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spk01: Hello and welcome to the UrbanGrow first quarter 2024 earnings conference call. As a brief reminder, all participants are currently in a listen-only mode. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. Following the presentation, there will be a question and answer session for those on the teleconference line. Please note that this conference call is being recorded today, April 30th, 2024, and a replay will be made available on the company's website following the end of the call. At this time, I'd like to turn the conference call over to Christian Monson, Urban Growth's Executive Vice President and General Counsel. Sir, please go ahead.
spk04: Good afternoon, and thank you for joining us. Today's call will be led by Brad Mattress, Chairman and Chief Executive Officer, and Dick Ackray, Chief Financial Officer. I'd like to remind our listeners that remarks made during this call will include a discussion of non-GAAP metrics, including adjusted EBITDA and backlog. These items should not be utilized as a substitute for UrbanGrow's financial results prepared in accordance with GAAP. Reconciliations of our GAAP net loss to adjusted EBITDA are available in our press release and in our Form 10-Q filed with the Securities and Exchange Commission. and can be assessed from the investor relations section of our website at ir.urban-grow.com. On this call, we may state management's intentions, beliefs, expectations, or future projections. These are forward-looking statements and involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the safe harbor provisions of the federal securities laws and are based on Urban Grow's current expectations. Actual results could differ materially. As a result, you should not place undue reliance on any forward-looking statements. Some of the factors that could cause actual results to differ materially from such forward-looking statements are discussed in the periodic reports UrbanGrow files with the Securities and Exchange Commission. These documents are available in the Investors section of the company's website and on the Securities and Exchange Commission's website. We do encourage you to review these documents carefully. Lastly, a copy of our earnings press release and website replay for today's call may be found on the investor relations section of our website, which again is ir.urban-gro.com. With that, I will now turn the call over to Brad.
spk07: Thank you, Christian. Good afternoon, everyone, and thank you for joining us today. What a phenomenal day for the cannabis industry. As I'm sure most of you are now aware, A few hours ago, there were credible reports in the media indicating that the U.S. Drug Enforcement Agency is supporting the Department of Health's recommendation to reclassify cannabis from the most stringent Schedule 1 to the less stringent Schedule 3, in turn providing a long-awaited catalyst for the cannabis industry. While there still is a review period to complete with the expected removal of the 280E-related tax burden, and the DOJ addressing state-run programs through a guidance memo. We believe many cannabis operators will realize significant increases to their working capital that in turn could be reinvested in their business infrastructure to refresh existing facilities and build out new ones. For the last two years, I'm proud to sit on the board of the National Cannabis Roundtable alongside CEOs from some of the leading multi-state operators in the space. It's the tireless dedication of MSO leaders like these and the lobbying efforts from organizations like NCR that have paved the way for our industry and the exciting wins along the way. As it relates to what this news and the subsequent final approval of rescheduling means for urban growth's future, it's significant. With over a thousand projects completed in the cannabis market over the last eight years, And with 120 employees, which include architects, engineers, construction managers, and horticulturists, UrbanGrow is the leading professional services firm in the cannabis industry that refreshes existing operations, designs, and or builds new dispensary and cultivation facilities, and further procures and integrates cultivation equipment solutions as well. The successful rescheduling of cannabis is a long-awaited catalyst that we've anticipated to reinvigorate an industry that has been facing strong headwinds for the last couple of years. With that said and moving on, I'm excited to report that in the first quarter, we had positive cash flow from operations and in turn delivered our strongest quarterly adjusted EBITDA results in two years. This improved performance is attributed to both the diversified revenue streams that we've been seeking and building out as well as our focused efforts throughout 2023 to reduce operating expenses on a go-forward basis. Today, our multi-sector focused professional services and design build firm operates out of offices in three states and Europe, and our targeted markets extend from the cannabis and vertical farming sectors to also include light industrial, commercial, hospitality, recreation, education, and healthcare sectors. Looking at the highlights from our first quarter performance, both revenue of $15.5 million and the slight adjusted EBITDA loss of $0.3 million beat our quarterly guidance. The $3.1 million year-over-year improvement in adjusted EBITDA was driven by accommodation of reduced operating expenses and strengthening margins. as it relates to the reduced expenses and as a result of the optimization efforts made in 23, we began to benefit from the previously communicated $8 million reduction in general and administrative expenses. In fact, we realized a $2.8 million improvement in the first quarter versus Q1 of 2023. The margin growth in the first quarter was tied to both increased productivity from our professional services providers, as well as the strengthening of our returns delivered by our construction business. In further backlog, it remains strong at $99 million. As a result, and relating to full year 2024, we are maintaining our guidance to recognize more than $84 million in revenue and to generate positive adjusted EBITDA. I'll further note that this does not take into consideration today's rescheduling-related developments, as there are still unknowns, including timings that need to be clarified. Looking at market trends, diversification has most definitely assisted in insulating our business from the previously discussed headwinds that we've been facing within the cannabis and vertical farming sectors for the last couple of years. Consistent with the sector breakout in 23, In the first quarter, approximately 72% of our revenues came from the commercial sectors that we serve, and 28% from controlled environment ag. In the commercial sector, our client base continues to be comprised of top-tier companies that include Fortune 50 and 500 firms, and revenues recognized in the quarter were from a combination of ongoing and new projects. In the cannabis sector, while the market sentiment has been stronger than it has been in more than a year, especially after today, we're actively engaged with clients on multiple fronts. However, cautious optimism has been the status quo for operators so far this year. In the interim, and while we wait for the rescheduling narrative to play out in the months ahead, we're expecting to see steady activity and to continue signing both services and construction contracts in legal markets across the U.S. as operators work through persistent state-level regulatory and legal delays. This being said, and in addition to today's announcement, there are a couple of key additional catalysts which could also result in a significant and sustained positive change in momentum for our business. First, on the federal level, there's prospects of successfully passing a banking-related bill by year-end continues to be discussed. Of particular importance, this would potentially include a capital markets clause that allows plant-touching businesses to list on the larger public market exchanges providing a more efficient path for them to access capital and create greater liquidity. This would attract institutional investors that can participate via these exchanges or provide capital directly to the issuers. And second, at the state level, while progress continues to be made on legalization in multiple states, we maintain our position that the most impactful change would be in Florida, the nation's third most populous state and one of the fastest growing in the country. Now that it's confirmed to be on the ballot in November, a successful vote to allow adult use recreational sales would have a profound and sustained impact for Florida operators, and we anticipate for Urban Grow as well. In closing, and supported by our $99 million backlog, our qualified pipeline, the recognition of last year's $8 million general and administrative expense reduction, and today's positive regulatory development We believe that we are well positioned to continue building momentum through the end of the year and beyond. Thank you, and with that, I will now turn the call over to Dick.
spk06: Thanks, Brad. In the first quarter of 2024, we generated revenue of $15.5 million, which represents a sequential improvement of $0.5 million, or 4% over the $15.0 million of revenue generated in the fourth quarter of 2023, and a $1.2 million, or 7% decrease, over the $16.8 million of revenue generated in the prior year period. The decrease in revenue over the prior year period was driven by a $0.4 million decrease in construction design build revenue, which reflected a decrease in the number of projects and average size of projects during those periods. Equipment systems revenue decreased by $0.4 million and services revenue decreased by $0.3 million, which corresponds to the historical downturn in the cannabis industry. Gross profit was $3.1 million, or 20% of revenue, in the first quarter of 2024, compared to $1.7 million, or 11% of revenue, in the fourth quarter of 2023 and $2.1 million or 17% of revenue in the prior year period. The increase in gross profit dollars and margin percentage for both of these comparable periods was driven by the impact of improved margins in services and construction design build revenues as we experienced improvements in delivery of services projects and started work on higher margin construction design build projects during the current quarter. Operating expenses were $5.2 million in the first quarter of 2024, which on a sequential basis is a decrease of $1.2 million and on a year-over-year basis is $2.7 million less than operating expenses of $7.9 million in the first quarter of 2023. Both of these decreases are associated with the company's expense optimization and resource reallocation initiative. Net loss was $2.1 million, or a negative 18 cents per diluted share in the current quarter, compared to a net loss of $5.1 million or a negative 48 cents per diluted share in the prior year period. Adjusted EBITDA improved by $2.7 million sequentially to negative $0.3 million in the first quarter of 2024. This is an improvement in adjusted EBITDA of $3.1 million compared to the prior year period. The improvement in our adjusted EBITDA for both periods was driven by lower operating expenses as previously discussed. Turning to our balance sheet, we ended the quarter with $0.7 million of cash and a balance on our line of credit of $2.0 million. With the support of the working capital line of credit that we put in place in December, we currently do not see the need to bring new dilutive capital into the company. Our total backlog as of March 31st, 2024 was approximately $99 million, reflecting a decrease of $11 million or 10% on a sequential basis. This backlog is comprised of $93 million in construction design build, $5 million of professional services, and $1 million of equipment systems contracts. Breaking backlog out by sector, 76% is with clients in the CEA sector, and 24% is with clients in the commercial sector. Supported by our backlog and pipeline, we remain confident that our cash position, combined with our $10 million line of credit, will provide us the necessary flexibility to manage through various macroeconomic scenarios. We continue to remain focused on our execution and returning to positive adjusted EBITDA on an ongoing basis. That concludes our prepared remarks. Operator, please open the call for questions.
spk01: Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove Your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star 1 on your phone at this time if you wish to ask a question. And please hold while we poll for questions. And the first question today is coming from Eric Delorier from Craig Hallam. Eric, your line is live.
spk05: Thank you for taking my questions. The first one on the news of the day here with the EPA agreeing to reschedule Canvas to Schedule 3. Obviously, the 280 Act does not apply to these standards operators.
spk01: Apologies, Eric. Your line is just really bad quality. We'll reconnect to you. We'll dial out to you so that we can get a better connection if that's okay with you. Brad, if it's okay, I'll move on to the next question, and we'll reconnect Eric as soon as possible.
spk07: Sounds great, Paul. Thank you.
spk01: We'll take Scott Fortune from Roth MKM. Next, Scott, your line is live.
spk03: Thank you for the question. Hopefully you can hear me better. I will leave the DAA question up for Eric, but just curious on Florida, Brad, if, you know, obviously that's up for an adult youth ballot vote now. It's still a big hurdle to get 60% of the vote, but are you seeing now that's up for a vote? Are you seeing operators come in and engaging more in your services as they look to build out ahead of the potential vote in Florida or still kind of muted interest from that standpoint to wait to see if this does pass in Florida from an adult use side of things. Just curious on kind of the operators kind of emphasis for moving forward now and building out potential ahead of some of these states.
spk07: Thanks, Scott. Thanks for the question. Yeah, Florida, It is a hurdle at the 60%. And there's a lot of confidence that that will be that will be beat. But the heavy work starts now and it'd be great for people to, to donate and to give to the path that truly it's created in the state with a lot of the other multi state leaders. So they can get the word out and keep pushing hard. The polls are trending higher than 60% at this time from what I've heard. But again, it's early stage and it's important to give so we can fight that fight. In terms of uptick, yes, for sure. In terms of the uptick and the excitement and the planning moving forward to hard, large orders, that's not quite here. The conversations on many fronts that we've been having are preparing to be in a good place from an equipment standpoint. Some equipment needs to be ordered four to six months in advance. Others is entering the design stage for new facilities and then at some point in the future proceeding to the build. But absolutely a very positive uptick in the state so far.
spk03: I appreciate that. Thank you. And then just focus on guidance. You guys are keeping guidance at more than 84 million in revenue for 2024. With the projects and the backlog in focus, can you provide a little more cadence to kind of the remaining of the 24 year? Obviously, you had some delays from 4Q, and I assume those projects are recognized here in 1Q, but just kind of step us through. Um, the year, as you see your backlog come in the second half kind of loaded from, uh, the cadence standpoint to, to meet your revenue guidance.
spk07: Yeah. First, um, addressing the three projects that we discussed on the, on the 2023 or Q4 23 call, all three projects are active. Um, two of them are recognizing revenue in Q1 and the third has, uh, has began recognizing for us in the second quarter. So those are all on track. We remain right now, we're cautiously optimistic. We believe that we've turned the corner and I'm excited about where we're moving. And that's before today's development came to light. We are trying to under-promise and over-deliver in terms of our setting expectations. We're off to a good start in Q1. The backlog remains Of course, we'd like to see it start to appreciate an increase again, but we're in a very good place. We feel good, especially with the right sizing of the company in terms of an SG&A standpoint. We've lowered the break-even level for the company, Scott, so that feels good as we're going forward. We can keep growing the business as the demand increases.
spk03: Oh, perfect. I appreciate the detail, and I'll jump back from the queue. Congrats on, well, still the DA moving forward today, so thanks. Thanks, Scott.
spk01: Thank you, and it looks like Eric Deloria from Craig Hallam is reconnected, and we will try his line again. Eric, your line is live.
spk05: All right, great. Thank you. Is this any better? It's a little bit. All right, well, I'll give it a try. If this doesn't work, we'll just take the questions offline. So on the DEA, obviously that's the big news of the day. I was wondering if you could provide us sort of an overview on the typical timing of one of your projects, you know, from your Canvas operators. What's the sort of timing for a project to go from discussion phase to pipeline to backlog and revenue? You know, ultimately looking to... kind of understand how quickly you'll be able to have visibility into, you know, potential, you know, bona fide backup in capital expenditures in the cannabis industry. Thanks.
spk07: Perfect. Eric, I got most of that. Perfect. First of all, it depends on the size, right, and zoning and where we're located, state, city, and county, and those requirements around the country. But typically, they could take as long as without any delays, as long as two years, depending on the size, probably as short as nine months, on average a year and a half. From initial discussions, we move into the design stage, architecture and engineering and the cultivation design. Civil and structural are all part of the engineering side there too. Once we have a whole set of CDs, it's put out to bid. clients usually will look at multiple bids in which we're participating and if awarded we immediately move forward we can be we can cut weeks sometimes months off if we're proactively involved at certain stages but overall it's a nine months to two years is a good average with without delays and how long would you
spk02: take to see that there is an increase in capex coming, you know, sort of industry-wide? You know, I understand that some of these projects from discussion to completion can take up to two years, but how long will it take you to notice if there's a bona fide capital expenditure increase in the cannabis industry resulting from the DEA? You know, would you have um is it is it a few weeks of lead time of um you know discussions picking up and leading to pipeline and deposits like is that is that a few weeks or is that um could these discussion phases last you know several months that it's it's hard to see if there's a true pickup or not i think on the on the q2 earnings call and looking at backlog at that point
spk07: from a services standpoint and new contracts that we've signed, that'll be a really good indicator. And then, uh, also from an equipment standpoint, you know, equipment in a strong cannabis market was a tremendous source of revenue for urban growth. When you look at 21, it was 56 million decreased in 22 to 33 million. And as we reported last month and 23, it was down to 13 million. And so the backlog that we reported at the end of Q1 for equipment was a million. So watch the backlog at the end of Q2 as well. That should be strengthening. I think the early indicators will be on services and on equipment. But I can tell you as a result of today's announcement, I already know it's stronger. We know it's stronger. Good, strong discussions with clients and and some signatures today already.
spk05: That's very good to hear. I'll just make it to one more question, given my poor connection here. On the gross margin expansion, you called out increased productivity amongst architects, engineers, and then increased construction margins. I was just wondering if you could expand on those a bit. I'm wondering if there was anything about these projects in Q1 that maybe lent themselves to higher productivity or higher construction margins. Ultimately, what I'm wondering is, do we expect these productivity levels to remain somewhat steady here going forward, or is this something that will continue to fluctuate quarter to quarter? We got a little lucky this quarter, so I'm just wondering how to think about that going forward.
spk07: Dick, I'll let you take that one, please.
spk06: All right. Thanks, Brad. Eric, yeah, with regard to do we expect kind of that same type margin, it certainly was a very high margin for us in the first quarter of 2024. Don't necessarily expect that it's going to be exactly that high on a go-forward basis. It was very low in the fourth quarter of 2023, as we had talked about from a construction project that we had that incurred some additional costs went over budget and we weren't able to pass all those on to a customer. Because of a couple of the construction projects that did get started in Q1, they are at very nice margins for us above kind of what we typically see for a construction project. So even though we might not expect that the Q1 margin we experienced is going to continue at that level going forward, we wouldn't expect it to fall off very much. And as always, and we talked about before, from the standpoint of our total gross profit and margin, it depends on the revenue mix that we have. So you still have to pay close attention to what happens as the equipment or services total revenue number changes over time and that's impact on the gross margin.
spk07: And I'll add in on the back there, Dick, a little bit. It has been almost two years, Eric, since we completed the acquisition of the construction company. And so there were some legacy projects that came with the acquisition and that ended up not being – what we would have hoped, right? So we call them legacy projects and they're pretty much finished now. The project that Dick alluded to in the fourth quarter and some surprise costs coming in was tied to one of those projects. So that's behind us. That's great. It's positive. Second, in the middle of 23, we had all of the acquired companies on the same ERP. We've talked about that before. And as a result, our COO and and team were able to put some stronger internal controls in place, and now we're seeing the results of those moves. So definitely trending in the right direction, and we weren't lucky in the quarter, I guess, to answer that last question for you.
spk02: Yeah, that all makes sense to me, and, you know, certainly good to hear that response. Some of these initiatives, like getting everyone on the same ERP system, has led to some structural changes in margins, but I understand that there'll still be some degree of fluctuation going forward. Very helpful. Thank you for taking my questions.
spk01: Thank you.
spk02: Take care.
spk01: Thank you. The next question is coming from Anthony Vendetti from Maxim Group. Anthony, your line is live.
spk08: Thanks. Just a couple questions. On the backlog of 99 million at the end of March. I know today, obviously, a big day to talk about cannabis and what this impact could mean in terms of future business. But in terms of the backlog, what percent of that is cannabis-related? And what percent, obviously, non-cannabis?
spk07: The 72%. was commercial or non-cannabis? Sorry, Dick, 76?
spk06: Go ahead, Dick. Sorry. Yeah, 76% of it was CEA related and 24% was commercial. That's pretty consistent with what we reported at the end of December in terms of the split by the sectors that we have. So even though our recent revenue performance has been a shift of that where we have had substantially more commercial than CEA. The backlog still continues to be more higher percentage on CEA than it is on commercial, partly due just to the size of some of the CEA projects that we have in backlog.
spk08: Okay, that's helpful. And then, you know, what this could mean you know, obviously, you know, less stringent rules should open up investment. There's, you know, the tax benefit as well. What, I know it's just happened a couple hours ago, but have you heard from any potential customers eager to maybe speed up investment if indeed this gets passed? And and maybe elaborate a little bit on what you think the timing is for a final consent decree to come down and say, okay, boom, this is going to move from a Schedule 1 to a Schedule 3, potentially.
spk07: Anthony, the 280E, the removal of 280E is most definitely the largest benefit to a successful rescheduling. Some of the large multi-state operators have publicly stated that the annual savings from the removal of 280E can range from $130 million to $180 million plus. So it's significant funds that we believe. Some of them have also stated publicly that they're looking to reinvest those funds into the company with refreshing existing facilities and building out new ones. And so that's definitely the largest benefit there. The period that it will be open for, anywhere from three to five months before the final approval would take place. But it has been stated publicly that if the DEA supported the Department of Health, all indicators are it will absolutely be approved in the long run. They're not my opinion, but just opinions that I've read. So transformational for the industry. As for clients, yes. Just as we have had increased discussions and interest and excitement from clients in Florida with the ballot addition for November, we're having the same today. And I'm not sure if you'd heard on an earlier answer, but We've had good, strong interest, even had some signatures today as well. So it'll take time. There's a lot of excitement today. We're playing it cool. We didn't want to increase our guidance or anything at this point. There's so many unknowns, and we just want to under-promise and over-deliver. But exciting time for the industry and for Urban Grow as well today.
spk08: Right, right. Okay, so that would be upside then. Okay. If it goes from a Schedule I to Schedule III, do you think that expedites changes in the banking regulations as well?
spk07: I don't believe they're related. I think any momentum in the industry is fantastic, and from a banking standpoint, you've seen all of the FAA bills they thought they could tie safer banking to, and that – as of late they've said that it won't be connected now that it looks like it would go to the lame duck section later or session later in the year. And that would be the best avenue to have it passed. But I think positive overall cannabis industry sentiment, uh, helps go a long way. You know, the, the people are speaking and, and I believe from a banking standpoint, politicians, they have no option but to listen. So I do see overall, working together for a better industry for sure.
spk08: Okay. But separate on the banking thing. Okay. And then just in terms of, you know, productivity improvements, you know, cost cutting, how, you know, obviously you decreased expenses but where are you sort of in that process, you know, halfway through, completed? Maybe just give us an understanding of where you're at.
spk07: From a productivity standpoint, it tied into some of the reductions in general and administrative expenses last year. When we had line of sight in the middle of last year, when they all were on the same ERP, we realized that we were We had too many service providers on the team. And that's when we started to adjust. And we've got to a right size now where we're capturing a large amount of those salaries in COGS. That's the key. On the last call, we had stated that in 2023, we moved over $1.3 million down into salaries, just because of the fact that we weren't as productive as we wanted to be. So So results in Q1 were very strong there. In terms of optimization, we don't anticipate at this time making any further reductions. We're right-sized right now year over year from the efforts and the moves we made in 2023. We're expecting to recognize $8 million in 24 of savings from a G&A standpoint and in Q1. We've already recognized $2.8 million versus Q1 of 23. So we feel we're in a great place, and we've lowered the break-even level for the company, which is key, and we do not anticipate making additional cuts. Now, that being said, we're always looking at expenses, overall expenses, and trimming where we can. Dick, is there anything you'd add to that?
spk06: I think the only thing I'd potentially add, Anthony, is just during the first quarter, there continued to be some reductions, but generally, when we hit the end of the first quarter, that was where we got to the headcount levels we were looking to get to. So, anyways, you're thinking about things going further out. Yeah, the first quarter contains a little bit of a high on the G&A side, that there would be further reductions expected for Q2. But by the time we got to the end of the quarter, we were kind of at exactly the levels we were looking to get to.
spk08: Okay, great. That's good color. Thanks, guys. I'll hop back into Q. Appreciate it.
spk01: Thank you. And the next question is coming from Eric Beder from SCC Research. Eric, your line is live.
spk09: Good afternoon. Talk a little bit about something besides the phases here. Commercial, what are you seeing in terms of demand for the commercial business? Has it continued to be as robust and have you been able to continue to expand the services you can offer for that division?
spk07: We haven't expanded the services at all at this point any further. Demand remains strong. The one area where we're watching closely is the length of time. I talked about it in Q4 as well, but the length of time that passes in between when we're being verbally awarded contracts and we're actually getting signatures. And so far in Q1, it hasn't gotten worse, but it hasn't gotten better either. So that's one area that we're watching closely. But the niceness is we're not losing contracts. So it'd be one thing if we're losing opportunities, but we're not losing. It's just a timing issue. Our pipeline remains strong. We don't publicly speak about the quantity of pipeline, but it remains strong and very qualified for sure.
spk09: And are you seeing, when you look at kind of your top accounts here, are you seeing them give you larger contracts going forward? You know, I'm saying as they kind of like, because I know the commercial is a little bit, it's not as much a one-off sometimes as the cannabis business can be. So are you seeing that trend continue?
spk07: We have seen that trend continue over or progress over the last year, not in Q1. You know, we hit a lot of solid singles in Q1, but no triples or home runs, and hence the backlog there. backed off a little bit, 10%, right, sequentially, but hitting a lot of add-on contracts to existing projects where they increase the scope, and some new smaller projects. But on the larger ones, we do have some that are close and out. We believe that we will secure them, but we don't have the signatures yet. But no real material increase in size in Q1 to report to you.
spk09: Sure. We got an update on Europe. What are you seeing in terms of trends there? I know there's been talk about Germany. What are you seeing in terms of the European business going forward?
spk07: Overall, Germany's slow and steady, right? They're just coming into themselves. They made that announcement a couple months ago. It's social licenses to start, so there's no requirement for the design and or build of significant sized facilities. Overall in Europe for us, the demand remains weak. We talked on the last call about right-sizing the organization in Europe, aligning the expense structure with the size of the opportunity right now. That all being said, we believe we've right-sized it. There's definitely business to be had in Europe. We want to be a part of the European cannabis and also in the future vertical farming market. It's going to grow a lot from a cannabis standpoint. A lot of the CEOs of multi-state operators who are expanding into the European market have significant forecasts for where that market's going to grow over the next decade. So we know we want to be there. That being said, in Q1, there was no additional new contracts signed in Europe. However, we did have a nice services contract signed in Q2 so far. So we expect to continue signing contracts, but we don't expect any robust material improvement in the business throughout the remainder of the year.
spk09: Okay. All right. Thank you, and congrats. Thank you.
spk01: Appreciate it. Thank you. There were no other questions at this time, and that does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.
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