TerrAscend (TSNDF) 8 Aug 242024 Q2 Earnings call transcript

Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I would like to welcome everyone to TerrAscend's Second Quarter 2024 Financial Results Conference Call.

Joining us for today's call is Jason Wild, Executive Chairman; and 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 third quarter of 2024 and estimates and assumptions relating thereto and the company's expectations regarding its new market opportunities such as Ohio, the likelihood and benefits of the company's tax refund claims for past years, the expectations regarding regulatory reform and the potential benefits thereof. 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 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

present the measures of and is during today's the GAAP on Securities which heading release are these today's measures. statements. XX-K information Exchange included Risk to no non-GAAP in obligation and SEC appears and regarding Additional Also, company in call, update time, SEC quarterly forward-looking earnings Form the and both these from XX-Q www.terrascend.com. we the or that for on reconciliation SEDAR+ non-GAAP makes Form you report to Investor our The financial revise the on find of press the statements filed or SEC go Please which GAAP under website in XX, the June company's to speak like the A I with the date, and Mr. of quarter filings the and at factors or Commission company's time website on on call at other with available Factors undertake websites. company's and will would this Jason any Wild. XXXX, Relations SEDAR+ company the on www.sec.gov now can introduce ended to ahead. as the only

XXXX. we of I are cash flow. joining for thus reported you yet free revenue The as and pleased far adjusted year-over-year operating thank growth and net and accomplishments quarter and EBITDA as positive team everyone, evening, Good another with our Financially, well in us.

For year-over-year. EBITDA million, an continuing of X.X% net adjusted XX.X% increase totaled revenue and $XX.X from an totaled the $XX.X of year-over-year, increase operations million, quarter,

positive last of million continuing totaling consecutive of period our operations to quarter marks XXXX cash Our $XX.X year. flow million eighth quarter same second $X.X the compared from for

free positive totaling generated quarter also flow cash the for million. We $XX.X

as used later our being existing to The and down pay which in balance matures expansion loan this to federal pleased TerrAscend a our well The transactions contains M&A are been revenue loan for the TerrAscend. focused prepayment factors. a support higher participated plans. on of million addition I'd debt, reform of recently are worked a competitive and interest to August that driving in In progress no future senior This thank upon based XXXX syndicate for Focus this in rate lender profitability, on has secured are any matures as geographic penalties. on refinancing on other optionality rate. carried diligently capitalize our Growth who and have debt through trust priority. proceeds or provides process on of to new slightly their of $XXX closed the lenders lead loan also for improvement and like to a to We substantial available the macroeconomic of this and blended proceeds year in

XXXX. loan I'm our growth and working enjoyed company was to deal until with as will strategy. debt We capital the of company this on an us are debt and milestone we no optionality to refinancing that team for to ongoing opportunities. I side the additional execute Completing for now important maturing material on provides financial structure. thrilled have together flexibility the support on with the have the this the late other in working also already transaction this closely Growth participate and evaluate the both my line equity Focus elected with in

TerrAscend's us. we and for put to valuations. a focused are the best quarters, a this that differentiated geographies believe that in possible transformational highlighted at invest On have pursuing. deals approach greenfield opportunities our us is position to the For compared Midwest priority assets has the attractive peers and we expansion in We several actively subject,

discussed begins in state to Ohio openly use. the interest adult our have implement as We

focused to would on larger expect the to the Tier we We to in X Canopy on we term. of operators multiple our square to When near allow the goal are least XXX,XXX market one any up to active and Ohio discussions opportunities us which with licenses, up dispensaries. Today, leader. X and feet in at operate is close in market, be in a enter of are

Ohio, headset, expect profitable no for in federal With Midwest, were comment leverage the make with to and to perspective, different. regarding than us new rescheduling us a our able we or to a see be enabling infrastructure Our Michigan for was existing XX-day any more SG&A the reform. public de-scheduling. rather to period basis. combined From cannabis we over stand-alone those DEA's Michigan of XX expectations XX% favor from the continue are on to progress states deadline Ohio comments proposed rescheduling and According soon for July data in of rule. the

While It of as research. by this event access the and to TerrAscend, cannabis would entire unlock a reschedule costs with is capital as the Rescheduling would unfair on cannabis be elimination provide to still the tax II greater result Schedule also subject reduce and believe well for cannabis companies patients. and treatment. that restrictions and consumers punitive in landmark industry DEA, medical to we would final ruling cannabis

believes and case supporter as and being Congress, companies monitoring is by in regulates the were Supreme for led the of claims Court the reasons Boies are Boies. taken business a treated While Court are bottom process the like have we the the cannabis is Substances encouraged we to Supreme pleased will agree. David be of want David case other justices that plaintiffs reexamination we in District the and persuasive every the expected, that by The taken U.S., U.S. the and leadership Court proud that acknowledged next year. the to the think seek pursue by Supreme be The the case stated there the marijuana rescheduling Controlled just as progressing especially the a of heard foundational line against can actions way and Court. being can attention a Act General Attorney their role

the far surrounding accomplished. what federal business have Given proud will what continue of to uncertainty reform, XXXX, from can controlling a Thus on I'm we perspective, focus control. we we in

in We with and have of expansion right deal and financial team, flexibility, The its still along development. assets, very early flow opportunities. possible strong the stages cash is the cannabis the industry greenfield transformational high-performing

of anniversary U.S. This quarter marks the in our fifth operating

then be and a XX% reporting almost positive with would $XX to have said I million of me that flow, quarter been you revenue, cash we would pleased. If gross margins

stock you. question positioned been am me that is, when was price I today than XX% pre would today why much it have very be disappointed. so than tell get I is it I years and it If would the I down in was company ago, stock is would the The revenue have often that from better X if the so sure was. you then very lower not believed U.S., the I'm disappointed

voting stated, and cannabis much boot "In machine. during is was weighing lot there the into voting short weighing. of XXXX As market of a same famously run, times XXXX machine." a Benjamin investor the a less it's long But Clearly, run, going Graham in the the on

over Jeff price the and company years, his reflecting to in For weighed XX% while stock wants be "We decrease term, will it's the to been on a last wrote the year shareholders X we opposite. that the be. XXXX. Bezos Amazon's letter in in are long

and we our and concept In of we the Over companies remind TerrAscend heads This heavier have our a long principle meantime, that ourselves to guiding often. term, all build has at working down the are. been company." a heavier

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

Thank and Jason, hello, you, everyone.

far tremendous in we have Jason XXXX. a As accomplished mentioned, thus amount

by me the with in accomplished state X share brands performed state first market vapes, in across in top with concentrates. New thrilled #X XXXX. our state share the are how quarter TerrAscend the was top that holding Let BDSA, the of position edibles to markets. spot breadth Starting positions throughout all with held for Jersey, half key according categories, we our we and This flower,

returned has expanded mix wholesale to the has revenue share sequential the sequentially been quarters. several towards and retail. And quarters. year, shifted expectations, wholesale we year-over-year, for This the revenue still the #X while QX. down versus the over XXX% increased come was for online below it our growth maintained retailers and in has market quarter, our retail, At in past second more X the As have time last the and trend first position over internal market we

speaks XX within New in the declines our declined stores. dissipated. XX experience. have have our X by the background, that As miles and of best-in-class customers X stores over quarters retail sales opening brands quality to for Apothecarium's of now our relationship This our the Jersey, These retail with of driven our products, the consecutive

EBITDA strong our margins, and New We to product low-cost have gross maintained yields, largely performance of margins high our and brands, in the Jersey, cash profit due quality flow cultivation structure.

X take explore legislation in expand to opportunities to additional retail increase to social qualifying continue margins existing would profitability. further safe operators up and enables equity This We stakes dispensaries. that to our under footprint

Turning to wholesale sequentially. remained stable and revenue Maryland. Retail

benefit increased and have quarter, flower in Hagerstown the this we completed weeks. facility of capacity rooms expansion During additional recent the at to our started from

stores this of well expect space. offers going extended conveniently larger we X relocated growth gross in expansion, and enabling as improvements early Nottingham, June, as drive-through margin continued result wholesale of we a our further dispensaries, Maryland verticality new floor As store increased In thereby a our location and in in located more one that a to forward.

As share usual of not X was retail of business the locations, In with quarter in highest have one dispensary XXXX. performing the Pennsylvania, track retail market while we it of as Maryland, BDSA footprints our does retail in the believe we second state. during today,

have Josh of Wana Valhalla that was driven revenue expansion revenue optimistic year-over-year, his cannabis into an we While Pennsylvania our performance our expedited support XXXX. use with category adult-use adult remain doubled will for Pennsylvania strong edibles wholesale formally XXXX. legend We endorsed by this in program retail January value-oriented and the year, and approve brands. Earlier brand Governor by stable, X, Shapiro,

is we according million, to $X.X be from BDSA. times, would significant believe state to Pennsylvania expected billion a $X With of grow have XXXX company. a population adult-use a the to $XX market billion-plus medical-only the lever mentioned we for many by a As state growth

lastly, This us are needed to As to the running our planning we approximate on And facility more in we the cultivation bring our state. operational has clarity additional largest preparing we Once improving additional door outputs online, solid use and driving main the to get the focus harvest. the Michigan, ground in of on the we to at includes and to rooms time expand. a to from give one efficiency capacity have lead hit gross cultivation launch XXXX foundation state. adult timing, on approach been X-month margin turn to establish in which when expect

currently gross including state, result, this in consecutive margins third the a Detroit our recent As XX% quarter. have second XX location. locations for of surpassed the We opening

to operating states scale on in level to are expect will opportunity In by as Michigan, state such focusing effectively the offer more neighboring footprint operational we new regionally. our our our meantime, We by running to so optimizing entering operating Midwest expenses Michigan us Doing leverage expenses. the the Ohio.

best with nation's continue second Michigan To as I our remains I our opportunities on market important to refinancing, to our recent go $X at deeper growth future am largest in about financial the Going flexibility operators includes the annual market have extremely plan, excited us of state. to for an attractive ever forward, in-state our billion execute in acquisitions cannabis sales. which and With multiples. accretive improved summarize, evaluate as over been. as have we we

through In in markets. one have and a and state. bringing In our we we capacity, going our in use with adult of across markets retail at in XXXX. expect Pennsylvania, in the forward the country. position New attractive Maryland, to new Jersey, to #X lot are We penetration look hold cultivation on our in the of wholesale we most high-performing deeper the core brands locations And

Finally, to opportunities we expand like Ohio. have many new into states greenfield

I update. would to We to also continue turn financial transactions. like to the call to a other actively transformative Keith now provide over explore

stock-based This reference brands; second, that for new both wholesale going by that with to everyone. demand for flower of second driven and quarter a in today on the of the filed facility third, quarter in compared the $XX.X Thanks, by Maryland of year-over-year. openings for first, all a Edibles totaled Ziad. Legend of brands increased growth X quarter of $XX.X over will revenue was Valhalla in million, $XX.X in increase compared our have I'll wholesale XXXX revenue million store U.S. representing the than revenue and manufacturing performance our of increase doubling evening, by Pennsylvania, to results across to $XX.X million Michigan XXXX, business a Sequentially, Michigan. Net in already the the mainly in X.X% new year-over-year, of million driven improved gross was mainly $XX.X the today million $XX.X from expenses Note margin Jersey stated in million $XX.X expansion was for an the last partially second be Wholesale and our compression and as QX New compared decline the in compared XX.X% a additional unprofitable XXXX, for the compensation, the both second factors: of doubling more and last supply our business Retail of G&A XXXX. in first been to million Maryland. XX.X% and excluding by compared New cultivation expansion profit Jersey; of quarter XX% stock-based XX.X% QX to our of our time Hagerstown. compared were quarter of second in for channel enabled SEDAR+ driven by dollars. SEC an points, results New and both Michigan, The Gross are mix for I Good quarter second growth second in was X.X% quarters. of by revenue the year. in the improvements Maryland price XX second quarter was by that Jersey, percent and quarter and year-over-year administrative in X the offset in Maryland. basis by also for reductions Jersey driven retail of offset driven revenue openings General of and New The decrease excluding second in million XX.X% compensation, XXXX, door shift revenue of XXXX. $XX.X grew was sequentially, margin in XXXX year. representing quarter to in quarter margin in XXXX

quarter of expense includes reversal an $X.X of receivable. related million debt of bad to year The accounts this a second settlement a

bad revenue this SG&A Excluding reversal, net still X.X%. were down materially year-over-year, debt grew expenses while

by partially basis expenses. million a continuing second XXX last XX% the XXXX gross Net XX.X% EBITDA XX.X% compared the amortization. to while managing level, year-over-year grew EBITDA stock-based We quarter in SG&A of margin. a at from decline continue the for was $X.X near adjusted the to points in improvement G&A growth representing compared depreciation operations XX.X% leverage expense focus offset The operations margin $XX.X year-over-year driven second compensation The reducing net to for expense was improvement of second of G&A XXXX continuing and to by gross or XXXX. million on quarter and profit and driven realizing excluding and and $XX.X by the quarter loss million, leverage, quarter loss year. million the margin of of from second margin a of in was $XX.X revenue Adjusted

and and by continuing compared the the million as represented cash operations as of flow and Turning the QX to the to were continuing cash eighth provided for end to cash as of of quarter This the balance end Net of in quarter positive last restricted consecutive equivalents, end second of operations. second year. of flow. XXXX XXXX. of million quarter was including sheet million from our $XX.X Cash $XX.X million of cash, QX of $XX.X $XX.X compared million the cash $X.X

an million second last at our expansion refund CapEx which compared flow capacity was for related completion in with the to that IRS. Free Hagerstown, project, an The included Maryland second $XXX,XXX second spending second cash quarter filed quarter, $X.X of of output return the related the of the we the $X.X doubled million million in to of was federal quarter amended site. $XX.X negative quarter tax year. XXXX mainly to the XXXX

a they was to we million made this closed of are and very on we partners. being have senior used including loan, and secured New on to existing During X, this non-dilutive the principal On that the the lenders August support debt like Jersey on our pay of debt XX.XX% trust syndicate, in gross distributions no payments quarter, August $X.X with of off thank lead to $X.X year. The for term a XXXX of proceeds loan I and rate Focused with penalties. later additional Wild, of same growth and duration our we also bearing we with loan partnership net the them of coupon this maturing this interest are the a million established would term in have with $XXX prepayment for support. X-year minority us. happy million, and lender given higher trust maturing that Jason the proceeds

As execute a reclassification closing our and XXXX. turning and maturing have net a have closing late of the obligations from positive. going has growth to capital to on enabled transaction This of resulted liability, this debt of financial we remove resulted us current in flexibility in we balance long-term to our has sheet from the resources filings. stronger our The negative material financial concern this our deal, position of result the plans, until also position working disclosure to from which the debt no

expect with represents P&L believe of EBITDA adjusted to be sequentially. increasing In results to quarter period slightly our flat Looking year-over-year. strong the summary, and across QX, another revenue we we down into second

operations. addition, eighth delivered our positive flow we continuing cash of from In quarter consecutive

with sharing our during progress action on execute on our to the and further provides back optionality growth to flexibility with our look forward the business the call. for plans. the took next like us we our quarterly to We operator financial over now I'd to call to end, turn quarter Following continue questions. which refinancing,

and gentlemen, you. Markets. one. first question begin comes we from Federico. Gomez, Frederico session the now will question-and-answer Capital Thank Ladies ATB Your Instructions] [Operator

is New question Jersey. on First

the half just. or time the first you you of were I mentioned we there #X that You mentioned I'm market reached last reported, third in share you second think 'XX. I curious, think

it market any So level, market maybe that are well. is competitive of MSOs the And players an as environment the or considering in important losing? you gaining at wholesale there other other are comments that in terms share for many just

I'll I think course, part, elaborate Fred, this the not Ziad first in the improved and is jump BDSA, whole of us. for of market market, conditions. will on release, the methodology their then take reads they the to for their market more Keith. recent in

a spoke And so which the directly for actually time. CEO been And them, in result, accurate to as their to of #X accuracy. XX% we fact, we've confirm methodology, according BDSA some more is quite with

great. And been result. that's so the that's And

data their year, recasting back so all we've beginning the along. through And the been of #X

dynamic From explained is stores, that when around of the stores that we XXX-plus stores were in Fred, to we around miles this had retail pressured. our Ziad. the market, will our as went that our XX we Within remarks, XX up of be stores from stores. we've knew XXX prepared

and weather trade that new the storm stores. we right So have New to areas were that have offer and in a be bombarded we quality, new the growth. back the And you we if able in products if you right the to we go in innovate service, heavily, you XX of products continue few launched right brand Jersey, knew our and launch to with excess if will

mentioned, being back have And into same the trend. seeing retail quarter, to So for I first business looking we're the gone positive. has QX, our as

it for improve of us and As to QX, share. in Jersey matter we continue expect a fact, to gain New

the retail and very excited, that stabilized those in pleased who wholesale we buying of we're will happy. So stores seeing with New we And increasing. shift continue through buying it continue that's the really why retail, improvement. the business channel now to consumer the and performance, our we're is is We're to we're independent from seeing We're very besides Jersey watch wholesale. momentum and retails, very we gaining same wholesale see that

matter the we decision made fact, we the a have the of to we after our after as extend decision Boonton retail, Now of we facility. made turnaround have and stabilization saw saw the

project, the that starting we're come and at beginning will online of it So XXXX.

add for of market And the if there we're position, of could of just top it quality the in X I just terms depth us, in positions. the

edibles, happy Ziad vapes, really -- in -- as think had that all formats across across the result. I his described that's concentrates, across remarks prepared about so flower, we're

what I'm in June. Yes. about We team done. quarter And with the what has most proud the exited the

Our in by X%. Jersey, grew June market by numbers in business X% where New our the June grew

QX. confident continues, momentum we're and here in seeing the that's about what So we're why

remind Perfect. how you And guess could if the the far? still then amount refunds? Have second more waiting are any the reminder expecting so there? for are refund. question here, tax had us just you denied on Or much I just you we of

Sure.

So refunds $XX we're that feel have million that received total we we of X owed. of that a We XX. of

been still denied. of the Nothing has XX receipt remains. there's that No million. $X news other than our further So

next Noel Clarus from comes Your question Securities. Atkinson,

nice the to hit refinancing, great. share me. #X A for congrats of that's market loan on you see couple quick New and ones in Jersey It's

facility. I call, is what were we that think going were able to and to that? Just talking the the existing CapEx to the to that associated market played the be? you expand be the Because decided mentioned last that on support What enough you thought Boonton into you've with yields about

would in expansion had XX%, X are that I back know But XXXX retail the where for where will stores a And the new We then up will good yield called and remember, supply. by we our is X we about Jersey. open. geography we've say, long in of And was how we make the wholesale it talked and New our near We've if we will pressured, as be didn't Phase it. thesis ago. on we yield or expansion. Then quarters improvement you improved X Yes. massive budgeted for

we We January, we store, watch We basket for the watch each We price traffic. basket. watch since the store size. watch watch we basket. by items the per watch as Now

need is us We have continuing increase stores in back to high X-month improve to to us The us encouraging stabilization to that as XX, the that of come retail growth. XX us have that service years. capacity and and that the for what combination have the our back confidence that the order gone and extra to going we business data wholesale give lotted and X make over helped that additional decision to next online accounts XX, will X growth

Okay. And then just how secondly, the available $XXX expenses million facility, you all facility? you have and think after acquisitions do that fees for that, from and much

this giving not The million. course, million. Yes. exact the they're, paid in forth part We're the Noel, but is so Keith. fees of we are $XXX loans closing as total $XXX and off amount, about our that of

interest of of the in yes, structures some lot on low over minimal the different a towards we're in dollars M&A sheet on M&A. on also the And front, million as balance left the jump But we're several sheet notes that's cash you Jason. can balance some M&A proceeds a of mostly well. the front, from in, go definitely discussion variety the extra sellers' to loan. there's and at it's all on the terms have discussions So the of But cash, we if that earn-outs cash maybe having, around want but

Okay. Jason, know. And this for is I then don't maybe

there be of date to use hoped you efforts for your had ahead terms the Ohio, start get of In sales. into adult to so folks

in has have as went date as come is you approached, that's the talking that, as and deal about were changing this at of week Ohio that you before? sort attractive seen all? Or still pricing it Now

are say before. the they the that discussions the were No, and pricing I same would exactly

we moved I be do the speeding gear to hope said early Ohio and the first quicker in market market. the in we of we quarter, meaning expected think of Ohio we the of in the last along to at I And we couple were ourselves days, market we think and to them getting and where than like to up would speed X the X adult months we program. will the Ohio we confident say, this being in the even the point, say in months that And use. further be more feel first, market are of to that X

Your Lauriers, next question comes Group. Craig-Hallum from Eric Capital Des

me, First broad one from question. of M&A kind a just

obviously So you sizes. have various acquisitions, done guys several

just now comments previous transformational I'm are you've some in presumably wondering places of what learnings looking business, taken type you As on at larger the consideration. like structuring then of M&A Ohio few and on those the that's done, smaller the you've away some acquisitions sort of transactions of some are from bolt-on a deals. overall, whether

Just any what influenced and learned on broad you've of sort comments what sort looking of that's kind of and how now you're at in M&A.

looking were are I'll in these say of and potential the earlier terms would it's and some size absolutely. we talking jump I businesses free the that at, transformational the start of funny. maybe just this that themselves of off to in and Ziad the would we're mean profitability then Yes, they in. I yes, drive. conversation today, revenues of like Ohio deals

talk brought both. at sort more -- multiple transformational about you I looking of transformational. of a be So would of as though versus I'm consider sort sort in that We're deal single-state assets consider I would even would But assuming I would what states. those

all the could of high ones we're Ohio. bring this are Some of Ohio on we're bring running mentioned in one I single And that that parallel. we're But priority in think other in the we states close on states question, as pretty our multiple in list. of previous or these

learning as add -- in want we portfolio, our I we the Maryland. look, we have have what as Eric, far Yes, have have Michigan, California, to New we Jersey,

Pennsylvania. have We

medical. those are of states We only -- have some

states Some we the creation. those flip of

Some of others. those advanced than states are more

we it as throughout bigger, whether whether state ourselves scenario the any biggest are scenario, are And earn-out acquiring, most one we years the learnings. the months surprises paid XX business, it's build conservative one the And whether learning, through and and play its against Maryland, the applied most That's it's aggressive the an that that protect it are learned for we've business of in a we dividends. is what beyond. and SSO or biggest So the we and small that of it's that we earn-outs long-term in earn-outs case and

because had it. of a from to think couple add perspective. just I'll parts sort your I That's the question deal of

go we're other which into the have, operational these lot. And a we've and because year The to go that was working ready integrate that's on I'd learned And would we if more and acquiring. what team as say, the playbook the to we anyone and I you're integration plugged last deals new learnings ready when painful are say on. integrated really it's a it deals did ready to knows, robust and seamless we not we're what integration perspective, with Maryland, so pretty you're in

a last Maryland, it boost in running with big our as certainly a that's discussed And bringing margins. regionally Right. to and that was we year benefit

where have. would our that I scale to of of from that But and we profitability good admirable margins is some higher perspective. the We feel happens get size describe margin be One what and the they think things got we materially much relative to at as that competitors. we when this about point we've what could bigger a

importance the good adding Keith, integration. the point on So of to

additional hope I I think there's Maryland. on That's some appreciate I on you Pennsylvania. on expanding there all this, I but that some didn't turning know in very had helpful. or color. comments comments mishear rooms I

to dynamics? then on what Or turning kind in of would wrong So confidence helpful. that what gives there. additional first, just competitive Just additional supply? ability market's around But you gives you Pennsylvania could me any or of the correct kind those rooms, on you absorb comments confidence I if be guess, comment I'm

retail data in Eric. Thanks, us seeing and is the wholesale. we What are gives both Yes. confidence that

turned currently has the our have our in retail on helped store. us to our per the in solid state continue and while wholesale flower stores have above We state and double that Pennsylvania, average average volume X room performance we to to stores, continue in

lead X-month rules expect from you will have news we the in regulators when to XXXX, very X, We carefully X, turn the are that because can Pennsylvania before on [indiscernible]. Pennsylvania turn harvest. X watching in you we went on expect here, the remaining months that around next the -- X And

and we -- the current at add So of attention our to our potentially the fleet in to encouraging wholesale give performance wholesale store, and launch of of business, those retail Pennsylvania is all have the also us factors going inventory confidence products the of this we retail deeper our growth, stores look but on our new the turn so. what's and stores, combination us X to do position the to as

in on PA just and jump in turn I that across board was us all inventory the is right which of want on rooms. those our Ziad the fact, has in I our to the enabled it inventory going to very healthy And PA, as and at but in And especially position. mentioned position end, build to in states,

the of all the the We've we've work great So said that our intentionally overcorrecting team of years, especially to had down inventory did sales with products. a through Ziad work through of the in levels couple levels inventory that sort worked a and life. through over that edibles job like long concentrates distillate to last have of

And need turn seeing. so here on rooms not that to a demand to really to We turning bet new on on rooms. continue we're satisfy additional we're taking the

Your next question Matt Bottomley, Canaccord. comes from

I just more get a little to color. wanted

any can $XX since there's sort other I'm to statewide a may there and good changed in with million basis, some then. give You had some for just on to and on Jersey granularity gave have store QX, But closer respect of openings. come kind your macro the quarter. you commentary just any standing retail gone level? New of where at a the guided that of if headwinds given you particularly What And maybe just sort with market-by-market pressures curious new of with

Ziad. is This Yes.

Jersey that -- came have So shortfall the the we comefa New from in so wholesale. miss

First decided you of we can are we and often choppiness. distribution mentioned team in confident in how the sell, we the all, successful, in wholesale that's you talked quarter-over-quarter #X the we Overall, In need for points, then those once brand. ground and exited the I to be But nature relationship the We game. mix confidence here, the what's for year-over-year. orders that's need at are wholesale the the by to general, need third our our we to grew We've demand. with we trained And reiterate, growth looking the continue But the that quarter we there, expectations it's need Again, once you and more the that demand wholesale. why XXX% the need be to that the to fulfill internally, in to June. grow. we quality, given sell what's see also occupy we the We're that the reason mentioned state. continue back products, causing wholesale that XXXX, were brand, us we shelf capacity. velocity choppy in we We we our of will is of our the sell-through and quarter-over-quarter. quarter, and nature our going the higher. will But

were New expectations our Jersey higher again, we So than wholesale. landed in where

it. on commentary then your the Got it. second just forward-looking QX. And Appreciate for just one,

the a muted the right on So think sort good sector guys of the that at you a of of job over done know profitability focusing a more. I past a MSOs growth theme lot is in have and bit And are year. now I

to is to of tailwinds of an basis? might certain be of had any flat headwinds might respect for track. to of in Just expecting with if on get offsetting guidance takes that a kind and wholesale less market-by-market rebound So us idea Jersey within mentioned to trying going way like homogeneous that everything a markets you there in New be sort puts is you're

take are can that. usual. I there Keith, it's There are takes Matt, puts Yes. and as

QX. continued a the there like wholesale. in said, Dead did Jersey the definitely we rebound We New like guidance. Jersey on in expect said, growth growth in being we cautious bit We're little our So New side, retail in positive

grow can retail flattish, anything, that assuming continue we further is growth as forecast. in in we just wholesale talked, there the healthy as decline wholesale to retail maybe and again, sort Maryland. if more in and in a Jersey as beat like to offsets New of in that of PA remain So sort retail, growth we're formula, but a bit stable little

We there, not growth. Maryland our and stable, the or takes. expansion less Maryland portfolio of expect in some the puts some more line distribution mentioned, but capacity relatively there we product are expect We've definitely breadth and and growth retail those to millions, we're finished wholesale. remains building and the grow and as

Your Instructions] question [Operator next comes from Andrew Financial. Echelon Semple,

about maybe want ask what quantify be to able of First you costs, perhaps Would just all, SG&A some I the teams. combining some to to by just regional management potential streamline save you're we quarters and potential see the to when cost the P&L? into to there timing kind kind of in the roll operating synergies of ahead expect looking would of that

sure just Andrew, in the we that. complete I a in of we about talk talk question about cost see level that's if we first an M&A, in to I that, want some Michigan a this that, it is make when synergy, your deal take potential Keith. And because like we across we deal like context understand Ohio. infrastructure existing leveraging our as Ohio, where example. state can

thought. or I the But the And we actually captured to know it's exactly not. I how that's hard say question close deal. correctly would until be don't if So your that

if Maybe could fair. re-ask I way. different it That's a

XX% revenue. SG&A about XX% targeting you're think of being I

if to on closing get So find ways target to you you is could you able dependent do those deal, Or you a to weren't deals? close that think levels? other

Okay. got I it.

front, for that -- we it's on almost like yes, continue us. So exercise an ongoing

of in adjust model and stone, of flex we in continue yet and sure retail adapt being labor up we're to we're conditions existing exercise right turning fact, every the organization-wide just making making state over our needed. to in responsible, every middle So sure as another down and

to the maintain case, we in measure that that's back slightly it. the we or plan the get above in because we're so way this And how get to to XX% XX% level

that. the color that's So behind

Yes.

dependent would call a if So us XX%. it or Ohio large transformative below what us I we bolt-on able to help should be in nice not deal acquisition got drive done,

more Understood. in into But M&A of that it held take for cash discussions you at in prior, is privately a we're how too terms equity understand years one when consideration. being consideration, maybe But discussing are In to felt level, appetite the just of I high potential what are transactions. base can't terms probably That's there evolving. targets helpful. the some here. especially of interested we with And you're catalysts a of those accepting fair details more seeing and M&A with then you much this. targets, targets have willing growing of get kind in

been stock I there's of we cash thing our actually I a is stock interest to currency. targets I of Yes, more definitely component we're The when taking have notes. interested stock that. it's a ago. talking are as in of year would interesting. a sellers' large as Yes, sort absolutely. or I'll a an talking earn certainly fighting about, them, mean these using less say, of in little like mean our out we're think deal as or versus take that cash for

years to there. up overall can in and terms what X continue to and going stock pointing them, to next valuation does doing whatever balance it to we the that we business, do of well have transaction. stock you're as out this a if So build as we're is the think end we're happening, our They this deal is over really whole the see upside trying X/X hey, a of

ago, most of our more bottom sparingly stock the using So targets than they line, our on did negotiations. it we're but year so in a

Your next question Equities. Excelsior Regan comes from Mike

talked of terms in margin for In the the XX% Quick year. guidance. just you past, sort the XX% gross to staying of about

context sort expectation? still So percent slightly the within reasonable the a down, is flattish of of of sort third quarter to that

for said how But that's my to we're gross simple language that on for QX. Mike, to remarks. We I the it you, keep XX% and prepared expect depending we quarter, range, our in in that margins by try it just about to guidance is. to in parse our yes, thinking XX% remain what

it. Got

I Ohio thoughts trends Michigan Okay. have but And of you question. couple on of couple seen a been little Ohio adult know the a use? a any days, seen any or in on second it's you have then the with stores the border first since days early of

Yes, yet, too nothing Mike. early. still to share It's

a proximity close we side. it's in we're lot on exciting not potential our Michigan the to much an a Ohio, eye of keeping friends lot a happening -- they're see eye what's to. of that on Ohio yet. have not a very have are And in close not conversations, stores -- But talking families with We Ohio, but and on

Did revenue impact one And guys I financial if that? from cost then more of sort closed any question. And the see California impact or of stores? savings that there any is one or Great. just you so,

super to store very, Mike, negotiated expire. negligible. but store waiting it, very, Yes, small our baby a for It's store, within super way We lease a a We're that of out it's was the very negligible. partnership.

Instructions] [Operator Seaport. Your Sonny Randhawa, next from you. comes question Thank

for I housekeeping a debt. revenue? of bad was Where captured income bit in a in issue. little an adjustment that Was There Just, guess, that was the statement?

about out and captured. into bad we you where reversal expenses. came was originally, however added was into expense it No, want back in operating it EBITDA, to operating It a or reversed subtracted think And that's debt expenses. it adjusted The was then it.

Okay.

million? expenses were operating $X So

but not understated Yes, $X -- by lower by understated, million.

the Okay. net just refinancing. then proceeds, What proceeds net update our I QX. we're for just sheet balance Perfect. of And trying to, guess, with just the were

missed we dollars net the et after exact before. cetera. but we the it's loans But it maybe several Sorry, million number, the pay didn't costs, off that proceeds are you plus give maturing closing

in the be that'll guess I release, next Okay. right?

question is this we're want just to back to make I Sonny, Ziad. OpEx clear. the sure go to Yes,

OpEx million. to were QX $XX.X from million Our $XX.X $XXX,XXX to QX down between underlying

That's reported true because than EBITDA EBITDA adjusted by That's why number. not higher GAAP the the the that's reversal. affected that, adjusted the number GAAP the was why EBITDA it out. and That's bad lower number we debt capture how was

I will closing Jason now for Wild turn remarks. back to it

for call. you look We quarter's to joining months. in a us talking to for everybody, few forward you, thank Well, this

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