we have enough capacity?

Speaker #1: What are others doing? And how would that kind of translate into our ability to kind of service the market? I think one of the things that's difficult to kind of estimate is demand.

Anthony Georgiadis: What are others doing? How would that kind of translate into our ability to service the market? I think one of the things that's difficult to estimate is demand. Given Virginia's location in that kind of southeastern Mid-Atlantic corridor, you have a very vibrant kind of intoxicating hemp market. If the loophole does in fact close in November, we think that could materially impact demand, which then would put probably incremental pressure on the supply side. As it relates to Green Thumb, that's the math we're looking at and running in our minds. In terms of how much additional capacity we'll add, we'll determine that over the coming months. We expect there to be some supply constraint within the market out of the gate. Really depending on how hemp shakes out as well as how soon the state licenses other operators will really determine overall how long that will last.

Speaker #1: Given Virginia's location in that kind of southeastern Mid-Atlantic corridor, you have a very vibrant, kind of intoxicating hemp market. So if the loophole doesn't close in November, we think that could materially impact demand, which then would probably put incremental pressure on the supply side.

Anthony Georgiadis: Probably incremental pressure on the supply side. As it relates to Green Thumb, that's the math we're looking at and running in our minds. In terms of how much additional capacity we'll add, we'll determine that over the coming months. We expect there to be some supply constraint within the market out of the gate. Really depending on how hemp shakes out as well as how soon the state licenses other operators will really determine overall how long that will last.

Speaker #1: So as it relates to Green Thumb, we're kind of that's the math. We're kind of looking at and running in our minds. In terms of how much additional capacity we'll add, we'll determine that over the coming months.

Speaker #1: But we expect there to be some comply constraint within the market out of the gate, but really depending on how hemp shakes out, as well as how soon the state licenses other operators are really kind of determined overall how long that will last.

Speaker #4: That's some great color. Thank you. I'll get back in queue.

Kenric Tyghe: That's some great color. Thank you. I'll get back in queue.

Speaker #1: Great.

Anthony Georgiadis: Great.

Speaker #3: Thank you. Our next question comes from the line of Erin Gray from AGP Alliance Global Partners. Please go ahead.

Operator: Thank you. Our next question comes from the line of Aaron Grey from A.G.P. Alliance Global Partners. Please go ahead.

Speaker #4: Hi, good evening. And thank you very much for the questions. Just regarding some of the prepared remarks in terms of plans for potential uplisting, I just wanted to get some incremental color there.

Aaron Grey: Hi. Good evening, thank you very much for the questions. Just regarding some of the prepared remarks in terms of plans for potential up-listing. Just wanted to get some incremental color there. Any commentary in terms of whether or not obviously that would be post phase II rescheduling that include the whole plant. Is there any anticipation of any additional guidance from FinCEN or otherwise needed, to potentially up-list adult use as well from your conversations with either NYSE or Nasdaq? Then just talk maybe further about whether or not the plans to consolidate RYTHM were in line with that thinking of having the up-listing or if that was separately involved. Thank you.

Speaker #4: Any commentary in terms of whether or not, obviously, that would be post-phase two rescheduling that included the whole plant. Is there any anticipation of any additional guidance from FinCent or otherwise needed to potentially build up list adult use as well?

Speaker #4: From your conversations with either NICE or NASDAQ. And then just talk maybe further about whether or not the plans to consolidate Rhythm were in line with that thinking of having the uplisting or if that was separately involved.

Speaker #4: Thank you.

Speaker #2: Well, the second question first, I mean, separate. But I think clarity consistent story for investors. We see this as going kind of into the new era.

Ben Kovler: Well, the second question first, separate. I think clarity and consistent story for investors. We see this as going into the new era. We're moving from Schedule I to federally legal, DEA compliant, should open up a brand-new world of investment. We think we've got a great story. We're teeing up to get out and tell it. We think the multiple is cheap. In terms of what's required, not totally positive, so I can't give you an exact firm answer, we know that the ALJ has to wrap up adult use would have to be rescheduled. Then we think it's a rather fast path. You don't know what you don't know. We're teed up to do it to be ready, we think we've got a good growth story coming with a couple of things in the tank here.

Speaker #2: We're moving from schedule one to federally legal DEA compliant and should open up a brand new world of investment. So we think we've got a great story.

Speaker #2: We're teeing up to get out and tell it. We think the multiple is cheap. In terms of what's required, not totally positive. So I can't give you an exact firm answer, but we know that the AOJ has to wrap up and adult use would have to be rescheduled.

Speaker #2: And then we think it's a rather fast path. But you don't know what you don't know. But we're teed up to do it and to be ready.

Ben Kovler: Then we think it's a rather fast path. You don't know what you don't know. We're teed up to do it to be ready, we think we've got a good growth story coming with a couple of things in the tank here. Potentially some of the growth fueled by hemp and other things. That's where we sit, the next big tell is going to be the rescheduling of adult use product.

Speaker #2: And we think we've got a good growth story coming, with a couple of things in the tank here—potentially some of the growth fueled by hemp and other things.

Ben Kovler: Potentially some of the growth fueled by hemp and other things. That's where we sit, the next big tell is going to be the rescheduling of adult use product.

Speaker #2: So that's where we sit. But the next big tell is going to be the rescheduling of adult use product.

Speaker #4: Okay, great. Thanks for that color. Second question from me: just in terms of the SG&A uptick in the quarter, just looking through the 10-Q, it did seem that there were some acquisitions or some consolidation, at least of some retail stores. I particularly caught the eight stores in there.

Aaron Grey: Okay, great. Thanks for that color. Second question from me, just in terms of the SG&A uptake in the quarter. Just looking through the 10-Q, it did seem that there was some acquisitions or some consolidation at least of some retail stores, particularly called out the eight stores in there. Just wanted to ask how much of that was included within the SG&A versus just organic investments, and then bigger picture, just how you're thinking about smaller tuck-in M&A and deeper penetration within select existing states. Thank you.

Speaker #4: So, just want to ask: how much of that was included within SG&A versus just organic investments? And then, bigger picture, just how you're thinking about smaller tuck-in M&A and deeper penetration within select existing states.

Speaker #4: Thank you.

Speaker #2: Sure, I can take that. So, first of all, with the SG&A, it's the combination of the incremental stores that were acquired during the quarter, which have a decent SG&A profile, that weighed a bit there.

Matt Faulkner: Sure. I can take that. First of all, with the SG&A, it's the combination of the incremental stores that were acquired during the quarter that have a decent SG&A profile that weighed a bit there. It's also the compensation investments that we made that were incremental this quarter compared to last quarter that had additional weight to SG&A during the period.

Speaker #2: But it's also the compensation investments that we made that were incremental this quarter compared to last quarter. That had additional weight to SG&A during the period.

Ben Kovler: M&A. This is Ben. I can take the M&A side of just our general appetite on M&A. I would say it's been a very consistent approach here over the years. We look at everything, we evaluate if it makes sense or not. We're really trying to generate returns and do a positive, a good return on the invested capital. We're not interested in sort of empire building or some future promise of what might happen or things like that. It's really got to make sense to us. We've been able to find a few things. I mean, we'd rather find a great M&A deal than buy a lot of our stock. It depends how cheap the stock is, but buying and doing an M&A can get us scale, can get growth, and can be better for shareholders in the future.

Speaker #2: And then M&A, this has been I could take the M&A side of just our general appetite on M&A. I would say it's been a very consistent approach here over the years.

Speaker #2: We look at everything. We evaluate if it makes sense or not. We're really trying to generate returns and do a positive, a good return on the invested capital.

Speaker #2: We're not interested in sort of empire building or some future promise of what might happen or things like that. So it's really got to make sense to us.

Speaker #2: And we've been able to find a few things. I mean, we'd rather find a great M&A deal than buy a lot of our stock.

Speaker #2: It depends how cheap the stock is, but buying and doing an M&A can get us scale can get growth and can be better for shareholders in the future.

Speaker #2: So we're out there looking and it's an interesting environment given the uncertainty going with a lot of things, given the tax situation, which I can't emphasize enough how just important the tax issue is out there in terms of cash and what's going on.

Ben Kovler: We're out there looking, and it's an interesting environment given the uncertainty going with a lot of things, given the tax situation, which I can't emphasize enough how just important the tax issue is out there in terms of cash and what's going on, and how it might impact M&A. We're out there talking, and pretty active.

Speaker #2: And how it might impact M&A. But we're out there talking and pretty active.

Speaker #4: Okay, great. Appreciate the color. I'll jump back in the queue.

Aaron Grey: Okay, great. Appreciate the color. I'll jump back in the queue.

Speaker #2: Thank you.

Ben Kovler: Thank you.

Speaker #3: Thank you. Our next question comes from the line of Frederico Gomez from ATB Cormac Capital Markets. Please go ahead.

Operator: Thank you. Our next question comes from the line of Frederico Gomes from ATB Capital Markets. Please go ahead.

Frederico Gomes: Hi. Good afternoon. Thanks for taking my question. I want to ask about beverages. You mentioned that you're optimistic for a beverage carve-out potentially. You mentioned that beverage may be a different consumption format from the others, and policymakers are seeing that. Curious if you could elaborate on that, why beverages and not other formats like gummies, for example, and why you believe beverages could be treated differently here. Thank you.

Speaker #5: Hi, good afternoon. Thanks for partaking my question. I want to ask about beverages. You mentioned that you're optimistic for a beverage carve-out potentially. And you mentioned that beverage may be a different consumption format from the others and policymakers are seeing that.

Speaker #5: I'm curious if you could elaborate on that—why beverages, as well as other formats like gummies, for example, might be treated differently here.

Speaker #5: Thank you.

Ben Kovler: Great. Yeah, this is Ben. I can take it. My comment was less on what is going to happen from the government side and more just what is happening in the category. We are seeing beverages be sold in places, not the dispensary. That is a big deal. You are seeing large share of liquor stores, convenience stores out of the liquor, beer into THC. National retailers like Target or Albertsons through Jewel here in Chicago, Circle K, Total Wine, ABC, Spec's, massive THC spreads of beverages. We see the consumers choosing this product, being happy with it.

Speaker #2: Great. Yeah, I can take that. My comment was less about what's going to happen from the government side and more about what's happening in the category.

Speaker #2: We're seeing beverages be sold in places not the dispensary. So that's a big deal. You're seeing large share of liquor stores convenience stores out of the liquor beer into THC.

Speaker #2: National retailers like Target or Albertsons through Jewel here in Chicago, Circle K, Total Wine, ABC, Specs. Massive THC spreads of beverages. So we see the consumers choosing this product being happy with it.

Speaker #2: And here are the reasons. Tastes great, lower calorie, no hangover, feel great. And you don't have a problem in the morning that a lot of people feel with a lot of alcohol.

Ben Kovler: Here are the reasons. Tastes great, lower calorie, no hangover, feel great, and you do not have a problem in the morning that a lot of people feel with a lot of alcohol. This, we have a lot of confidence, has a place on the shelf because consumers want it, and we do not see a lot of health and safety risk. In fact, the impairment versus alcohol and all those sorts of positive things happening there. The hemp product or the hemp game is unregulated product masquerading as marijuana, sold at the gas station, oftentimes imported with chemicals and untested and unknown. What I said in the prepared remarks is we see it as a distinct category from intoxicating hemp. A 5 and 10-milligram ready-to-drink beverage is different from 1,000-milligram gummy I could buy here in Chicago, a block from the office.

Speaker #2: So this we have a lot of confidence has a place on the shelf because consumers want it. And we don't see a lot of health and safety risk.

Speaker #2: In fact, the impairment versus alcohol and all those sorts of positive things happening there. The hemp product and the hemp game is an unregulated product.

Ben Kovler: The hemp product or the hemp game is unregulated product masquerading as marijuana, sold at the gas station, oftentimes imported with chemicals and untested and unknown. What I said in the prepared remarks is we see it as a distinct category from intoxicating hemp. A 5 and 10-milligram ready-to-drink beverage is different from 1,000-milligram gummy I could buy here in Chicago, a block from the office.

Speaker #2: Masquerading as marijuana, sold at the gas station, oftentimes imported with chemicals and untested and unknown. So what I said in the prepared remarks is we see it as a distinct category from intoxicating hemp.

Speaker #2: If 5 and 10 milligram ready-to-drink beverage is different from 1,000 milligram gummy, I could buy here in Chicago a block from the office. It's just like so material to emphasize.

Matt Faulkner: It is just so material to emphasize 1,000-milligram gummy versus 5 or 10-milligram drink. That is what the market is today. If you go into a hemp store, 100-milligram, 500-milligram, huge dose, unclear what is in it, untested. That product has to go away. We are confident folks in DC will get rid of it. Over time, and I do not know if it will be right away, and it could be 6 months or 1 year later, we know this drink category is real, it will exist. It is a meaningful part of the retailer's business. It is becoming a meaningful part of the distributor's business. Pretty soon, the alcohol folks are going to realize the consumer generational trends are in favor of this, we are going to see that. We believe in the product.

Speaker #2: 1,000 milligram gummy versus 5 or 10 milligram drink. That's what the market is today. If you go into a hemp store, 100 milligram, 500 milligram, huge dose, unclear what's in it, untested.

Speaker #2: That product has to go away. We are confident folks in D.C. will get rid of it. Over time—and I don't know if it'll be right away; it could be six months or a year later—we know this drink category is real and will exist.

Speaker #2: It's a meaningful part of the retailer's business. It's becoming a meaningful part of the distributor's business. And pretty soon, the alcohol folks are going to realize that consumer generational trends are in favor of this.

Matt Faulkner: It is a meaningful part of the retailer's business. It is becoming a meaningful part of the distributor's business. Pretty soon, the alcohol folks are going to realize the consumer generational trends are in favor of this, we are going to see that. We believe in the product. We are coming off a lot of momentum here in Chicago here this summer as consumers are really starting to become aware of this product. It really did not exist in this market as little as 2 years ago. It is an exciting time, but certainly tons of uncertainty.

Speaker #2: And so we're going to see that. We believe in the product. We're coming off a lot of momentum here in Chicago this summer, as consumers are really starting to become aware of this product.

Matt Faulkner: We are coming off a lot of momentum here in Chicago here this summer as consumers are really starting to become aware of this product. It really did not exist in this market as little as 2 years ago. It is an exciting time, but certainly tons of uncertainty.

Speaker #2: It really didn't exist in this market as little as two years ago. So it's an exciting time, but certainly tons of uncertainty.

Speaker #5: Thank you. Appreciate that. Second question. Just maybe going back to the comment about potential stabilization in some markets. But I guess I'm curious about what do you think.

Frederico Gomes: Thank you. Appreciate that. Second question, just maybe going back to the comment about potential stabilization in some markets. I guess I'm curious about what do you think supports potential stabilization in the overall market on a go-forward basis? What do we need to see for that to happen, and in which part of the cycle are we? Is the markets consolidating, maybe unprofitable players leaving those markets? Could it be related to the upcoming intoxicating hemp ban? What are you expecting to see and which part of the cycle are we? Thank you.

Speaker #5: Supports potential stabilization in the overall market going forward. Do you see that happening? And in which part of the cycle are we?

Speaker #5: Is the market consolidating? Maybe unprofitable players leaving those markets? Could it be related to the upcoming intoxicating hemp ban? What are you expecting to see and which part of the cycle are we?

Speaker #5: Thank you.

Speaker #6: Yeah, that's a great question. I wish the crystal ball had a clear answer for us there. Very, very murky. I mean, you said it.

Anthony Georgiadis: Yeah, that's a great question. I wish the crystal ball had a clear answer for us there. Very murky. You said it, you called it out, kind of all the confluence of factors right now that's impacting kind of the supply-demand within these state markets and then nationally. What it's resulted in is just really price erosion that we've seen over the last several years. We've got pockets of stabilization that Matt alluded to. I think, Ohio is kind of no secret. The hemp ban there seems to have really been a positive thing for the market. I'll tell you in speaking with our Ohio teams, yes, we're seeing price stabilize, and we're seeing as a result, revenue go up as units continue to increase due to consumer demand. Where we are in the cycle, it's still very murky and anyone's guess.

Speaker #6: You called it out kind of all the confluence of factors right now that's impacting kind of the supply demand within the state markets and the nationally.

Speaker #6: What it's resulted in is just really kind of price erosion that we've seen over the last several years. So we've got pockets of stabilization that kind of mat alluded to.

Anthony Georgiadis: We've got pockets of stabilization that Matt alluded to. I think, Ohio is kind of no secret. The hemp ban there seems to have really been a positive thing for the market. I'll tell you in speaking with our Ohio teams, yes, we're seeing price stabilize, and we're seeing as a result, revenue go up as units continue to increase due to consumer demand. Where we are in the cycle, it's still very murky and anyone's guess.

Speaker #6: And I think Ohio is kind of no secret. The hemp ban there seems to have really been a positive thing for the market. And I'll tell you, kind of in speaking with our Ohio teams, yes, we're seeing price stabilize and we're seeing, as a result, revenue go up as units continue to increase due to consumer demand.

Speaker #6: So where we are in the cycle, it's anyone's it's still very murky and anyone's guess. We do think that a closure of the hemp loophole would provide kind of greater price level stabilization.

Anthony Georgiadis: We do think that a closure of the hemp loophole would provide greater price level stabilization. The reality is that there continues to be kind of supply-demand imbalances within a number of the existing states that still need time to clear out. We use the term kind of, water finds its lowest point in capitalism. There's no kind of difference here, and we think it'll just take time for all this to become more apparent to us. We're watching the factors that impact that supply-demand imbalance. Hemp is a big one. What happens at the federal level? It could go either way. If you see rescheduling, could result in an influx of capital, and then we could be in the same situation over time where there could be imbalances created from that supply-demand.

Speaker #6: But the reality is that there continue to be supply and demand imbalances within a number of the existing states, and it will still take time to clear those out.

Speaker #6: We use a term kind of water finds its lowest point in capitalism. There's no kind of difference here. And we think it'll just take time for all this to kind of become more apparent to us.

Anthony Georgiadis: There's no kind of difference here, and we think it'll just take time for all this to become more apparent to us. We're watching the factors that impact that supply-demand imbalance. Hemp is a big one. What happens at the federal level? It could go either way. If you see rescheduling, could result in an influx of capital, and then we could be in the same situation over time where there could be imbalances created from that supply-demand. We're watching it closely, but we think, just like everyone, we're anxious to see some level of stabilization happen, because it's been a very challenging operating environment for the team and the rest of the industry.

Speaker #6: And so we're watching kind of the factors that impact that supply demand imbalance. Hemp is a big one. What happens at the federal level?

Speaker #6: It could go either way. If you see rescheduling, could result in an influx of capital and then we could be in the same situation over time where there could be imbalances created from that supply demand.

Speaker #6: So we're watching it closely. But we think just like everyone, we're anxious to kind of see some level of stabilization happen because it's been a very challenging operating environment for the team and the rest of the industry.

Anthony Georgiadis: We're watching it closely, but we think, just like everyone, we're anxious to see some level of stabilization happen, because it's been a very challenging operating environment for the team and the rest of the industry.

Speaker #5: Thank you very much.

Frederico Gomes: Thank you very much.

Speaker #1: Thank you. Our next question comes from Pablo Zuyanic from Zuyanic and Associates. Please go ahead.

Operator: Thank you. Our next question comes from Pablo Zuanic from Zuanic & Associates. Please go ahead.

Speaker #7: Thank you. And good afternoon, everyone. Just going back to Green Thumb consolidating rhythm. Why not the other way around, right? If you get wrecked, reschedule, and then rhythm consolidates Green Thumb, that would be a much, much faster path.

Pablo Zuanic: Thank you. Good afternoon, everyone. Just going back to Green Thumb consolidating RYTHM. Why not the other way around, right? If you get reg, reschedule, then RYTHM consolidates Green Thumb, that would be a much, much faster path. RYTHM is already NASDAQ-listed. Can you explain why do you want to do it the other way around? Thank you.

Speaker #7: Rhythm is already an asset listed. Can you explain why do you want to do it the other way around? Thank you.

Ben Kovler: Pablo, this is Matt. It's not really an option at this point for RYTHM to consolidate Green Thumb because Green Thumb, assuming the vote goes as anticipated, Green Thumb will then control RYTHM, forcing consolidation of RYTHM into GTI's financials. The opposite way of consolidating is just not possible from a GAAP accounting perspective.

Speaker #2: Pablo, this is Matt. So it's not really an option at this point for rhythm to consolidate. Green Thumb, because Green Thumb wants assuming the vote goes as anticipated, Green Thumb will then control rhythm forcing consolidation of rhythm into GTI's financials.

Speaker #2: So, the opposite way of consolidating is just not possible from a GAAP accounting perspective.

Speaker #7: No, I know, but is this just an accounting issue or is it a transaction in terms of GTI buying rhythm?

Pablo Zuanic: No, I know. Is this just an accounting issue, or is it a transaction in terms of GTI buying RYTHM?

Ben Kovler: There's not any buying happening. The shareholders are approving the ability for an owner to go over the 49.9% that is currently in there. Once that's removed, because then the ability of Green Thumb to do it, Green Thumb doesn't have to do anything. No economic transaction, nothing changes. Because that's open, according to GAAP accounting, we will then consolidate RYTHM's results into Green Thumb.

Speaker #2: There’s not any buying happening. The shareholders are approving the ability for an owner to go over the 49.9% that is currently in there. Once that’s removed, that gives Green Thumb the ability to do it, though Green Thumb doesn’t have to do anything—no economic transaction, nothing changes.

Speaker #2: But because that's open, according to gap accounting, we will then consolidate rhythm results into Green Thumb.

Pablo Zuanic: Right. Sorry to harp on the point, I always thought, and I'm sure I'm wrong, I guess, that having RYTHM being NASDAQ-listed. Once you got reg-reschedule, that would give you a very, very fast path to be uplisted, because then Green Thumb, NASDAQ-listed, could acquire all of GTI. What's wrong with my thinking there?

Speaker #7: Right. But sorry to harp on the point, right? But I always thought, and I'm sure I'm wrong, I guess, that having rhythm being Nasdaq listed once you got wrecked, reschedule, that would give you a very, very fast pass to be up listed because then rhythm, Nasdaq listed could acquire all of GTI.

Speaker #7: What's wrong with my thinking there?

Ben Kovler: That's not a very fast path. There's complicated tax ramifications of all those transactions versus list Green Thumb on the Nasdaq or New York Stock Exchange. That's a fast path. You've seen others do it. There's really not a big delay there. The transaction you outlined has a lot of complicating factors that would create more friction. We're evaluating it all, but that it's a harder transaction to effectuate versus the former.

Speaker #2: That's not a very fast path. There's complicated tax ramifications of all those transactions versus list Green Thumb on the Nasdaq or New York Stock Exchange.

Speaker #2: That's a fast path. You've seen others do it. There's really not a big delay there. The transaction you outlined has a lot of complicating factors that would create more friction that we don't—we're evaluating it all, but it's a harder transaction to effectuate versus the former.

Pablo Zuanic: Okay. Thank you. That is very good color. I want to ask a two-part question regarding the states. In the case of Georgia, again, maybe I am wrong, but I saw you own 10% of TheraTrue there. I want to understand whether that gives you a path to control an ownership of that licensed operator in Georgia, which is only one of six. Also related to states, you are seeing Verano Holdings make three acquisitions in Florida. Are we going to see Green Thumb get more active on the M&A front in Florida at some point? Thank you.

Speaker #7: Okay. Thank you. That's very good color. I want to ask two-part question regarding the states. In the case of Georgia, again, maybe I'm wrong, but I thought you owned 10% of Terra True there.

Speaker #7: I want to understand whether that gives you a pass to control and ownership of that license operator in Georgia, which is only one of six.

Speaker #7: And also related to states, you're seeing Vireo Growth make three acquisitions in Florida. Are we going to see Green Thumb get more active on the M&A front in Florida at some point?

Speaker #7: Thank you.

Speaker #8: Hey, Pablo. Anthony here. I'll take both of those. So Georgia, you are correct that we do have an investment in a Georgia operator, Terra True.

Anthony Georgiadis: Hey, Pablo. Anthony here. I will take both of those. Georgia, you are correct that we do have an investment in a Georgia operator, TheraTrue. We are watching that market very closely. In terms of next steps there, I would say it is just preliminary to make a call on that front. We are certainly watching what is happening in Georgia. We are very excited about it, and we are excited to see what that market can become. I will tell you, we have got a full plate right now with Virginia and Texas. We are not ignoring Georgia, right now we are spending a lot of time and effort on those two specific markets. Your second question about Florida. Look, I think what you are going to see in Florida from us is new store openings.

Speaker #8: We are watching that market very closely. In terms of next steps there, I'd say it's just too preliminary to make a call on that front.

Speaker #8: But we are certainly kind of watching what's happening in Georgia. We're very excited about it, and we're excited to see what that market can become.

Speaker #8: I'll tell you, we've got a full plate right now with Virginia and Texas. We're not ignoring Georgia, but right now we're spending a lot of time and effort on those two specific markets.

Speaker #8: Your second question, about Florida. Look, I think what you're going to see in Florida from us is new store openings. We've got anywhere from five to seven incremental stores opening between now and the end of the year.

Anthony Georgiadis: We have got anywhere from five to seven incremental stores opening between now and the end of the year, and we have a path for additional stores in 2027. That is one of the states where we are seeing nice same-store sales growth. We are not going to break that out, we are seeing nice progress within that market. That is another market that we feel, if there is a hemp ban that goes into place, that is a market right now that has got a lot of hemp being sold. That should only provide additional growth support for that market. For us right now, it is head down, open up the stores, and continue to lean into the playbook that has worked for us. We have seen some of the assets that have come to market. There has been a lot of hair on them. It just has not made sense for us.

Speaker #8: And we have a path for additional stores in 2027. So that's one of the states where we're seeing nice same-store sales growth. We're not going to break that out, but we're seeing nice progress within that market.

Speaker #8: And that's another market that we feel, if there is kind of a hemp ban that goes into place, that's a market right now that's got a lot of hemp being sold.

Speaker #8: And so that should only kind of provide additional kind of growth support for that market. But for us, right now, it's head down, open up the stores and continue to kind of lean into the playbook that's worked for us.

Anthony Georgiadis: That should only provide additional growth support for that market. For us right now, it is head down, open up the stores, and continue to lean into the playbook that has worked for us. We have seen some of the assets that have come to market. There has been a lot of hair on them. It just has not made sense for us. As Ben mentioned, we will look at everything and eyes wide open, right now, head down, our plan in Florida is to continue to open stores the old-fashioned way.

Speaker #8: We've seen some of the assets that have come to market. There's been a lot of hair on them, and it just hasn't made sense for us.

Speaker #8: But as Ben kind of mentioned, we'll look at everything with eyes wide open. But right now, head down, and our plan in Florida is to continue to kind of open stores the old-fashioned way.

Anthony Georgiadis: As Ben mentioned, we will look at everything and eyes wide open, right now, head down, our plan in Florida is to continue to open stores the old-fashioned way.

Speaker #7: Thanks, Anthony. And Ben, if I can add, I'm just going to add one more if I may. Do you want to make any comments in this public forum about your relationship with the folks at the MSOS ETF?

Pablo Zuanic: Thanks, Anthony. Ben, if I can add, just one more, if I may. Do you want to make any comments in this public forum about your relationship with the folks at the MSOS ETF? Per their latest disclosure as of yesterday, they own about 24 million shares of Green Thumb through derivative swaps. Any comments on that? Thank you.

Speaker #7: Per their latest disclosure, as of yesterday, they own about 24 million shares of Green Thumb through derivative swaps. Any comments on that? Thank you.

Speaker #2: Sure. Thanks, Pablo. Yeah, there's a significant shareholder we'd love to be in more contact with. We've reached out. Maybe if anybody on the call has good communications with them—they're certainly a participant in the multi-state operator market.

Ben Kovler: Sure. Thanks, Pablo. They're a significant shareholder. We'd love to be in more contact with them. We've reached out. Maybe if anybody on the call has good communications with them. They're certainly a participant in the multi-state operator market. The multiples among the operators have changed as a result of, they're the only institutional buyer in the space of size. There's a big disparity in the multiples. If there's any fundamental or actual institutional investors out there that are interested in investing, either in the Canadian or on the way to the US exchange, we think it creates an amazing opportunity for shareholders. We want to have a good relationship. We've reached out several times. We'd love to speak to them. We're excited about the potential uplistings and the potential rescheduling.

Speaker #2: And the multiples among the operators have changed as a result of really they're the only institutional buyer in the space of size. And so there's a big disparity in the multiples.

Ben Kovler: There's a big disparity in the multiples. If there's any fundamental or actual institutional investors out there that are interested in investing, either in the Canadian or on the way to the US exchange, we think it creates an amazing opportunity for shareholders. We want to have a good relationship. We've reached out several times. We'd love to speak to them. We're excited about the potential uplistings and the potential rescheduling.

Speaker #2: If there's any fundamental or actual institutional investors out there that are interested in investing, either in the Canadian or on the way to the US exchange, we think it creates an amazing opportunity for shareholders.

Speaker #2: We want to have a good relationship. We've reached out several times. We'd love to speak to them, and we're excited about the potential uplistings and the potential rescheduling.

Speaker #7: Thank you. That's all from me.

Pablo Zuanic: Thank you. That's all from me.

Speaker #1: This concludes the question and answer session. I would now like to turn it back to Ben Kovler for closing remarks.

Operator: This concludes the question and answer session. I would now like to turn it back to Ben Kovler for closing remarks.

Speaker #2: Thanks, everybody, for joining. Buckle up. We think the next six months could potentially be the most significant in the cannabis landscape in the last 12 years we've been running the business.

Ben Kovler: Thanks everybody for joining. Buckle up. We think the next 6 months could potentially be the most significant in the cannabis landscape in the last 12 years we've been running the business. We're tuned in. We're excited. The team is ready. We'll talk to you in 90 days. Thank you.

Speaker #2: We're tuned in. We're excited. The team is ready. And we'll talk to you in 90 days. Thank you.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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