TerrAscend (TSNDF) 9 May 242024 Q1 Earnings call transcript

Good evening. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to TerrAscend's First Quarter 2024 Financial Results Conference Call.

Joining us for today's call is Jason Wild, Executive Chairman; Ziad Ghanem, President and Chief Executive Officer; and Keith Stauffer, Chief Financial Officer.

Our remarks today include forward-looking statements, including statements with respect to the company's outlook, including the company's expected financial results for the second quarter of 2024 and estimates and assumptions relating thereto and the company's expectations regarding its new market opportunities like Ohio, the benefits of the company's tax refund claims for past years, the expectations regarding regulatory reform and the potential benefits thereof and other financial and operational matters. statements. in could is differ cause those in discussed and to materially statements projected that uncertainties actual such forward-looking today's subject call risks from Each results to

events Actual indication performance. may or results of predicted by results future and implied forward-looking or timing considered should and of not timing differ from be the the materially results statements, reported such certain as an

today's the Securities heading which update and of XX-K information Exchange forward-looking Risk to date, on in undertake are no SEC www.terrascend.com. appear regarding Additional SEC, or Form SEDAR+ these the these from the call The that statements. makes the www.sec.gov, filed or statements at under available with on the filings in revise company's the of speak any and and factors Commission, obligation at we company's to time other with website Factors and time, company this as only the

company and Relations present the GAAP or in March report measures Also, which on ended during non-GAAP SEDAR+ earnings reconciliation will find XXXX, GAAP Form and the can XX-Q both on on financial SEC you quarterly the XX, release and press measures. is Investor today's to the included quarter of A our the company's for call, the non-GAAP website websites.

Mr. I would now like go Jason Wild. Wild. to ahead, introduce Mr. Please

for increase million, XX.X% same adjusted from for period prior of year-over-year, year-over-year an you the margin during revenue while flow thank continuing margin joining We're how growth XX.X% our quarter our operations us. year. and March, the call the everyone, for line a guidance conference in an of year-over-year. XX.X% And $XX.X and revenue in adjusted EBITDA was EBITDA to representing Net expectations. evening, with and cash we increase XX% has year-end Good started. exceeded compared pleased totaled adjusted with EBITDA the totaled $XX.X Net XXXX provided million,

our cash flow cash related taxes gratified the taxes. has this our XXXE focus vastly see delivered to been for $XX.X how has Our generation, million period excess position on the positive measure another quarter, of $XX.X quarter a million uncertain operations to sufficient am accrued and $X XXXX tax of totaling last seventh positive to We consecutive free on compared cash cash $XX.X in ago. generated year from to of same I the million million flow and We including quarter year of compared in flow improved.

to was each core last and steps flow during large in profile part improvement margin down due of improved cash continued of generation in pay to substantially XXXX we Our first our year took the quarter and markets process additional and competitive our underway actively are sheet in lower in to a debt a improve debt. of substantial portion balance process refinance opportunities materially of our expense. the well our We're interest and exploring our to

significant process this seen new existing in from both have interest We potential and lenders.

XXXE have taxes the eliminate cash recent improve regarding potential on that the additional and and have DEA reschedule, income to dramatically more emerged, decision with Also, flow. constructive rescheduling the given and lenders existing sector the news become lenders net would

continue to will we'll We appropriate. as a close, process provide additional refinancing and updates advance this to

The we're expeditiously has very the faster, adult is our intention before been entering and adult-use as market as March, We state states to call The of moving start potential the every intention moving we implement state to has a with new M&A, we in XX synergies state Regarding Ohio. use. program, approximately mentioned and imminent, enter so this we fast footprint. presents the implementation million and moving substantial still enter last our that our of our to current operational possible. growth disclosed on of such population intention faster. With think have

than other potentially and allow our our and to more We market Michigan active to states integrated parties and this We're profitable multiple [ infrastructure other us for happens across states, officially Michigan to details has Midwest quickly Northeast to manner in provide us Maryland new Midwest new this stand-alone it combined wait Midwest share to the immediate and SG&A a July. as both when how potential any existing a on make expect the last we into we leverage states multiple cash and rather with similar ]. discussions our will leverage in into infrastructure will Interest further entity. in flow. acquisition This can't

potential allowed that ample look and transformative months also we of us I has a opportunity these TerrAscend one to not But discussions weeks ahead. to on in more as but not of opportunities, to engaged biggest. in are biggest. I the forward becoming path greenfield that now the of the best appropriate transformational additional on past, this only it best, larger In we on being focused The explore as our deals. is the see one have benefit said the I sharing the

multiple punitive enable industry a to and will will reform, a tax cannabis we to relying action perspective, Schedule From take TerrAscend result I'm of not III to there and event in and paths as cost. that reschedule moving is to have in is at greater that been lower we're the DEA recent the optimistic elimination its past. solely potential to groundbreaking federal The the are the and cannabis likely news Congress treatment This on entire cannabis access stakeholders. for capital

treated rescheduling would want is be equal towards step to we rescheduling milestone accomplishing towards the tax bottom goal. bring this is treatment be Overall, a will and the playing for other leveling that the field substantial significant a business, industry. like every just The line

David seeking judge a scheduled end, for oral federal XX. that The To arguments cannabis Massachusetts for businesses. treatment recently hear May the to in equal agreed Boies lawsuit are

been positive a this development lawsuit, and in represents We supporter of process. this have the foundational a

totaling And position to it tax approximately million. applicability. changed interpretations, $XX we our relates refunds Additionally, based as XXXE quarter, last the expect on legal we

with we're quarter results. pleased In our first closing,

right strengthening is about states X possible and capitalizing on the have opportunity and growth. environment strong expansion current team, XXXX by assets, been which We the cash excellence additional accretive terms, entering attractive XXXX greenfield not have on and ago. years would into operational foundation. pursue ample high-performing flow to the was about

I'll the turn call over Now Ziad? key to provide to across Ziad our update markets. an

Jason, and you, strong Thank to a start We hello, everyone. had XXXX.

markets. our me Let each performed through key how walk you in we of

position Starting most with New operations market. consistently in to state, Since be a share Jersey. to and BDSA maintained we our continues largest data. market the profitable top according X commencing have This

towards mix wholesale revenues year, has from retail. remained proportionately has market grew evolved, Last in to QX wholesale similar the versus in our As QX, QX, QX. XX% then doubled and to strong QX revenue trended another

margin, model brands and cash largely to experience. EBITDA and New profit high We leading have an maintained due flow efficient cultivation yields TerrAscend's and retail strong structure, Jersey, low-cost margin in and our labor product gross quality, retail

and are which of to potential in footprint equity discussions profitability. would margins enables to dispensaries. store We increase further that in up take X retail remain existing state our the to retail additional to opportunities expand exploring social count under Jersey, we stakes and our operators New increase New Jersey see legislation qualifying active, These

XX% to sequentially. Turning stable, revenue revenue Maryland. wholesale grew Retail remained while

our assortment innings in ramp product capabilities wholesale our We the sales the and grow up provide in early program are to we market. and as Maryland, a into adult-use expect we continue full of still the to

we fact, our an In capacity harvest expected completed just first midyear. doubling expansion, with cultivation recently

improved dispensaries. verticality quarter-over-quarter production Gross in Maryland of yield, our margin and goods as our increased X increased we ramped our manufactured

locations, this we in have improvement facility margin gross year. highest-performing our footprint market further of in collectively, expect believe Maryland. With we cultivation state-of-the-art We retail throughout X one dispensary the this retail and

results larger decline that and to revenue a traffic our our Pennsylvania, to retail. a center, higher grand Wholesale has With location later our at and year-over-year experienced XX% accomplished. front team growth we caliber XX%, products solidify upcoming strong seasonal The sequentially the our opening Parkville breadth speaks and position and store both month retail rates of the brands. I'm the really of expect We respectively. of and this proud of in grew at retail state. In to the new

For respectively. with quarter-over-quarter this example, our our to and XX% performance drivers and growth, edibles Legend brand key were Valhalla XX%

supply inventory and We demand. have position reduced balancing with are our effectively more our

demand In has products lower us room grow inventory in additional and operationalize for our the to enabled fact, levels higher quarter.

As we've for opportunity be market the a consider for adult to large stated particularly prepares before, us, as state we Pennsylvania use.

market endorsing according Shapiro billion and XXXX. in is With to During states' BDSA. by XX called population the Governor on for the by become the adult support Pennsylvania an $X X, use formally his lawmakers first January plus quarter, expected cannabis million, to Pennsylvania expedited a program other Josh state, finally XXXX follow adult-use of to legalize adult-use a leads

achieved foundation main QX, gross had on our to and goal seasonality, margins expand. which from Michigan, Retail In gross we previously declined sequentially to focus a establish in And lastly, XX% once due expected efficiency of communicated. our operational as solid to improving again sales driving is margin. we

in nation cannabis remains a $X sales, over billion As for annual the second-largest priority in state us. Michigan the top with

have soon Day location with XX for locations, retail planned weekend. the we XX Memorial second scheduled Detroit Today, be in opening to our of

deeper pursuing We in to actively go this opportunities are market.

attractive and Jason infrastructure corporate Ohio Midwest cash leverage drive margins noted, As opportunity improved flow. represent to an profit states like Michigan to our

results. solid our I across with quarter all summary, am of pleased In drove our progress geographies, which first

XXXX. even We to greater expect over of the course achieve success

now the provide call to turn to the like over would update. Keith I financial to

I have in SEDAR SEC, results Thanks, filed that results dollars. on Ziad. The going today been U.S. are will I'll over be stated Good the and today and reference evening, that already all with everyone. both

compared increase of brands of for a of was to year, New million, $XX.X revenue, Net in revenue Maryland. for XX% for to decline million $XX.X first year-over-year, Wholesale for store by representing New a increase revenue $XX.X offset million Legend $XX.X XX% quarter compared revenue Jersey wholesale XXXX. by representing increased and Michigan, and in revenue driven flower was openings Pennsylvania, an increase new of door for in in QX $XX.X Retail the growth of by quarter brands. driven $XX year, the year-over-year, openings quarter in edibles across our demand last unprofitable in the X% million mainly Valhalla XX.X% new driven million million by of the in by quarter and doubling a totaled our to compared Jersey QX last reductions performance driven mainly an in first

in partially the of last quarter was in decline New as compared by quarter offset improvement related Gross in margin channel costs shift mix for by first Maryland, year-over-year driven scale-up The XX.X% to Michigan. was first in XX.X% and year. the Jersey

quarter-over-quarter a X we Michigan, for achieved remained In we that margin our made New gross gross years second in gross state. of consecutive quarter. into the in adult On gross margin very strong levels Maryland. absolute Jersey, goal declined basis, margin While margin use in XX% also to improvements year-over-year

expenses last XX.X% quarter first of G&A first compared the of in excluding $XX.X XXXX, in revenue, million in quarter a $XX for first XX.X% to quarter the first G&A year. excluding of the compensation, of also stock-based compensation, percent compared to was the XXXX. as million quarter were stock-based

loss improvement was and driven a for compared Net the first was million while relatively expense in million loss last growth $XX.X the $XX.X by from net revenue quarter margin continuing The quarter first of gross of maintaining to G&A flat. operations year.

driven XXX basis representing adjusted as partially XXXX quarter in basis from year. XX.X% to of point a compared XX% G&A XX last was gross the grew The million, and year-over-year $XX.X of first quarter in EBITDA by margin million XX.X% offset points EBITDA continuing adjusted margin. expense $XX.X the leverage, year-over-year decline to First by improvement operations

in the the quarter of cash at the million in of of This was from Maryland of to $XX.X as to consecutive represented Free in positive last $XX.X were quarter our cash of $XX.X restricted $XX.X to quarter, first balance capacity last flow March as spending the compared quarter and quarter as continuing first from Turning first XXXX was compared was December flow to $XX.X including facility. in compared million seventh to our sheet Cash flow. $X.X million cash XX, year. Cash equivalents, XXXX. cash, of million million and XX operations operations. expansion CapEx flow $X million the year. million related primarily the

million $X.X in During we down the paid debt. quarter,

debt We million the this a process continue year. both through the refinance of of existing at work matures new to potential with competitive to $XXX end lenders that and

received have from various existing interest indications and We lenders structures. for new significant of

of cost on forward capital goal overarching the that updates lowest Our is look achieving to further We front. possible. providing

to quarter. Looking revenue of rates QX, expect into margin we first the and gross year-over-year growth similar to XX% XX% G&A with

quarterly look We year-over-year business next during sheet to work progress forward EBITDA anticipate to on XX% and we of our result, a our As growth adjusted sharing XX%. on call. our the balance continued

concludes operator now for to to turn it questions. like over our prepared I'd This remarks. the

from from [Operator comes Capital line Instructions] ATB first Your question Gomes Markets. Frederico the of

is First question on New Jersey.

your You wholesale. most mix to and the largest, mentioned there market, revenue continues shift it's profitable to

And just at curious to shift, impact margins? that more of how the wholesale have you in with level, growth So do terms that have your what continued there? much does capacity

I start, is a can couple Keith. of comments. this further Ziad have Fred, might and

So this been anticipating cycle now. for that been we've we've several seeing, quarters

wholesale. it's So X to an retail pressure that we as we where or knew ago, stores, been increase the on would the and year obviously and started would count benefit about quarters X a on dispensary put state offsetting our get

unfolding. happening. So been That's that's been

year we've initiatives realize. And much really, other along been past I'm were different cost that much every add we've thanks facility, a Throughout terms in about that or automation our continuing time And and we facility, so, gross yields, for all to amazed a time, improve which to we've of there. importantly of our more automation talked the the into that margins we stable. period have reductions relatively continuing preparing walk done our over through how able number to that's to stayed efficiencies of go which just and lot. I have

impact. helped the impact definitely There's offset that's the pricing. pricing course, a So is premium because, to at of all retail wholesale to an

quite pretty time significantly that's Now that store have that impact counts wholesale remained prices muted have down while the prices sort happened thing the the come steady. other over increased that as is the retail of have dynamic is

that's to to muted the Anything So of impact sort degree, of, mix Ziad? as to shift some well. that that, add

this. about all the the is look gross the I between it with skipping wholesale supply/demand the are do to agree I and wholesale the holding look in beyond cheaper stronger retail it margin revenue. most much right at and to of way EBITDA aspects that or retail. pricing will a Fred, add thing Jersey, and is I at easier talked because Keith, in or rent like only margin, of Yes, a revenue the is how the That's wholesale. not store is you lease accomplish labor the but model in revenue to exist X New because expensive Keith

you So an don't that when trade-off. you level, see at look EBITDA

market Pennsylvania, gaining you market. in strong It Perfect. growth. appears that And then that be wholesale would share in

So upside there market the in upside the do is what's environment know improving? that's how for a I there just you much curious been Pennsylvania? think the you? in challenging here is past. But And

Patient an in Pennsylvania had stable. we've stable in Yes. is for because we the environment. is are about stable. second, what of count is want agreeing state had to And market your that from a Thank in senators Pennsylvania sides you. ready I'll collectively, some Revenue question meetings. changes. is -- overall get representatives Pennsylvania that the legislative Pricing both I adult-use And the hearing share and most exciting But the environment a today, the we to launch. but is is as aisle industry, for us good flattish.

brand, the with a beginning it and really of we game Pennsylvania when this our combination the at we impact all has ground ground laid But real it's success goes recreational the and And variety for have capitalize in in will what So wholesale is see of our that that work team. we'll that the year the wholesale. hopefully battle year. caused the is on quality,

have add We we on add it's Jason. Pennsylvania. in several can we And rooms capacity capacity could would that We all just to that. still I in still the that brought significant still extra times our disclosed But -- there's in the many demand. states meet in before, we've is Pennsylvania to as of our mean, I canopy size quarter combined. other to equal the canopy all --

-- got we've be revenue currently facility realizing. recognizing starts, of rec putting once multiples the out So this it can is and

from Securities. next Clarus Your Noel Atkinson of from question the line comes

QX. Well done in

here. me for couple a Just

So that's positive this impact the do see you in terms what opening of coming of Marsh the store in potential there? month, White

about store. of Yes. No, was smallest our one we're this excited It store.

stores. We are -- moving

area. to high-traffic moving are a We

But store, combination the forecasting Maryland that things are what most about X of excited is are in the as I described for conservatively in We the is new it. we One the store. state.

our cultivation not have our size or doubling from accomplished and goal verticality we and started Second, our we to of our them opportunity we desire perspective. from then wholesale the in expansion verticality. output and facility that Because have a X, we of stores the closed on and July yet those close

half that second in really crank new us. harvest cause growth store all in, cylinders to first August, the for our together is So on trifecta year the come Maryland where the with of when in will the

Okay. Great.

mentioned Supply/demand market see What or or you by what remains still Jersey wholesale the sort do you strong. expecting Jersey of year? pricing of New overall of that just are in in expansion next, the Just still. over quite New terms rest competitors there the in you imbalances in production the

for accurate. pricing where years is -- or the X it's strong. Yes. The Wholesale this average believe still it state, and is holding ago, wholesale still it started exactly it's not,

We are keeping the our because new to commanding and much It's definitely the cultivators eye state. so is premium brands expansion. quality, a and our that We're that our the on in partnerships. slower coming are than of an price, that retail

to have equities, the which efficiency. day, the versus the patients customers the And to the brand. Jersey have supply and demand quality, will to the behind of us model starting perspective. a equilibrium, will a few the end online coming from declare what's start establishing I wholesale and New then in to demand the establishing cultivator the years from loyalty And establishing think new at the will stay will ago, continue and retail exceed store, brand residents, cultivation

New dynamic good the show pretty for data and the feel in Jersey, that us and quarter have we prove that we continues every with to us. So

then could process fast how Great. other last folks about maybe moving? And on rescheduling that. of days Jason, you it's We've bit and Okay. in finally, a the industry the over from couple some the little talk heard

any So helpful. would insight there be

Sure.

III, -- of the with obviously, it's I has few So am they goes certainly it rescheduling, on we next I news that confirmed think the it DEA seems OMB. I the step the and got White Schedule and process. And that concur the the -- the a a regulatory ago. step to weeks not expert, that next Office called office happens an that's mean is it soon. that, seems it's the really the Management pretty but like I write-up from approval hope getting of House And Budget. the and

So if hopeful on, and going they I'm have have it shock process with whole following and are the that House this a that been on been on shouldn't their be the the sides what's the desk. the White to end be I by year. But it a this if rule if and doesn't, process the change the in continue what could final of understand, enacted would progress House. White was there even from even dropped

In have you -- only me that and with happened if of know It's from relief. Noel, some would I'm SAFE just X type told just towards But perspective. would other is add, shocked X regulatory other we've terms X been excited like now industry I of multiple treated the paths has got it We years and ago, that -- been that ago. thing was this what's years I the Banking. or how

process. DEA in rescheduling of the got we've Now sort

Boies positive day oral what against XX And in A definitely Attorney the of terms we're U.S. case at -- in the forward to in arguments. of a May the the come Massachusetts case. we've development, the looking got couple agree hear our General. the weeks and Massachusetts, ago, David first of happens of was judge That case did the

the David rescheduling. forward certainly -- money is if it me back, just we excites would the also that think our we on rescheduling would the so David help Boies can to still And about But if David story. like issues fix it a to a back CSA speak. Substances whole should case essentially III, goal, Boies harder shot the legal what want another that. Boies ensure to to taxes Controlled It would Schedule happens, other might state -- things. still even case But or win have taxes. it the that seems whole operators get -- we and if lot in would not if doesn't it I then where a be in also, and And win cannabis it's different the case We be have a Act go would better illegal. back story it's banking going apply of

from next Capital question Instructions] Markets. of comes the [Operator Andrew line from Echelon Semple Your

on the results. Congrats QX

want mid-XXs a a and Do some production in First that just home in level of you gross you expecting had temporary And balance QX, XXXX? out I you gross comfortable margin well. above margins as think off bit Maryland a in issue you're in XX% XXXX. here, They point I margins. getting at that understand through the at to be on capacity in this cultivation play figure were year? you can investing in more state to again are of how

Thanks it's Yes. question. Keith. for Andrew, the

medium meaning the of first expect in mid-XXs. level range. -- results. We or to quarter, of we will happy do margin with was less So It line It XX% we more that term, we're here did kind get all, We guided. line near sort with what for of it with to to it the didn't in like get this year, in the in was we what expected. XX% that the be

quarter. going overall, So moving to term, XX% That our seeing we're XX-point-something the full XX.X%. XX%. But with Maryland short just use It our was a number other in at things In and year to definitely QX. in direction favorable adult clarify most XXXX, peaked that. in that was of in quarter

behind just we is for we have important quarter I'll XX%, of Michigan, remains Maryland improved and like in we about quarter-over-quarter, which consecutive and and in with an equation second we're my at New like Maryland earlier, the expect expansion have the that prepared the initiatives mentioned disruption the I improve that to Maryland us. did fuel gross of remarks, we That's last Jersey, in talked I very because part number of other Maryland, noted continue. quarter. continue we strong, that there. a expect margin to clarify to us. have doing

that's PA, not least, like but last it did but some what really in a then hugely some rooms there's that's because PA, not thing Wholesale's in additional up. and grow brought impact little a that. And to did Retail's have and costs costs really on, related in onetime alluded material, to talked. demand we And Pennsylvania. QX. onetime good to. as some we've we Jason related And effectively balanced supply up, bit just We stable. Demand's

has And Pennsylvania solid us. been so for

hyper finally, out, to our M&A. then and round on And everything we've back talking about to it been focus M&A

what of would we alluding to, then us done were these once some take about. mark us that get to asking that you So above is help really things can XX% we're the that

coming in level Jason, about I talking -- fifth some to we And of here. accomplished states. want I were here talking and Keith Andrew, the margin our earlier, add, X-year Ziad were and in of only X we U.S. our June anniversary about and reflecting that just growth our Yes, the entering

size and more. best next one only of us our perspective that phase our very will be double but in from that journey as to we the are of to improve the excited of efficiency We not also company growth about the and companies margin take

will and to in some year-over-year while X%. in revenue absolute the just mention adult by by perspective, from that and allow And by grew that gross OpEx grew to fixed we an July adding that use, want about we costs is and dollars launching have Maryland revenue that only that XX%, we I will of OpEx second talked leveraging that just reach level our those the on -- bringing level. both public as us EBITDA that a be margins, you company, and

helpful little be announcements wholesale Very forward And more lumpier a that. on segment. a bit ahead outlook that just great. looking for alluding the then pace just of also of be question the would final tends to of you're year It more color. That's progress. those and And to to, maybe the making a some

of with the your in cultivation QX just [ continues from ] it capacity. expecting a to you're in that balance wholesale Jersey? how terms new of New So are in larger of And How pace trend thoughts the builds what sounds Maryland the state for bump year? also like

those. accomplishing first why should one the ground step. and first team is we've creating entering points, great Wholesale Step job in started is new needs a really are using data delivering and my X on question. productive see for that shelf that successful, Andrew, And number really be the be both for that to a from pleased is to in our DNA, fantastic X that game accomplished. our and steps selling, Pennsylvania. showing in X, And distribution creating to on order, it there ago years to very I'm Yes, be opinion, we And wholesale main stores. a it's done be

becoming is those and second more when important. the The patient it and they coming customer buy step the product for and and a That customer believing patient in products. loyal this is back

we very happy are quality. you our And quality. happen, to that need with For

You that to that state. portfolio a attend segments different is brand need diverse, in the

very those of being has both You retain ahead the bringing and innovation excitement the acquire the I'm new need those ongoing industry pleased and on have, and that innovations in order the done what on ones that customers with you fronts. and market to to team

question Your Excelsior Regan the Mike Equities. from line next from of comes

sort seems Maryland in but come started. it's it adult-use before it seems to potentially closed forward potential noted, the acquisitions you start actually a versus if sort have on you've does Ohio, of terms what -- later? closer you that maybe thoughts How thought versus or sales your guess I moving process it's go? X a are I like before acquisitions June. of guess the as actually Ohio, -- In those target, lower price acquisitions sales how address to getting month in of that closing a

is for the question. Jason. Thanks Yes. This

faster. state the As mentioned think I as seems I moving -- Ohio mentioned script, we in in be the or to

mean rollout months or I we working we're in X done faster. before get X. X moving to we're Maryland the in urgency adult-use the July just deals that So X same with did on

in are it So we deals see change looking a a of And I of type would towards the it if the we being terms don't of by program the running that done. can missed to by get would do or the that as we our program Having or the materially necessarily the we're we deals we're that Ohio. to say as or starts. going start still weeks we're But do best time at hard months deal the signed that negotiating. couple

Got verticality? And to understand just of it stores that of in Is make also integrate opportunity as in vertical. revenue sort terms with opportunity. as integration more more of it. just those the is it's them to you a margins of Or is sort the well? margin expanding a -- of definitely the -- that Maryland then But the Great. more

the that will help will grow and be win and It's It's and both. and because our we able believe customers brand both wholesale It's of others, more our stores to with our margin against quality with will in our if of thesis and play. our verticality in that acquisition then both. retention revenue our of you us and channel. believe a But we if

I So but gross see as play. margin mainly, both, a it it's

[Operator Instructions] Eric of line Lauriers from Craig-Hallum. the comes Your Des next from question

me for here. M&A on First one

of Do more Ohio. on profitability And geographies, of have M&A those biggest an I also to targets portfolio levels analyzing you're brand see are value And are But of both potential you of front mind here. example, targets also map, when portfolio the just do speaking, kind kind obviously on open your how brands guess proprietary I wondering, specific important you understood for broadly I brand wondering, factor? this wide So fully that's coming more fronts have need, feel out? brands? there, together. is Just guess, built that you and and focus

and equity has own see very comes strong between it another and Ziad portfolio our few here. about direct One a Yes, does correlation examples a brand here. brand and brand, Gage example own and the partner A brand -- our M&A. Ohio. to When Gage in brand. Eric, brand from example We pull a Michigan around

will target has. brands our region, to in new brands be acquisition Kind states partnering even the to Ohio, Tree -- the and with successful we see new the at the that we beyond Gage, Midwest target So like adding that --

presence We doors my Another market. and Jersey a new it's to our were together. partnership Wana of ways, In leveraged or were an X. In and both new more in established where with a make and the open they when because gain X both this in Maryland. MSO case, and start We Wana New growing able market Wana. The brand to wholesale example majority equity of had a leverage was and share, the happened win Jersey New advantage first-mover that and the marriage than dual, brand business. X players our an both partnership equal customers, opposite mind, to it's the our patients and to perfect we brand our it's good relationship in is is when a real

we it's the mix customers and together strategy combination partners. to with by supported strategy brands adding And the sticking which right the that premium a right our our So a live the shelves have are to on of value the strategy, patients. and is offering a right and

are you of, that mean and you helpful. value. I kind I party. balance than you that premium value? with proprietary That's sort premium view towards of with your barbelling value you of Do feel mix of touched here brands the sticking guess, and -- And having that lean of trade-off more the value? side wondering on between you sort thing overall you side brands I happy how have premium guess third of higher it with than brands prefer Do on proprietary sort proprietary with the premium your Just versus kind of sort on this of the now? of strategy

levels by -- but the We learn Eric, the each that right. state, basket from customer loyal by and at the versus we understand We it's learn at learn in from to sure that super it's urban. super, we segment, pretend look versus state Yes, behavior. make super different loyal. at rural the and We versus look and the we what loyal don't area, wants we from size. the we the we And it's segment data it have it average

all we of what's flowers our for take higher brands more learning. specialty we quality deliver that for and premium for we us. So our value ever yes, is and right And brands that do are But convinced mixture to than skew continue premium that us.

out And consistent along we're But lots also don't inconsistent. value the there's more that to the valued to of lot best not largely Eric, package is when on obviously, lot we here. thing because through, be they're I bag is talking that there the -- possibly quality could they brands care this We're it's that the can. bigger product be would of also the way things that because value, goal sizes, to about add to it's is consistent enough allowed are -- a way is that it's our what even a put that. Jason. value are we're of They SKUs end. in are that The just only pass got that in to talking like all -- about the That's

great Yes. same Those that consistent are with in quality. repetitive facilities indoor That's produced a the point, value being are Jason. brands

about a seem or do and Those into to that's we these some -- we it stores. states, relates Maryland footprint of new it's your the to retail focused to of retail like with right. in want there being the one Right, similar Eric, Ohio and of with perspective of to like that And open ones brands we're rec. years places I from at. be we're in, or in just, operators as program stores like question like best right, of X. M&A, for going say if to do even footprint at in day that about And X that did as for would I highly feel the years say, on looking our X are retail looking the we're the X start back least also and or sort X weighs were large what the X what if more share, to, at that be day other we stepping

There no the turn continue. call further I to now will time. back questions Instructions] Please are at this Mr. [Operator Wild.

today. you of We can't much our news wait in call. on Sure. some so then. Thank Thank the next everybody dialing to next share And now quarterly news you to our quarter exciting much. in between so for hopefully, have and we'll

you Ladies participation. your and call. concludes Thank today's gentlemen, conference this for

disconnect. now may You