TerrAscend (TSNDF) 12 Aug 222022 Q2 Earnings call transcript

Good afternoon. My name is Joanna and I will be your conference operator today. At this time, I would like to welcome everyone to the TerrAscend's Second Quarter 2022 Earnings Call.

Joining us for today's call are Jason Wild, Executive Chairman; Ziad Ghanem, President and Chief Operating Officer; and Keith Stauffer, Chief Financial Officer. Today's presentation includes forward-looking statements about the business outlook in the states in which the company operates. statements. in could is differ cause those in discussed and to materially statement projected that uncertainties actual such forward-looking today's subject call risks from Each results to

and the forward-looking Additional on website heading our now information presentation, undertakes the and was in of Exchange company's Wild. Securities that statements at with XX-Q factors original introduce at Wild. Commission speak date Mr. to this or no Mr. regarding appears ahead only the and update XX-K this presentation obligation of Risk in these as available the these of Factors statements. company's the and like Jason The filed www.terrascend.com. management under revise any www.sec.gov go I and Please would to

joining or with Thank New in this states days first among our months. important medical-only. growing everybody. in we are each for Michigan, We early Scale leaders markets; scale the having four use recently key approved afternoon XX Jersey and to New as Today the meet you the expected Pennsylvania, is for afternoon. demand to XX in build adult the be of market, been three either Maryland, us Jersey, approaches adult very particularly the each use. to was when each next over Good

the position While awaiting for the both launch. presence in and leadership capability, launch we and had a use, of well-prepared April adult built which us invested

Maryland's far us The Pennsylvania, use already leading we each the be cannot have and considered environment to to for impacted behind. in us. addition has expect more In growth challenges of about Jersey, and runway consumer. November Pennsylvania excited macro preparing which markets the year, these expansion key has not ballot on future in and the We created this use ahead be widely that completion we New where adult capacity with of capabilities completed nearing adult have both Maryland programs or to

While return the rates East we over across anticipate a particularly driven growth have state-by-state Coast. by concentrated the sector unfolding story, growth slowed, significant mainly to growth the cannabis time, on

are provides opportunities acquire are capped bad. low presenting historically the part of we We multiples. all benefit other are most market recent operators a bidders the that environment The in states. fewer that not not slowdown are and growth extremely The growth current of ability in are our that in attractive With is opportunities. not is markets available in strategy to great at story. deep some our about wide many The states key of who best-in-class attractive to for excellent businesses multi-state assets, ideal optimistic

Jersey. attractive states, let's New talk of Speaking about

Phillipsburg of Following our we better use two performing the as Maplewood or in are adult late stores expected. launch April, in than and well

few sales million grew their environment. many of location Lodi, in combined finally weeks bolsters these a year of to-date just third our a in a best will Phillipsburg first a competitive In our be opened sales. rate reasons opening and can We Maplewood with that rec at performance full run sequentially Lodi $XX each least for believe and a our Lodi confidence in Pennsylvania, achieve Additionally, amid challenging ago. performing dispensaries. the stores

launches. with to market product competitive when we market Pennsylvania several our upcoming the spending to better quality a summer the which last old increasingly long-term. navigate product the of we complete a more library patient sophisticated completed CapEx With these and now key new, us an dynamics. is brand were and for hitting actions of new Today is have to to appeals well from new have company higher that We strains base. market position transition ahead curve the genetics resonating We the took patients. necessary

the launch early use. polls will upon in succeed to is In in to ballot adult prepared use Maryland, well it are of pass. current that Honda with We adult indicating flourish and the November environment

we for These continued the along in and another will position complete. dispensaries Allegany that now did of schedule pursuit is limit we vertically the integrated operator Dispensary us Jersey, cost adjusted As we a this leading to has four dispensary as closing our are our a New preparations with preparing Michigan, the have of Gage of with challenging, northeast Hagerstown acquisition accordingly. the market acquisition. very the market. reality the are additional In up structure expansion and become in nearly key integration Within on

opened launched and Additionally, to our complement our lab. our retail the wholesale extraction we branded quarter, initiative manufacturing during presence,

by markets. economic we the focus we strategy. dispensaries on environment and with parts, have over also maintaining increasingly backdrop, growth like discipline have now turn call executing on front, retail Ziad? year. volatile Ziad demonstrated an the of to the key long-term to expect the while XX and I'd to In provide to adapting by update many our agility moving our Michigan On end an quarter open in competitive a to

the you, Jason of out business. laying Thank for our overview aspects level and higher macro

that in in rolling by spend team celebrating all than them. cannabis I our challenges, with customers their appreciating business got every spent commitment, XX up I like more not and would with witnessed quarter Today, my my stories the opioids. they operation career more details effectively colleagues promised learn them our and every have of passion, Next, the on sharing off so my I to field, team full operation us TerrAscend. functions our ethic time with day-to-day my on members. across On the seen from side the communities what job, support through second in plus witnessed I time side do and welcoming them I is and working work have their witnessed unit, committed first years week emotional serious take in state-by-state. XX% This to the more on sleeves I my field to in team can day. I changed and I and members and life, pharma. their patients their multiple and how

for that a pharmacist, determined makes cause. every to work As me harder more that day

at nights J.W. nine Wild residents. the spent you I Thank travel, the During

more Going deep exciting I'm our have Today, our into sequentially time and expansion this with with excited fast-moving the and delivered moves. that and the made and the with In of results over Jersey. planning the second New period industry led we opportunities Jason ahead. for even revenue pleased our progress discussing XX% by next night financial about QX, quarter we growing solid and

start Jersey. Let's competitive increasingly patients on use April began high strains in resonating our are this new sales with New XXst, and quality products Adult with environment.

has in product quality facility, additional have a which we well higher the investment resulted Over in our past PA year, our as as completed capacity.

Staying to processing This complete be capacity this ourselves dispensaries The prepare located and the increased with fully We feet, the large increased without Maryland integrated With functioning northeast, expected to strategically adult entered an meet integrated with area, ballot for in the become we will demand. in our XXX,XXX anticipated to we quarter. square and use future. operational in ample are facility is are at build Hagerstown year for last vertically a be now the cultivation vertically use market a new to processing, on November, in of kitchen. further demand the investment. now and with a and intention significant prepared steps the facility adult taking out

capacity room calculation with doubles further for our state expansion. existing initial Our

capabilities to our enable our manufactured On new the side, us product product extend offering.

We replace with challenges facility an that us. are wholesale is To-date presented facility. excited state-of-the-art older Maryland a to the operational , for new market

dispensary, the and Medical previously on We and closing. We acquisition expect close is leading in form the and within situated of Allegany approval. Pennsylvania. regulatory Allegany us. area square miles rebrand announced brand step our our foot West coming the for plan X,XXX factors at [indiscernible] first introduce Allegany upon to six as is subject to to weeks dispensary Virginia an

reach full retail the competitive our us actively better in demand. contribution look attractive and strong dispensary Similar current acquisition. is comments of the continue the the my four Gage acquisition to Michigan, other second on first for Maryland We offering In position the Pennsylvania, for use was quarter environment quarter limit, very to adult from to opportunities. anticipated to locations

driver and forward. COOKIES all going Ann vertically we which branded branded growth our during our are integrated, as of is products, COOKIES, with Although efficiency, our position in retail Arbor. over our see to dispensaries, full in the engaged quarter, either more party comprised to wholesale not cash all brands. dispensary, the At Gage second Michigan the flow. and our opened in integration quarter, we popular business, leveraging up With for the XXX branded positive best first wholesale launched Michigan, we and expectations our footprint important of or newest to us cookies an having of not profitability, XX Today, end quarter dispensaries cell's have third half continued our than continue

Gage cannabis Award our a also during We brand into introduce artists Khalifa. nominated recording dispensaries with the Kush, quarter, founded Grammy Khalifa by premium

expansion. to the of With At announced amounting months, be in the TerrAscend for lab we clinical have our an to add state our come. allow setup lineup on acquisition, open next, XX also another Between is growth open us recently dispensaries locations we are in pending we three the extraction five and our strong making selective for where our that opened coming and to cultivation progress will map locations and will closing go our years total on to plans we in additional previously expected Monitor Michigan. facility,

Additionally, and to to achieve Keith operational the by call and focusing profitability. delivering on by will achieving improving update. while now to a the like would financial excellence, provide product margins listening customers, our by members, growth I team over to we quality and turn that driving

to have and I'd Thanks the U.S. going our and March everyone. we became that GAAP. previous in everyone been XX-K accordance filing be in our also today SEDAR both a I'll that with filed U.S. The SEC filer XXXX with results Ziad. already afternoon on results Good with XXXX, like EDGAR. over report effective remind

$XX.X in adult start XX.X% of sequential Michigan. and sales Jersey of in I for will of This totaled stated reference increase quarters' dollars. the results sales an sales New by that today are XX.X% full second quarter of worth the driven use was All buy year-over-year. and the in U.S. sequentially growth a million, Net the

recovered Michigan, Pennsylvania along stock-based sales Frederick expansion, in with the profitable more Michigan, volume by quarter of the the sequentially. gross margin Hagerstown core The XX% while for margins XX.X%. Jersey to Retail sales Regarding business margin our half we This the to points, Pennsylvania, wholesale revamp improved as sales and benefit for in wholesale challenges margin following were we of In XXXX. our and business decline stable state-of-the-art nearly our facility, new on flower for driven a at both facility improvement with including quarter strong sequentially, retail the month sales previous quarter full sequentially. impacts the and inventory up continued million, the in the margins higher we transition of sequential that XX.X% discontinuing points in margin million opened sequentially margin in $XX adult quarter saw in the were new Jersey. quarter an our sales the non-branded in and down compensation on a Also, improvement slight XX% and planned extraction the wholesale QX in edition margin was recovery margin QX. by in well to across combined business as challenges an and increase in channel, New lower expenses gross our quality facility excludes operational revenue facility adjusted was and driven were drag Wholesale adjusted by of new full versus each the products. XXXX, million, sales margin by to Even aged Maryland reserves business, of experienced proactive basis as by compared back Retail the the introduction Maryland. use Gross our to vape in New of as our of The legacy facility normalize capability the encouragingly, in quarter-over-quarter, driven expect driven the of margin driven point X,XXX our Pennsylvania, gross transition dating for legacy improvements of of a new intervention improved in in Michigan, in quarter sequential quarter, were sales. second beginning the was half the XX.X% concentrate in which quarter-over-quarter. of we Gage Pennsylvania, write-downs G&A offset margins, up strains, was by of was sales this $XX.X revenue acquisition. end partially quarter. by with QX the of decision April. to XX% excluding focused the we our branded In of over previous all Hagerstown. a This was our the discontinue our basis expansion we and vapes. Wholesale businesses. focusing at California second In XXX facility Adjusted transition non-branded use as up driven at in gross one-time nearly beginning introduction quarter, as expect back to decline by QX. of basis both state. improvement we from Adjusted XXX by higher to for ramp late wholesale was on by was $XX XX% at by revenue planning scaled operational of adult driven

G&A pre-opening staffing due for adult start in were $X.X preparation expenses use Jersey. to other Michigan of New the and Excluding quarter-over-quarter, million up sales expenses in additional

associated As for The of New as increase gauge a of $X.X margin by the million for the delayed EBITDA to a staffing driven Gage in X.X% loss Lodi for since higher the store, to opened previous our end margin percentage compared full in net from quarter by G&A New has million subsequent improved gross G&A XX.X% all of with QX Adjusted was The $XX.X million for in previous a the income offset increased the Jersey, the quarter. of X.X% QX. the the improvement versus despite three higher was stores revenue quarter EBITDA in the previous a quarter sales a to QX and quarter. launch quarter of XX.X% million was Adjusted in which in was of $X.X for in with net adult the improved Jersey. costs addition the opening percentage and impacted well from use full the expenses, positive addition to in $XX GAAP as of quarter. quarter. by of revenue,

expect driven of the the growth well by Michigan. sales and Michigan Looking acquisitions up our quarters half Maryland both continued sequential in revenue ahead, business in in Jersey, additional of closing use Pinnacle of second in the store respectively, branded in of growth adult as AMMD the we as New ramp openings and wholesale Michigan,

also adjusted QX, continued sequential and expense well EBITDA expansion We EBITDA by as expect leverage. driven adjusted mainly margin growth and as in operating QX

sheet, cash balance at the the ended $XX with million to equivalents of quarter Turning the end versus March. million $XX cash we and a of balance

taxes Monitor the Capital Also Maryland the and mainly $X.X Michigan Township the end quarter, approximately was our million million Hagerstown, $XX expansion in in at expenditures, work by interest $XX.X we of During and at the primarily million. of note, quarter deposits $XX to tax including driven the ongoing relating our of were cash facilities. used from operations, payments of $X.X million. quarter, payable payments balance million

$X in made of million acquisitions Maryland, and of also XXXX to note final and our We Pennsylvania. cultivation KCR related in processing HMS dispensaries payments

for recently final cultivation CapEx facility. near the our expansion well Jersey of year relate to rest in Our payments for Hagerstown project, the as completed leased for at spending our our mainly plans plans Harmony New as

our result a of our to worthiness have attractiveness as ample based capital and liquidity business. access credit on the We of strong

it of have to the owned operator concludes over We to for leasebacks. like borrowing our capacity questions. due I'd minimal unencumbered now prepared and our remarks. to assets for additional sale This usage turn

[Operator go gentlemen, comes ahead. Instructions] at question-and-answer and will from question First the Please Bond session. Thank now Jefferies. Ladies Andrew you. we begin

everyone. for Thank Andrew evening, Owen good on you our Bennett. line This the for taking Hi, questions. is

largely coming wholesale, a helped. for first for know on online. of So, of retail improvement a the optimization obviously branded was New like quarter. via expected of But non-branded also maybe one imagine me margins, greater of Jersey sales mix and going in Keith, very substantial factors into production we was discontinuation in Michigan, of kind Plus there you, I'd a lot this this,

those margin help out? Thank that the differentiate you or any other you. And the call magnitude how could we that, think benefits trends for the quantify and than related So, to about of year? rest impacts to of should various

terms Sure. of you I I and I Hi, drivers impact in on a the the key Andrew. the my magnitude pretty of think in margin drivers the Yes, of order gain. highlight so prepared the that of way about in remarks, it lot our sequential in much order was priority talked

a tailwinds. there's as think going forward, headwinds and of balance look to be I we

actions have really because Jersey. our underway, and of New So, ramp-up of we've said, gross going in first we month-on-month-on-month that's I'll -- margins because of with business we upwards, new I continued drive as New and a to margin to continue lot Jersey, improvements tailwinds our seen our start have foremost our in

I going XX% us As that's well in start we XXs XX% Michigan the And Michigan. the mentioned, vapes can into to -- our to the really that extraction going start in. vapes the mark in to -- I believe up so we or manufacture as own from to that's get mentioned fill and branded kick lab

a we also on but number So, my I to that's it's COGS didn't provide prepared of other good another one driver. remarks, mention have And thing in -- is key then we color across with resources, there. drive facilities. initiatives boosting that our to we And plans activities cost our internal have of boosting from per down talent underway we pound and have the continue all some have to

the provide see across fuel that any then on the pricing be a side continue positive we need markets. that that we we to keep the our lot to also to need pressures mindful just to runway continued and do So, that's to of we combat

products the that the maybe generally hydrocarbon Are in per just sense production a you wanted these in limiting one rec any live of still trying ramping? for facility New that levels, this you're like get seeing one production get and to vape production super customer cartridge these helpful. your anticipated of Jersey demand versus for that I on stores. on your purchasing sense transaction? own And products any to of Great, your for putting on Ziad, outlook to a extraction then these limits second to demand relative Just market, a products? Is

production on have the patience any we the Andrew. you, they not the limitation base and the and At customers on do thank what Yes, on on any have this we limitation don't point, get.

robust pipe a the our innovation have that under your that QX is We coming question, plan and limitation. QX down brands of to customers. answer But is both here different segments different there in there is to cater no of

I'll Thanks. Fantastic. pass on. it

you. Thank

from Capital Markets. question Kenric Next at Tyghe ATB ahead. go comes Please

Could that that But better for to understand increasing evolution fact of you obviously Appreciate get dispensary you of the that that Maryland, scale different? it provide to try increasingly good acquisition that you ran or And getting much then issue timelines the perhaps the will guess you out better to in opportunity the in piece much equation that could market to that is into? the you're cap? you players bringing in afternoon. the color Hagerstown handicap opportunity you. for around and the little dispensary And more or color that of us about obviously urgency help bit cap. -- called be Thank the if space and the that a second that on here. I for around the a majority is what focus model? Thank Maryland, there's

you thank Kenric, very Yes, much.

is and that it's business. season during going those old reason simple the equipment old facility had perspective, that an manufacturer Maryland the longer no down the of in GPOD start summer the For

volume the new quality. the equipments where have a of caused fixing production on transition pressure that excited those part facility replacing So, the is very would tremendous That and and the to why we're production into be task.

from is that perspective. Maryland So

capital And Keith, small talking are Kenric, really that are the putting a sizes we're businesses in cannabis business partners or what weekly from five pressure far in market, are opportunities opportunities multiples, is macro being their buyout we years on environment or seeing of who board, rate, the are across Not M&A. to As businesses those and that by perspective the at the opportunities on only to different that interest how basis Jason inflation, the potential coming magnifying pushed has and that at the M&A, look was different looking are as Maryland, us of a attractive extremely three presented the to some ago. smaller for from are I of that than at. almost it is

do frame a as in how out could, And a sort That's one much flattening us of managed quick to obviously how you hear market. performance strains, increase how the Pennsylvania, sort Obviously, new just half is is you. off the flower wholesale the just to today? quarter, also we of think navigating you useful. going evolution mindful growth, can if Can to Pennsylvania context well. some just you sort more intend environment how count the call of market? challenging for was back on prices patient that? about that you mitigate -- Thank half? more Do necessary the you on how becoming? you the encouraged a really You tools get of good challenging be up that strong have it's of and How challenges? that second Or of to I the think that in of that But, what context to the you challenging the do of your in we the have think to do the those again, second appears help wholesale through but

work on or and are We reaction having some the of modeling, very a pricing Pennsylvania. is there the the and that question Keith the it's for right increase this short-term your quality while both by in patient today space operators a something right the a shelves. perspective, by It's around at by and retail revenue? on real done inflation, caused perspective, cost wholesale is pressure and it's We not? are relationship decisions patient well by the mix the with the vertical they made are right opinion, retail I the the that XX% own patient is your question. the will the from -- shelf wholesale, to in gross increase products, decide for the improvement their could to keeping you -- I medication that your vertical your a have to will of by Hey, a X%. Yes, what and that shelf from The know group by think quality But environment, wholesale be state. can that every of have believe that great recession, drug the end in In it the have only my of day. presenting at winning combination the margin move

And new increase the in we're the expect we to their So, -- happy our We're expecting we with second as saw product as sequential or standards with the happy how far We're the they on that the on that XX% portfolio are will see seeing next keep half the wholesale. year the quality. then high to from their menus. patients of increase price wholesale? work

range of margin sort the here -- called the target sequential we margin Very willing just what target long margin shot a of -- you drivers. The exiting least can one improvement the give us and question and of or at able or look some expected direction are here is quick me, Ziad. A would is, part the I revenue of to useful? quantum be even out shot, from Keith, for that math potentially some long mean but growth, you probably interesting sequential appreciate expansion final a the

so, its really doing predict internally we about the are it to we're Kenric highlight again, -- to fuel. headwinds can control difficult we're on everything really to is else pricing. what's trying provide that Yes, What the

the And cycles, really costs which internally it's hard at to at yet And everything give things other drive to are our Andrew have that's we should, outlined at that that's and if -- we're a there doing confident But with doing. I to thing, outlined too going but down we initiatives we I all everything some guardrail that to some continue believe And earlier. subside give point, underway everything we're so pricing can facilities, point, different earlier. much where they and we're our of market-by-market pressures but all there. to the in the at actually us

I'll it Keith. get leave queue. Thanks and Great. in there back

Thank you.

Next Stifel question Please ahead. comes go Partheniou from Andrew at GMP.

may of million debt, next good Could taking my balance you questions. about if quarters? leverage Thanks million not Correct evening. over the have your I quarter of the targeting Hi, you representative fully but talk kind off with starting be this wrong, normalized think debt-to-EBITDA acquisition. what position in from plans cash is for that given The a your Cash my little bit sheet. your is management few for million. me you're potential math Maybe $XXX refinancing Gage in ratio? $XX of maturing And due $XX November debt?

Andrew. hi, Yes,

of terms So, levels. yes, you've debt of in read the it our right facts

we mentioned, -- out a strong cash you have weekly on sheet, example, if we look generating balance million runway, for I have $XX we in for have the basis. over Jersey our flows cash really us As on New

rates getting So, projecting additional against earlier, part of out like responses November, loan. are other intention we states assets our and And that matures we're in, in have my very that market but the and terms and and hearing other the borrow we're for And to feel have we there. We coming and lenders as with loan refinance of, interest we're that's that the capacity that are kind in own a I midst encouraged the that that Gage to mentioned, that been we've by are the difficult looking in do talking and we borrowing environment various we that in. in for we unencumbered. in actively have

And so plan balance that's for our kind sheet. our game of

are assets Andrew, want seeing I worthiness we that really the is to that the the the conversation they credit also this earn reaction anchored available business we're business. [indiscernible] the our thing add, versus Keith those market, the in to the us, and Yes, is interest we only the that the but have during expressing -- around have, the groups that in have that they stakeholders the partnership because lendership investment in

they're a partnership lender more share. a into So, than coming

looking Thanks little on bit maybe that are that. considering that a acquisitions. theme, for And continuing you at

think coming ratio, a What to thinking see Just like if about -- you raising fund share well, pay raising to justify kind equity. talk improvement and acquisitions, for about that there of raising would bit I back was debt in to as or little those leverage of equity? you're release, the price to press

Hi, the was would is Keith's is comments our equity today. than appreciably is Jason We're better levels. raising that where future points stock I considering it not in it here. it's on say the some than for

of opportunities of terms there looking at. In acquisition that broad range opportunities, is we're a

Some some payments are use structured, cash-light, cash, the further the them then cash-light, road. of of down at or part them to stock, some of ability earnouts them and very many them have part some are very or are of point

excellent balance that be would So, sheet-friendly, we there's think in that company. bring very lots to the that assets of would arrangements

years. assets of there. first and a current that, are or all out provide no next have the three of In the to what would I growth path have seeing We terms of excellent nice we that glide FOMO. think we really over going two we're say that are

two I've term it while potential would similar, ago where are of lot a crazy I eyes, more a has used -- be we attractive, of amount getting not, those and that quarter if multiples so of, sort versus say better, a we we'll deals, in seeing the think what larger that traffic, away. where one or be -- turned seeing think, whites multiples -- the least, And changed this that coming seeing sort is and are just are to we're of That We're point where internally, that expected up the assets taking getting deal that still is of, the incoming excited would we So, just to the advantage will getting I we that about. we've whole quite -- opportunities. think or been and the if we're something that to at where is the we that of getting not going more are we're point end we months that's that down. their we closer

Thanks get for I'll in the the back queue. color.

Thank you.

question ahead. comes Cowen. Azer at Vivien from Please go Next

Hi, of like thanks. terms want opportunities there sequentially, on at than in M&A be Gage, to you Good with as clear step of footprint have are afternoon. recognizing continue out follow-up a what Appreciate Keith, that. all geographic increased cost some around guys But component improvement with the will operating sequential narrow that peers? are driven that's look clearly that questions SG&A margin full expanded leverage dollars, of I to by Keith critically, a the of just integration synergies more for you that up business, Thanks. somewhat pointing your

an drive and don't operating initiatives quarter Yes. come. targeted know Hi, this initiatives, we've full -- a give But that see but operating we like COGS the being there's aggressively impact to long -- more leverage of your savings and we're Michigan, revenue pretty there's continue. we in combined because QX. a productivity opportunities opportunity impact more of actions some specifically peak, that a to in quite if this pretty to and board will in we and Growth already absorbing is as quarter I we the our the expenses Michigan going was believe pursuing Yes, operating us well. really just list that Michigan, in taken expense that that notable across at have to was question pretty continue better Vivien. broadly, we

much took beyond. the that we have didn't that the the that quarter of the end second quarter an impact but quarter, start we we In took in actions at Michigan, third of fact, have in to the of already in second will some an and impact

So, provides there. a more context hopefully, bit that

be external Yes, our Keith. I that's I'm you and the quarter to helpful. expectations conservative That's tried for If of certainly below We've are came were in sure what just for they seems the could aware prudent. with what follow-up you're year. that expectations. you,

do Thanks. comment in So, half? the expectations for external on you revenues to back care

shift the is in that entire lot a giving of estimates Pennsylvania business Pennsylvania, with revamp and I internally tricky how So, our we've everybody's guidance. business. with in for trending. bringing makes moving stopped We have look, lot line in come on know board it focused to We on do a moving parts. there's the Gage environment parts in the so operating with of been

So, so. I the Jersey New understand ramp it's difficult to that, model up all

at of what consensus light the this don't speaking comment we year expect, everyone quarter in a So comments on on half I the broadly reported and numbers. of back numbers half we really will have of in year. those relook of assume and back those I commentary what the some the

Thank you.

from ahead. comes Please Capital question Eric go Delorier at Group. Next Craig-Hallum

for that Could Jersey Thank timing on my Maryland questions. quantify then touch and New for you and expecting you CapEx expansion, the you're perhaps expectations? taking

Eric, Hi, Keith. it's

project And CapEx underway, it it point, New if made, is the but much now I Maryland first this on the for frame Jersey payments which our half is slightly the will then you, could Jersey essentially without CapEx project's New be still of to in exactly plans that, CapEx At the below be So specific terms spending that complete. the is into pretty the complete. half back detail that according will Jersey, frame of there's getting year. way I'd year, New are in the for the the

idea So that's about there. maybe you that expect what gives to an

pending Maryland? payments to include for the just does And Sorry, that does that clarify, comment?

plus, then CapEx That half no, pending top, and in back layering the then half be spending? new and so plus the payments spending Maryland, on from back the that will that

on, you mean, generate second you these of do from with Do on? ops half? just, you and to to the flow margin focused cash color appreciate positive expect And cost I some guys improvements in the that expect are Okay.

towards a of timeframe sequential continued operating by first across then XXXX. cash specific quarter the second, We're the that with end progression line of and not, not the giving but on not. described We're if the And, items. initiatives the the positive we're on an But that. I flow, eye focused second half by

Thank you. Keith. Appreciate color, the

you. Thank

Matt comes go McGinley at Next question Needham. Please ahead. from

you. Thank

at in a would your follow moving to comments. like even have imply a I the $XX question on was million XX% it of profitability you're probably in revenue but terms more in up based G&A rate, margin gross direction state. a on Michigan, wrong your slip So sounds million, $XX.X which the really specific quarter, around in a

the to need Is So, of state be in overhead that Or just back But profitability to much that my question there? wall you problem in Is some there with fix? mentioned is for the turns is, might to stores to get cost profitable? to get harder get corporate that you Michigan M&A for you there that to cutting. what profitability? the a

synergy starting not Yeah, and Matt. and here is you we some marketing It's between with Michigan we user of started already question. Ziad. the for experience so the our team. Thank This exploring our the remaining that have businesses

Some Michigan, be of and across then and the to New service initiatives like market and itself. took that with instead additional that the in out created spread created headcount. Michigan talent the enterprise, we of shared We a service of Jersey shared bringing

We've what While see next it initiatives. had does show the quarter, in you'll quarter. specific not this in

them of around is the One cogs.

the a comes cost from perspective perspective of it Specifically, labor and as to production. an automation from

the XX% to quarter around by be cost have plan per by with XX%, XX% cost around the that reduction production pound of next reduced We pound. the on per cumulative to for

only action outstanding The two model, model also second piece general somewhere labor a hour. to mid-level and more on area with We sprinting the immediately labor floor our transaction. in goes also stores the board, tiered that to four labor around in hour. the team needs six retail, that at look Michigan, three as in has done the retail transaction that in to man per the at when in and additional like industry, you labor And into job Michigan, it model that model across to be man management, with not sits the model, believe needs but both look transactions an in per

initiatives seen the benefit places And have taken this. of already Michigan. those in So took already we've

fit recap, it the on It future for to OpEx present So under leveraging the from overhead perspective. the on enterprise. cards. the labor is for side that the a is across And to model team entire the built it's was by

follow-up a retail the for $XX dispensaries. the just You I'm wholesale on believe Okay. about be to to run the wholesale you Jersey. is year dispensaries product that. in selling just begin opportunity? you'll New just Thanks should think million first opportunity the sufficiently And wondering, noted not the more supplied other state? rate in how for do then my we When that not

Yeah.

exciting in we wholesale make have New already wholesale Maplewood efforts waited that It's had. to our an We planned dye well, So we flow we've started market. carefully Jersey, sure setup is two and the in we and has that well wholesale the job Postwork up wholesale market. are the done supplier to set be last outstanding an consider quarter ourselves team to top

the current prior line a customers wholesale to down to establish tours, in addition learn the that the of are lead the coming six customer to the the potential the engaging to more become make online. nine is are already as down order to the loyal and lead team granted customers. offer and they a applications quality the we're In relationship opening sale seeing more about see product, months retail The sure licenses

you Thank

at Glenn comes go Mattson Thank you question Ladenburg. Next ahead. from Please

Yeah.

you No you the strategy. happens. market, in like of right it's curious Is before the M&A if it legalization until the historically done more accurate? hard along? on of, a that's a I'm more deal, Get whereby that, a deal side there goal by would to your on comes to Which process terms on for too well, in equation? is adult the wait, states look get just that trying jump early, those thought just Just up? states out just pass to get that more matter know, it you've the about financial two would just Or of into you wait is transaction you

the lots would whole looking medical going to eat off dream Yeah. races. we to scale, are go then places to it's while in then and goes for say rec, in or Pennsylvania ways markets assets we I buy go rec, benefit and that more approach. sort when there, where of it's the of while more can eat you markets, it but There's Maryland in in acquisitions dream the

attractive multiples are go more the valuations of terms gone already they're focused have to states states are that markets, coming there are that assets also certainly still looking of going we In in in less rec, rec the -- new on are medical years. certainly in but like

the one the there Maryland, of turn just to for once and of the And a mistakes happens? you the how like some one appetite the Thanks. you passed, powers Or have other Have have a on? have that be be state made they markets? also feel do to vote sense in vote that from to on talked the if is like quick ready were sense of learned

Yeah.

are Here is the -- ballot fact we for know this is today. the We on November. Ziad. It's

great The other signature it go. fact All the not interfere show all is surveys are the let and in will governor they signs. Those they ballot. will the that it will the said, pass

be lobbyists an -- it that us could and know hope could us Jersey the believe hope few or a an be it's facts are government we timeline. that Arizona, be opinions We as is know, an believe XXXX launch. those we it all it lead a it Arizona. Then So to New could approach. a today. lead few affair to a And We Illinois, or

was. And Jersey New maybe more developed add just than to that a it's medical program

more to excuses maybe is any state that took giving the why longer. but lot a had Jersey through, there, it to work New not

thing open not like the people would was that also on would summer ballot or as year, it should it they approved July -- and you will sometime said it to add Which over XXXX, as passes XX plan it age leaves I be reading of think the time do if believe, right, believe effect that XX to that that of next they'll tea be in effect. I I and question mean I if and might is, this for it something to one we're the of that vote. that be be are doesn't was of, get on something the implemented that the us And but written adult-use on it the that but to think Yeah. or true, hopefully leads the to it still believe execute

color. the Okay. Great. Thanks for

you. Thank

Noel Clarus Please Securities. Next Atkinson ahead. from question comes go at

still guys. This the guys portfolio questions so behalf retail evening, Most XX to our addressed, been or dialing by of the more on Are George have just in a targeting your of have you one here. stores of Good Noel. in end quick is year?

the the to best stubborn including of switches fit stores Yeah. state the that Pinnacle Michigan, next would we're next that and will on Colorado and will are. California. plus stores George, environment, it's we're environment for see are and with go. adjusted not stingy felt We we're one and example, reviewed and for moves us our the agile, we we're as we're we three allowing, five to fastest what plan, acquiring and to arguably be very the this being evaluate we've seen continue we being we quarter. continue being the that where And letting quickly anyway, challenging guide in

will one pricing that that retail us on is help decide versus factor Now, wholesale.

be going of retail continues, the on fleet or and demand. here is in dynamic assets the retail If some are our we're expect the at was then in point. reducing other center attention. referring supply we That's aggressive the balance XX%. by what our Keith and getting to earlier that state, production back price is, to are at or That bring to, of XX% some balance every publicly increasing shutting their factor names The to more will between or that cultivation published, down seeing the

store that determine than we and decision Pinnacle thoughtful Now, will balances a are dollar we from to the up. smarter from big CapEx is is put being a buying environment, spend we we doing those an decided established, will have better every in a all from very of operational in efforts today's on be we And take, we our and perspective. like a we store think are ROI and accounts. where what ground is what also Maryland We believe is, building the

for That's guys. it. Thank me. it helpful. Got you, That's

Thank George. you,

you. Thank

Semple at from Andrew ahead. Next go question Please comes Echelon Capital Markets.

the And Matt to been state. XX% color in wholesale so the disclosures the Thanks question. quarter-over-quarter. suggest that down on appreciate I pointed Michigan. good that return there, evening. some provided in I guess that's just pressured in would to already taking my state dynamics wanted in out, I sales Hi, for space as there's statements made that financial the about were that far

retail maybe in that's Just spend Michigan some pressure would retail appear second on and store given also decline that per to If expectations sales the this case, the retail quarter. Michigan market, for on the within for for significant magnitude time there's quarter is and that in been in half the your could wholesale that mix of dynamics year? are suggest the second that typical what you some fairly

pick Yes. it Hi, I'll start Andrew. Ziad will This and up. Keith, is then

just that came decision bulk it's million our which do out was a no to wholesale, business. to think I very margin related X quarter-on-quarter longer clarifying worth low

in us And question. make to picking going healthier you're been that's disclosed forward. the retail that So, going there. will take Ziad, what's distorts or maybe what seeing up

and super excited, retail the And platforms, we Yes. and at acquisition flat, matter excellent and New it’s From Pennsylvania and customers an see driven through we happy and is we in state. a we're dashboards the that a loyalty patients it’s us. dashboard, Jersey of New slice story, for because retail you Pennsylvania story, a honeymoon in a and what is Jersey. mentioned that retail is retention look a how flat, no But future great the sales, really and story data obviously a the each Michigan, and perspective, it,

seen QX stores. count have Michigan, For retail we in our increase XX% example, QX, in a customer to from in

in our New the is still the comes five The for super, times our are loyal those more were very described, super retention are and times, Pennsylvania look best super XX in more to our in in customers, in brighter. XX% XX loyal visit super we five days. I super, than the at the accounted days. -- even three years. every customers loyal visitors times and and loyal four loyalty Pennsylvania three The XX loyal customers way. visit the super a XX is to below The are The and super attractive one XX customers look The we're customers XX% pocket, story us piece acquiring XX We day, customers in. every than Michigan, sensitivity pricing customers. the so in loyal In for XX% us every in super, loyal. of where Michigan tiers

In the at us that us end, six much addition, months. customers in new the other look to used are previous us. on the that better And is have for not that see that and that's we And to we getting state that in gone retail be of has challenging, environment think environment itself what down. the us acquisition combination has is is in or in an that I flat or flattened where the allowed an retention, acquisition

at has You down since example, March, market know to similar look gone sales from sales. you market story XXX from Pennsylvania, million a the XX Michigan for million in

dissect flat be us in we we the sales feel cultivation when state, today. to the doors in for we retail working it plateauing data, So with as can as that environment, make it's working, work well that increasing, increasing it's

the more may. one appreciate there. Okay, additional And color if one, I quick

of of integrated, maybe I You don't the New data, margin Pennsylvania? just comment Jersey gross I other limited profile here. vertically to directionally How's where license you shaping are state-by-state markets, know you on but know, some typically up guess, namely your

Yes. It's fantastic.

Jersey the New dynamics a probably you good can in as get picture in there. the as is market So given

I month So not along a for still margin say to like month topped enough we're adult-use at profile. And far said, with we've seeing scale over that month, cost far leverage by better in the we're very -- our we're gross margin. over gross getting healthiest so out point and getting where program

from don't And we all to really we May continue continually with to in on lines. because see And we we drive New laurels. the in state we Jersey, So want want through COGS the the that about, encouraged initiatives across to are, optimization our Even just keep we're through to like April adding without rest talking where where even can go encouraged here. June. also additional that's

Thank you. Great.

Thank you.

Pablo go ahead. at Cantor from Next question comes Please Fitzgerald. Zuanic

the is after market market Baker comment taking sales direct the store now? Just the can you for And up Lodi, on or XX per Thank any just which cadence month questions. your that then opened average for Matthew there New two the whether you X color much help? demand Can the above on has and on million? are sales more pent excluding of market you This Was Jersey dropped stores you. million? first would comment Pablo. our Thank

sure I'm first first thing out. Ziad, and chime it's will the information It's say month again, that Keith, Matthew, Hi, they difficult I -- is, to came because in. guess

I the everybody state in felt about of the kind so think information. of like that accuracy

I'll maybe doing. a and that just really aside minute comment on positive. So we're we're set for how And

program that in think And I stores. million is versus not in each of say, us would before capabilities because market. remarks above us one and think opening locations get adult-use advantage we indexing the shared the from it sense reach believed New and would to Jersey our all the started because information But at it's our even can that we that the we that XX along market. of average. Northern makes be would it way to our published our across data over that piece the operational belief hard our reinforce And that store

So add. Ziad, that's yes, to anything think I --

revenue prior for each talked it's of know the state launching we the making on we period, first short only month factually data those know own are, have of can want confidence launch I was how us. prior record that prior to are XX% Yes. that's Lodi there All revenue The -- we Cookies, concentrates, that that the to to thing And delivered There Cookies prior Saturday. what opening store. XX that opening was door but we add then of perspective, traffic a million million. I around is to was share the given is XX launching you data there And to XX% excited about share events about a from Matthew, we take the us tell in the that that created Yes. that I And grand and in of foot engage, Corner. number.

the facts there better better So pharmacy and we are anecdotally. many. remembering are the state. feel average that and drive-thru those – I'll drive-thru confidently, the in days and working the be But we first than my But doing than

And of come sales retail you. wholesale then retail you that. caller New Okay. how on more on Question then Jersey, Jersey on versus your your Thank for your you much the comment Thank And can New split? own also from branded just one question. products?

bigger. and Pennsylvania, foot the your state. experience customers cannabis. gain with more And is by the We early, stay the it's your Their Yes, product traffic New selective, expectation fully like and when and there, Jersey our we're the almost XX we totally that's to customer and portfolio don't is my and but because improve goes design, acting and as on and color because and vertical. vertical, patients basket excitement will of product. size up and increases similar plus is think because menu faster

will some other our thoughtfully through third-party. wholesale in will fit take quality not increase right strategy, we partnership believe between -- our time, that that will and vision of own-brand that but it the dynamic we it So will providers the and we

about between is, question understanding will that as New Phillipsburg supply will that and be be and kicks retail, to able I we're a Lodi busier But in, make to first soft As better and retail. even us. to not about longer mixture between early can that we're actually we knowing mix we'll conservative we two opening conservative Jersey a once expected, you produce. the around this beneficial Lodi during far that than we it’s produce most than weight what versus the will other took is the a Saturday have us -- and two a inventory and We to are and with Matthew market. our excited throughput store, unlock ago demand is sell wholesale decide market assure was weeks we biggest though happening. or the in what And Anything manage still we that in going to extremely of be Maplewood that's days. way. were wholesale that able we sure supported everything

questions. you. are further Thank no There

proceed. may You

look us joining for to and we you today, forward Thank quarter. speaking with next you

concludes for ask we Ladies please and you your for today. your thank and that participating call lines. you this gentlemen, disconnect conference We