Ayr Wellness (AYRWF)

Jonathan Sandelman President & Chief Executive Officer
Jason Griffith Co-Chief Operating Officer
Brad Asher Chief Financial Officer
Jennifer Drake Co-Chief Operating Officer
Owen Bennett Jefferies
Matthew McGinley Needham & Company
Russell Stanley Beacon Securities
Matt Bottomley Canaccord Genuity
Andrew Semple Echelon Capital Markets
Scott Fortune ROTH Capital Partners
Howard Penney Hedgeye
Call transcript
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Welcome to the Ayr Wellness Third Quarter 2021 Earnings Call.

Joining us today are Ayr's CEO, Jonathan Sandelman; the company's CFO, Brad Asher; and the company's co-Chief Operating Officers, Jennifer Drake and Jason Griffith. The company will discuss forward-looking matters on this call, including targets for revenues and adjusted EBITDA. This forward-looking information is subject to the assumptions and risks as described in the company's management discussion and analysis for the quarter ended September 30, 2021.

As well, we remind you that adjusted EBITDA is a non-GAAP measure. September the measures GAAP discussion contained for quarter to disclosure and and you the non-GAAP concerning in ended refer reconciliation measures to other analysis We XXXX. XX, Ayr's management turn now to Jonathan call I will the Ayr's over CEO, Sandelman. ahead. go Please

Jonathan Sandelman

and everyone joining for you today. our thank call morning, Good conference

We terms of our our to record headwinds results in lot have despite some today in in a cover of our operations markets.

growing acquisitions. demand our is branded cannabis consumer you and We good exciting outpaces consistently flows and very demand high-quality recent like be see when pricing. the largest Taking and supply see there demand could again milestones But in to ebbs increases the a Some adult We and cultivator legalization step openings. are scale cannabis for catalysts that the to create use reason. for said often demand, or price and timing near-term United of in our but fluctuations. anticipated business of supply back, most in seek States. supply again responding in in we Supply cannabis fluctuations dispensary

First all our what's cannabis, we in customers the product it's and best for because want to produce box. foremost, inside about the

market own Adult the balance timing volatility. transitory, Vertical the states capacity match a outsale in soft. real mitigate flower wholesale history, where price to can redirect out in be we recently a prices imbalances demand the to business, use supply seen across market as in again increases Greater to tried emphasize our help plan a these wholesale eliminate brand in price perhaps impacted stores. that volatility to not corner way the in additions the we is have market. our and across mitigant key loyalty another around want price be Boston The through supply our and but ebbs the is [indiscernible] Pennsylvania, carefully continue our broader temporary persist year. have We Jersey, into Because timing of integration market high-quality And our may that is benefit it. in to demand next to anticipated experience, when have quarter the from maintained is In quality this serves In it Florida. 'XX. volatile may of stores and as We a the they reason. for mismatches, and prices may demand products to flows exists New does

and today phase why branding impacts represent to to our we updated introduce retail box. of unveiling is of in represent of the brands design corporate company of evolution Ayr the the with excited next brands. we've brand said our these mitigate before, quality what's The which new quality CPG are inside you As the to and an house

developed quality well-calibrated which highest for markets. very why and the of Our marketing future levy extracts key flower, is bulk and origin insights. cannabis the brands and stick these kind are our building free of represent consumers. into the of reflects best Alongside leading have categories market we and consumer-centric and power portfolio brands company fuse premium felter which and from of They roll data-driven, consists scaling being across current invested resources

These We power the in core variety core facet. but also in in dose much broader same address offer of form, are a a audiences unveiling to brands categories large national selection a brands experience. and

we in growing Massachusetts over We And to quarter have and existing portfolio in XXX is wholesale entire at morning. of an this are that the a the walk with businesses while already you beginning than We in year. this Pennsylvania call XXX the with I'd our doors, from through foundation and Arizona. more love Nevada, up time third in for from strong ended business strong starting the products

brand our stores industry look the an deck local our we brand. customer to to Investor a new Ayr, have the for an reflect We've are bring which to showcases in brand retail the experience Last, our and quality at that building and products and We retail term. long please committed concept intentionally built we I'll this in website thinking consumer that of detail. updated great this At are to communities. in reasons segments. commitment the and corporate our Ayr forward. So concept is our continue of great but our details stages own unveiling invest know for this understand quality, is categories early us create we it's in how foundation our to Griffin, that, house of our And the building we brand. and we because who new Jason path Officer; Operating we've brands this Co-Chief walk going in product through are still the to committed brands, the With turn over it their today will

Jason Griffith

John. Thanks,

our Consistent building. brands, rollout against of markets is scale the producer new flower across high-quality more goal is for quality largest than the of executing important the critical our ever. With States of national in cannabis being United brand

make continue our talent facilities cultivation, to to investments operations, and brands. for foundation build in We successful that major

are XXX,XXX Ohio, projects feet and production when in our under doubling We in, brands. support large we annually projects have X.X Massachusetts, just these our national feet square tripling of capacity million over be capital pounds Pennsylvania, to to XXX,XXX Florida. New ongoing all in XXX,XXX several complete, from our biomass will square and and Arizona from pounds, cultivation Jersey, All

as and have $XX particular, our likely to cushion the other $XXX CapEx As the you and but beyond projects New and million We can. to third Jersey factored in spend pushing some are quickly supply quarter plans close other Ohio next to move another imagine, XX a our $XXX and to even delayed complete projects. million previously in. forward and to can and the versus as the are quarter In over these efficiently we we port them we cultivation ongoing invested Massachusetts, projects to in million given we in slip plan prior seen shortages, months labor factors, delays

LEAN hired senior several manufacturing, production people to in quality control we important, this and as Just process. lead purchasing,

centralized also it sales to our specifically about. questions a I to national since one efforts. some have streamline on want Florida the and wholesale cultivation time and our most We largest spend is get created platform we the

and We and and including and continue These in of our to there terpene content on controls. better like have new in resulted as quality implementing profiles. make process increased the THC terms cultivation and improvements lights steady progress yields physical SOPs flower panels improvements quality such improvements

time humid hot As Florida. you in can to imagine, summer is hardest grow the

a acres trend overall and harvesting increase planted greenhouse XX more up hybrid of space significantly always hoop are which is will in straight production fall, cultivation. flower available for XXXX in first line our XX premium and leave progress strains. This we So our the biomass our houses of also but not early we is consistently now beginning

We of brings have we of our dispensaries in continue to our Florida, footprint, XX set which in retail we particularly XX in to increase are now Overall, are in supply inventory which business, productivity where acres across critical our Florida. the operating footprint. XX another mix, to can to X-state to expand product me retail and mid-XXXX. a is come bringing be proud online we This level

of have or at to We XX end additional LOIs leases bringing least on are us by an targeting XX XXXX January the Florida XX and XXXX. stores by

is flagship in by of Boston adult In next Greater near come. With use, unify the know margins. the brand, retail level be to practices store retail we across best As stores year, the our retail the that come eight five will be term, yet from supply improved like conversion our a to we adult-use drivers see it stores use In bringing to Florida, is New while growth we drive retail not yet constraints, only for as our it retailing will followed we'd adult per and given productivity to opportunity growth productivity years tremendous our to where markets we in under temporary. Ayr to early full from convert Jersey. launch the store markets new portfolio of our

locations this adult the is priority. securing use market in So now best before the

branded look will stores stores convert XXXX. XX-plus We to Ayr in to those

third to the over Now, Brad the I'd through to call like to turn financials. quarter run

Brad Asher

a inventory speaks recognize market gross QX normal product an to automation COGS in good gross 'XX, consistency contribution sequential from the sequential million increase wholesale on dip over year on sales and to the increased I attractive represents representing prior continuous quarter the third-party SG&A And representing from market acquisition flow-through percentages although growth of Jersey driven basis X% acquisition than from still increase increased September both for dependent an The well this year million and maintaining increase nearly profit in XXX to side, quarter addition by of in over quarter. the year The was New QX fluctuations mix. will decrease New percentage quarters, over profit quarter, based $XX.X a well we increase profile Overall, in basis XX.X% which course margins the out the Jason XXX the everyone. $XX.X prior a increase Adjusted million dynamics. our Adjusted across that on we during be prior one and XX-day organic get addition anticipate flat this quarter million prior the increase on growth compared and by which $X.X apples-to-apples a for of minor was million available a believe as X% through XX expected was data. of for a an in to XXX% and our representing removing points largely acknowledge XX% our prior adjusted itself. point increase building XX% XX. sales the during closed including two infrastructure, prior we was margin quarter. on morning, increase largely prior as $XX driven approximately sales, GAAP was next in basis expense XX% the our employees, investment to by based we the will driven EBITDA as retail expect prior and SG&A an from an $XX.X quarter. has later sequential Jersey million, as $XX.X When gross we of and continued Adjusted over quarter. while over quarter margin to to a in bit. represents largely Thanks, workforce improvement on of due at and the This quarter.

we in to expect begins minor percentage increase on of this decline increase a continue our expand we as this we of gradually dollar basis sales While to footprint, as we operating year a expenses QX anticipate to a as before continue we expected as build markets depth here the 'XX existing more of throughout in scale in build and in to is our expanding leverage increase while temporary new ahead revenue in markets. The increases year.

is to incentive we with proceeds does hand which position month, of QX, initiatives. million the the $XX.X the flow not $XXX ended further strengthening operating warrant period earlier fund managing exercises $XX.X quarter of financing offered on million had on during but inclusive capital million Lastly, across our our positive cash growth debt operations. of by the working this closed include from capital we which cash cash In

to will We inventory in online and the our an facilities building continue come cultivation as investment throughout new make 'XX. stores up

CapEx before more to ever feel I'm once and journey. excited investment compliance it step drive nearly and consistently facilities prepared year. Co-COO, of are $XX million QX, our we future EBITDA. the the will the The sales revenue states, for comprised advance of across bridge million Jersey infrastructure over with through in we to significant quarter readiness this lifetime making approximately business continue along our We 'XX. New paid once in will in us This a of corporate $XX.X function cultivation next million online to inclusive In from activities and key cash in investing for paid I'll purchase consideration and $XX.X today, generate prepare cultivation now a of all acquisition, financing. to hand projects With expect operations way that, Drake. in which flow contributing than We technology, Jennifer are the

Jennifer Drake

expansion expanded Thanks, to exercise growth our by to our over in is million has million our feel M&A people. million XX $XXX the the notes alone, ability senior of and operations, from over continue months in Brad. incredibly to our from The business cultivation last place. marketing, increasing increased cash driven footprint, people recently from To our states standards lead cash seven We've capacity. right and terms and $XXX and our retail XXX finding that projects. drive in year this warrants, start in from had of total business to balance people and to any six presence past X,XXX of with stores most an eight, Having footprint the we the right tripled today. we've growth. investments But We've XX transformative two $XX added the to our added in important our in and corporate sheet, grown assets end, the our senior headcount XX and year from the at the HR growth of growth to part are other our scaling improve IT, people hardest in months, functions. controls This confident

quarters. next our spent critical leverage necessary and Our by revenue. additions of has in brands of will investments corporate major is be corporate a for long-term and an generate result investment well few SG&A the The SG&A expansion ahead expense XXXX increased coming our success. and these footprint projects in the This online SG&A supported begin material evident operating in investments of to corporate as as

anticipate supply/demand wholesale that imbalances markets. Looking of John fourth mentioned at Massachusetts at top quarter, the growth and in particularly despite least line the sequentially, Pennsylvania XX% the earlier, we

expectations continue mind, we flat into relatively in third that support volatility supply investments Because And with in remain persist XXXX, to a compared quarter. next our behind introduce and the may brands. prudent EBITDA. EBITDA it's adjusted adjusted into expect quarter range fourth We with think price this to for year's we

to reflects things: $XXX million one, to $XXX supply compared now million on also earlier forecast delays million. of some forecasting capital EBITDA it's to expansion projects, the adjusted $XXX our important prior range country of Jason whole highlight chain are disruptions. our the XXXX of mentioned This is three We where experiencing

New are these timing cushion In after course, projects weeks, cannabis factor in don't Two, given recent all several ongoing projects, delays delays. projects, chain our most CapEx delays eaten and this is Jason these expectations we there disruptions the earnings us; these our have ultimate our for impact supply disproportionately always Of The but three, into mentioned. timing in earnings as because and of projects, have We Jersey. drivers delays of begin Ayr capital important still of business. these has affected have power through and importantly, XXXX use power and most path and our XXXX Ayr's EBITDA think Massachusetts the are approvals pipeline to be achievable to we million reflect have see potential $XXX changes in to and a very to adjusted the may that for the prudent been M&A adult projection we want persist. always in

on As forecast. will XXXX update our progresses, and we'll tighten up environment you the market

it we expectations now comfortable with his revenue, back I'll for closing Regarding to remarks. $XXX prior of remain our turn million. Jon

Jonathan Sandelman

Thanks, Jen.

have We one our to company built withstand from headwinds. day

culture, strong extremely and foundations our our team, We controls systems our our have now brand. in and

quality we company. and this a Building taken task to have the launch work company's to scale building not the of ready now brands easy lightly. our Quality built this brands cannabis not at is to a is into evolution infrastructure box lot to products put in future and of leading into to investment CPG around thought, as our enjoy. for branding our to we decisions company. research, put Ayr assets that a lead ensure consumers the have the the and and we've are of We deliver leading we're what next is phase the CPG right on effort We

and In be into Ayr, believe, environment pulled that, and lead the the conditions open strength return as our great the industry, well will where good the is, by resources today continues the us assets it Chicago. We to to financial on industry it people, forward. Consolidation day. the in have day when the business, like we stores volatility for the expand the to Ayr, cannabis up cannabis are future. questions. this The With two current our exceptional growth change the great Companies take capitalize to drive is with the to positioned and of and market buyer announced that with needed we shareholders. being footprint news extremely in at benefits to new we like I'd pivot and systems, opportunity within


first [Operator Bennett Jefferies. Please comes question from Instructions] Owen of Our ahead. go

Owen Bennett

guys. hope I all's I questions. a And actually couple well. Good had morning, of

think is continue question. give but on you been pricing into of do get at So pricing you've one maybe said pressures in know worse? Can it the even some your indication, pricing the just of some the pressured First you how may could think much seeing being markets. first wholesale. I please, you XXXX That's is you

Jonathan Sandelman

you that What isn't why address question, please? don't Jason,

Jason Griffith

the Owen, thanks for question.

Massachusetts, we're seeing Pennsylvania pricing well. and certainly So downdrafts pressure, as of in in terms Nevada

what a into to competitors seen coming supply of move increase we've market they're think products. trying more as and significant start customer I the to push really lower seen that we've is or pricing --

the So really And continue, a it us it potentially supplier. potentially XX% we we've our it But it towards the opinion, later to this occurrence. in of may quarter of seen XX% by neighborhood more in appears And a in that longer. decreases. And company-by-company throughout abiding see is really the to depends bit year. first supplier

Jonathan Sandelman

So Owen, this Jon is Sandelman.

follow and strive when behavior and in Massachusetts. supply to is first stores We're our that with take have choosing the is in and adult-use that quality view, -- temporary hold to what participating nine in the in power grow but we we brands new what quarter to that saying and we're produce fourth into Pennsylvania -- and simply of we quarter have demand we'll the stores seeing imbalance. a me instead Let supply a temporary We're rational my think up

so And we choice. business a made

in the competitors. participate retail first through of some the in ability quarter sell behavior temporary our We rational it the have of to or

Owen Bennett

around the the me And just core portfolio on clear. takes question brands. brands and power brand next new very to that the to Okay, the

the brands. of Just of brands how in? on will generally a power in core be brands, have to entire the versus And the you do they power portfolio premium much are state plan you priced every

Jonathan Sandelman

the participate. in So we is answer brands power we'll every state that our have

in we see the You numbers. of year, in now in were XXX From we're our the can stores. and beginning XXX stores

So the stores. will will the Ayr not stores be our only be, wholesale brands in customer in power but

The sorry? I'm second question, part of your

Owen Bennett

brands at core wondering more difference it was of mean, going which generally have I focused state. on sort or as going the are just brands the obviously probably value-focused they or the I what's core you're pricing be to space the well. power which mid-price to then brands the depend premium between does

Jonathan Sandelman

we what in So price said the every quality flower volatility. is that every in in the quality we of speak that that products, a premium brands on make. we and the see flower and the what we to grow, right call we Premium to participate products mitigant market our day power pricing

to So market That participate a every in and the maintain is quality best marketplace. each able have command in different products been premium. we premium

don't So that ever I a that every we overall but you general have had. market is percentage true for in

Owen Bennett

was helpful. Great. guys. very Thanks, That


from Our of go comes Please next ahead. McGinley question Matt Needham.

Matthew McGinley

you. thank Great,

revenue be in quarter fourth down New asset the benefit bit and added in top you fourth in from in Nevada quarter. that only states guidance, the the have surprised acquired Massachusetts for high-volume little I'm your a the quarter given like very full core actually on already will you've So XX% top Pennsylvania some three of and calls line growth dispensaries Jersey, line the guidance the

Jennifer Drake

Matt, thanks.

reiterate adult-use we'll for as more whether our of for lower increased nine hold are said making demand, stores want points in choice regarding see Massachusetts, in rather we some or in QX brands what these before, get just whether the a example. we had price as we'd to we or So in to stores it's Pennsylvania at participate whether market what we wholesale Jon

So some obviously, having but wholesale same-store in acquisitions. sales we modest growth are less revenue retail and

Jonathan Sandelman

So Jon. it's Matt,

stores. had But we you in business adult-use about didn't adult-used we a If our today, the Massachusetts we frankly because will, business wholesale stores. do think plan previously, quarter, in we have first have significant

instead of products now we one in sell major wholesale; our So now have to two. channel was having which

to asset do can before. has we a in never simply, allocate way Ayr so been And able

adult-use can what irrational had simply simply up again, simply behavior a we something month which a products. of participate this two what quality expect today And selling is is is go in a the could long-term take pulled I And rational think I participate level to do So major into business. or case; few a volume that is never can stores and exponentially. sell irrationally which by or a I one said later. or our it's we it we to hold we inventory that months product premium later business before

Matthew McGinley

think And million I guidance. in projects that next I and some Okay. guess my of appreciate 'XX guidance under these cultivation the guys year? question likely for I the that you might will business? do have but that still price Or -- you then are the on appreciate up is give even 'XX mark six number $XXX that. second that the wholesale see of EBITDA are in the volatility factor guess could softness in impact or that make guidance $XXX did guess, you within revenues, the you all lower but with online New to that the million top on into delayed you And why within M&A, states keep be other just with wholesale wouldn't coming any also I incremental have in a 'XX? that Arizona Jersey and I that, projects you revenue stated

Jennifer Drake

-- in that are comfortable us keep the There a comfortable XXX. that in keep us going number with on things that revenue of

numbers. because give was last we XX said transition what business really of really sense some Florida to we our For added terms initial out the our stores ago that call, the sense important put is give people earnings guidance meant a a such gone, respect on the to guidance of to business more example, a as time I there's the power not it which thought point with than the we've months, of has people expected in of our in we of initially over

of Florida the added -- guidance revenue, initial us did health have are with we things non-vertically stores We've added in offered in which integrated initially So we Florida additional the that We've added in capability provided keep we more a expected. we initially that not expect. stores than comfortable Illinois. more stores terms lot croup in

more those to still business of add retail lower stores stores EBITDA Florida our kind four is average the ramping you than All things related of up. as serve have know, that revenue bit and that that have for contributing an our thing lower non-vertically great are delays less other be to and margins EBITDA. more to as because project, EBITDA at stores as EBITDA EBITDA. four-wall to to selling little to we contributing wholesale Those to across to the wall platform is things a in Illinois and also buying revenue remember contribute paid And now retail and be when we're revenue in expansion longer to these and our capital going

Matthew McGinley

Great, very you. helpful. Thank that's


comes go ahead. Our Please Beacon Stanley Russell of question Securities. next from

Russell Stanley

my taking for you thank and question. morning Good

with retail anticipate the expansion going more to you're hold your dive construction wanted is demand do focusing little on get it? online. expected complete, [indiscernible]. in phasing the I sense, to expected premarketed I Milford now wholesale have own in that you you a a how extent anticipate sense want for do understand Or just online additional once get there early or to off you Milford I expansion year next with the to that demand and XXX to that Massachusetts, to market on capacity you and just production? as plan decision I wanted which to into coming to bring take Just on of all the shelves a just in reception it

Jonathan Sandelman

what about imbalance temporary But between we're is Russ. industry. for remarks the is about question, the in and a actually feel short my I at product. talked supply demand thanks the in So opening we Ayr, reality

our building supply would in are stores the So increases MX the Florida, the state are XXXX we we nine we've efficiencies achieving the and fact in adult-use stores in it Pennsylvania, came supply. looking of In supply at product, we our supply enough If wouldn't revenues with bring don't capacity have didn't eat and short into adult-use. in because imbalance. opening. we to the in, today, potential wholesale we're enough managed demand and have we retail In on

talk our eight imbalance about in build states a demand in. in to industry in that you five states yes, we're of the adult-use happening and which supply the supply ahead the So is have we of temporary catalyst several of because

and maintain most to very brands the when We the so pricing you them as that brands those to delaying so built built building the premium money in value that can supply those managed by discount term, soon demand several brands importantly, that as moving talked we brands have long that And brands. worked it. the EBITDA. a selling quarter the simply brands we've fourth as discounted as we Why build weeks carefully spend time on out them we few by franchise But create. achieves in maintain premium simply the our in in about new I we've weeks. Ayr for hard higher revenue, higher and

Russell Stanley

I move if can Ohio. on Maybe to Great.

M&A on seeing your licensing the wondering opportunities to M&A Illinois round what in and/or potential participation market's got more one given Ohio, say, is a this is but would if priority in that and markets underway medical you this but just multiple can the you've there, what the bill expand utilization a overlooked becoming program just your think than I'm are efforts market on growth? I front the wondering, this more of speak active on you're of substantially.

Jonathan Sandelman

a the it and And will chronic can be had state people, restrictions. be we've regulatory round add participating are conservatively. the permissible the increase has vertical start we to square off elements, in was recently tends start medical state in That about every XX they process. we We've is box our consumer this increase. we put the conservative changed in They of in then has per then when add control always pain markets. Jen as Ohio, data can foot when ensure I'll Yes, participate to terms many of million because we rapidly. this to some we that's always because in and a has that off Jen? seen while changed size. one in licensing comments. So quality we of market it's for care said high really the cultivation going to in and expected entire the the we The only products we expectation

Jennifer Drake

a I I think essentially. most it's things great to We've going on it's open to think the to faster. going move may And Pennsylvania becomes mean thought be a going Jon I things the more was of to same it's population cannabis, bit the as always that slower. as hit -- little legislature highlight. statement

So XXX% license the of as cultivation few legislature participating conversations very the involved one some X the holders. in of Tier with

So is on. will to a it move than we're us, lead focused you previously may state expected faster great. definitely which And as it's


Our next question Genuity. comes from Matt Bottomley Canaccord of

Matt Bottomley

and the all morning. of for Thanks this mentary color

Just that back wanted comments one to guidance go Matt the of had of $XXX go on a comments questions revenue the and to of just couple to million.

your around exiting run $XXX about at million there. looking somewhere the year, your QX is guidance rate using Just or

your own are elements more I'm if execution we within curious just commentary maybe and So independent in that control. can any that are your are of -- your on forecast get

$XXX developed already more assumptions Jersey and the used Massachusetts when that first million open So into your of to versus that today. out ultimately just be things might go the turns New sales what's stores, online, that operating material

Jennifer Drake

are stores Massachusetts Jersey. our timeframes on said our third online which the store and about time little on and and up the had New Jersey uncertain many turning this and pipelines to of in no in we've that. think is our meant frame talked I -- sorry, I two many us have in sorry, drivers New I QX in coming this change Somerville has times, And Pennsylvania Massachusetts In there's which a were been the XXXX and Massachusetts, always to we've Massachusetts as analyst a discussed according So about. in every call with biggest conversation more cultivation Massachusetts bit our as Pennsylvania, adult-use air

respect with still to change really there's to expect to adult-use. Brad, in in Jersey, in you something? sometime early do Massachusetts. So want add no QX New expectations we our And

Brad Asher

has Well, about million. want the store talking $XX store, rate medical a I of something. add run of that third store a to Jen's

a $XX stores around the So adult-use store and adult-use States, in superior. in rate versus million at medical adult-use it's run is most date, United outperforming versus -- their a stores stores this versus

of So concerned the store because Watertown stores. about Boylston I'm and is here third big The less the performance. it's store absolute kick

Matt Bottomley

all sort here philosophy That's just of the great. question from then it second comes great of management Okay, just here, M&A. details. when more my And

were So materially ago. from a attractive here year very have clearly, you a you and portfolio where different

out already? this kind you to the then here looking of might we to additional Or Illinois. that and morning round more Clearly, in in just going spending on forward growing what integrating here. from deeper opportunities. expect there I'm where focusing or we you've terms curious Are you of have M&A anticipate gone you guys year you in and in versus are So markets next might what time just are enter? quarters Pennsylvania you

Brad Asher

state the So what are run every we operationally consumer in United I've And always is said represent to taken the in day that States. said XX states. a wallet. going focused the We've And mean XX% of those we've of always past, in very doesn't business. will roughly want that one to we share efficient be necessarily the approach states to be most from wallet on and in

in is since only available M&A other Are in states or there The revenue So more are more opportunities -- yes. M&A yes. we're is are within some, answer there eight we the in today. The states. opportunities states sorry, answer


comes Echelon next Andrew from Markets. of Semple Capital Our question

Andrew Semple

Congrats results. the quarter third on

here EBITDA margins. the be First on just would question

on Your pressure higher some implying guidance sales sequentially, EBITDA QX the profile. flat but margin in towards EBITDA

there. gross a get the related you into investments the what's bigger driver of the given sense Are to environment to pricing on side pressure is any seeing making the on margins it you're want more business? Just the OpEx or

Jonathan Sandelman

you Thank for the question. Yes.

I So the wholesale in the think important and also to looking each those recognize quarters. at from retail margins, it's of contribution

that increasing, actually well mostly QX cultivation is margin. benefit comes have as QX. It's when QX contribution retail that that to massive capacity and in you until not our QX, for online actually So our

understand I the it's think important magnitude capacity. of the cultivation to

through pounds business. to mentioned Jason drives really XXX,XXX XXX,XXX that from So the going and margins

Andrew Semple


your to the store retail clarify coming ahead cultivation of running just there, So online. it's capacity

Jonathan Sandelman


Brad Asher

vertically of And market being having to in instead the integrated. hotel buy

Andrew Semple

Got you. Great, that's helpful.

impacting projects the I supply challenges the prepared Second question on here. the appreciate CapEx underway. color remarks in chain the

there's of or across wondering generally setbacks have build-outs all any Just particular experiencing facility seen if the you in underway. projects of this that are your CapEx

Jennifer Drake

country build would said, point, month, in do back has And into push some there's just really look world month board. just we one get everyone then we the -- materially everyone and projects. things these to that's as no as if say cushion. a there's a experienced, And I it's It's and project at not your in to month, it's things bit the a little cushion of the they're delayed. across end a that as you the

we so people the let just we and were change. wanted to where And know expectations


from Partners. Fortune Capital Our of next comes Scott ROTH question

Scott Fortune

here. provide You have mentioned state. mix of Jersey's you you XQ timing market, kind color? wholesale. starting board currently, the with more how at a key And But to you you I currently we product on the Jersey, the coming know wholesale place New little look three you 'XX QX of do inventory on coming the through in Can New and logos? stores sell-through for currently that with fell here. board ahead 'XX are -- then How in can build of

Jonathan Sandelman


starts. in to where our have do So period XXX% market and comes online when in stores New buy that our feeding terms Jersey. a the temporary of going in wholesale [indiscernible] today, our have going capacity we're have It's not cultivation mix to we're currently business to we until

to QX. a to we're cultivation until is which going we're that not online until capacity So wholesale that happens, have -- comes going business

Scott Fortune

pressures Okay. looking a appreciate pricing that. we've Western you West, Development Arizona, the data, then there. in and the pricing into more those and kind then guys here. at Are the here those despite softness keep XQ transitory of is look up holding How going markets lot of I State of at volumes from you pricing the seen the And What seeing are transactions?

color Just that think kind transactions on you standpoint. and the more of from volume

Jennifer Drake

Nevada, Sure, stores a we're our sure. retail so because productive. are buyer In net

So continues for us and we see such Nevada to an engine of our sides be overall. both business that

and example materially we going a would early sell both option next shortly, a for by our balance we're close is better if adding -- have that that's perfect way, in is by increase beginning, we our capabilities wholesale, Tahoe the to of should year. Hydro capacity -- think, I into and have capacity which go that where the that the has very Jon mentioned -- Nevada say So we market wholesale to earlier, business both

know, excellent that's we only into we and is, and you So go and as Nevada. great increases go -- flexibility our which our as market excellent, excellent, can retail can well

Jonathan Sandelman

think we about So when current when into today trades to what XX% we price an the all we flower, I you a wholesale want we Kynd our our the participate premium every sell to that. about So at is market market. quality we question, market about sell right? market price flower quality question add which is sell The interesting Nevada premium, flower to So wholesale at in sells mitigant a talk right? because a

one Flowers. we state the premium consistently in more That's grow acquisition we that to current market we prices. business quality, Hydro, quality, say which considered at Arizona, Kynd is a in introduced time, a the is a price. we at also that And is our one premium flower. again, mitigant, premium. the there, okay, selling at at today, it or when And made So comes price wholesale a premium it I'll the flower in wholesale trades premium premium Tahoe competitive sell very sells a premium. to now


Howard [Operator Instructions] Hedgeye. Our Penney question of from next comes

Howard Penney

to a on for guidance. wanted your I back second double play

also the I'm this it leverage have you means going in making necessary suggests to the and are on which sheet leverage. thereabouts which which investments that business the XXXX the making to year, invest you're the expansion $XXX continue million business. but think I get correctly in in XXXX also cash if I G&A to you you're of or understood balance for the that assumption further geographic investments

continue was can need expansion to make to the investments -- if the and leverage through you future in So hope to know you correctly I of that I run don't company you maybe understand. G&A anyway, the sort I in growth [ph]. future said just grow with make I business but that of knowing states

Jennifer Drake

think expansion We capital we in certainly forward to projects. business as generally which the and expect M&A of investing footprint going in Yes. what be means

that we So markets, that's existing attractive. our expanding means find deepening presence in it markets new to

the those absolutely investments business of all So returns. will in have

why we measured suggested band to while the when that we be when we achievable also to we for we that see and guidance that's million we for our very That's why prudent, EBITDA XXXX. had to. previously widened path so said, And a our guided $XXX want

Jonathan Sandelman

going Howard, go I'm to but it's -- understand answer not and Jon. sure to it it's question I try your ahead. I'm not

Howard Penney


you're right? going a So states investments guiding right? states eight question, three and I'm probably bigger XXXX, this line. G&A trying will to grow the -- in three those further XXXX require to yet states from in picture states is You're more You to grew to on leverage

the Does guidance line. the and growth business, the in G&A leverage to trying in geographic I'm the clarify? for that balance required investments So the on

Jonathan Sandelman


right. $XXX million, the of talked the $XXX in range CapEx the assets that and we've Howard, So million about we that's to today, have

question is, sheet. on If this you balance all your have your "Hey, cash Jon,

more buy yes. You've just If we to not question the create going that value. at do that to future, you you drive forecast going to you're think told in your shareholder the will that like good EBITDA not things prices EBITDA Obviously, are be forward?" yes. we Do stated have including states. just -- states? Well, well, we the in it, Will in we growth we've way more capital going is, that How are the be that in the to that's

going signed So we an we already be agreed our to the there EBITDA point. in 'XX. is that course, it's will not at the And be or in expectation should something haven't included footprint of answer if But yes, buy, we're to grow also. this


call. This concludes today's conference

your disconnect you day. lines. for a may You and pleasant Thank participating have