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spk11: Good afternoon and welcome to Green Thumb's first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the conclusion of formal remarks. During the question and answer session, we would ask for a limit of one question per person. As a reminder, a live audio webcast of the call is available on the investor relations section of Green Thumb's website. and will be archived for replay. I'd like to remind everyone that today's call is being recorded. I will now turn the call over to Shannon Weaver, Vice President of Communications. Please go ahead.
spk16: Thank you, Betsy. Good afternoon, and welcome to Green Thumb's first quarter 2023 earnings call. I'm here today with founder and CEO Ben Kobler, President Anthony Georgiades, and our Chief Financial Officer Matt Faulkner. Today's discussion and responses to questions may include forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. These risks and uncertainties are detailed in the earnings press release issued today, along with the reports filed with the United States Securities and Exchange Commission and Canadian securities regulators, including the 2022 annual report filed on Form 10-K. This report, along with today's earnings release, can be found under the Investors section of our website. Green Thumb assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. Throughout the discussion, Green Thumb will refer to non-GAAP financial measures, including EBITDA and adjusted EBITDA. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in our earnings press release and SEC and CEDAR filings. Please note all financial information is provided in U.S. dollars unless otherwise indicated. Thanks, everyone, and now here's Ben.
spk10: Thank you, Shannon. Good afternoon, everyone, and thank you for joining our first quarter 2023 conference call. I'll lead off with an overview of our results and some observations on the current state of the industry. Anthony will discuss our operations. Matt will dive into the financials. then we'll open the call to questions zooming out given that the industry is still feeling pricing compression inflationary pressure on input costs lack of progress in dc and limited access to capital we feel good about delivering solid results in the first quarter we posted 249 million in revenue gap net income was 9.1 million dollars or four cents per basic and diluted share Adjusted EBITDA was $76 million, or 31% of revenue, and more than 300 basis point improvement year-over-year. In the face of double-digit pricing compression, expanding margins more than 300 basis points year-over-year feels pretty good. Finally, our cash flow from operations was $75 million. The most important message I can convey this quarter is that Green Thumb remains a fiscally sound enterprise with a strong balance sheet including cash totaling $185 million at quarter end. The management team here appreciates this setup, which gives us the optionality as we continue to execute our long-term growth strategy in a patient and deliberate manner. As I said before, this is a marathon, not a sprint, and there will always be hurdles to jump. Luckily, our team is quite skilled at navigating challenges. We remain engaged and excited about the future and our ability to play offense with large amounts of cash and time on our side. At the end of 2022, legal cannabis industry in the US reached $26 billion and it's estimated by analysts to grow to $75 billion over the next decade. GreenThumb is in the fortunate position to strategically play this growth opportunity. We operate in attractive states that give us access to 50% of the US adult population, We don't need to shed any assets or close facilities to fund future initiatives. And we have the dry powder and cash flow to explore options that will create profitable growth and sustainable value. As Buffett has taught us, only when the tide goes out do you learn who has been swimming naked. I am confident that we have a great foundation, team, and board in place. Last week, we welcomed Ethan Nadelman, one of the nation's experts on drug policy reform to our board of directors. Ethan's deep understanding of the cannabis industry and passion for our mission make him a perfect fit for our board. Ethan's appointment will further strengthen our corporate governance, and we look forward to his contributions to the team. As we've discussed from the start, we have always been disciplined stewards of capital and resist growth for growth's sake. We can sleep at night by playing the long game. We have plenty of runway for meaningful growth as we scale our business in our 15 operating states, several of which have yet to launch adult use sales, such as Virginia, Minnesota, Maryland, and New York, to name a few. Like I said earlier, we have the capital to invest in expanding our platform. In 2023, we plan to open around 15 retail stores across Virginia, Pennsylvania, Minnesota, Nevada, and Florida. On April 17th, we added two new stores, Rise New Hope in Minnesota and Rise Grove City in Pennsylvania, bringing our total store count to 79. On the production side of the business, we will continue to make investments in our cultivation facilities and our product development. We are continuously inspired to pursue new and outstanding experiences for our consumers. For example, infused pre-rolls are one of the fastest growing categories in cannabis. And we recently added Show Dogs to the Dog Walker Pack, a new line of infused cannabis pre-rolls. Like our four-legged best friends, Show Dogs are the perfect companions for an elevated journey that's all about new experiences and even greater heights. On 4-20, we launched Show Dogs in Illinois and plan to expand to additional markets, including Massachusetts, Maryland, and Nevada later this year. I'm very proud of our family of brands that range across the cannabis value chain. We have something for everyone, from our premium brands to our value brands like Good Green and Anshan, the latter of which is gaining market share according to PDSA. Having these sought-after value brands is especially important when consumers are trading down during an economic squeeze. While we are seeing average tickets down, transactions continue to increase in our value segment. That's the beauty of a diversified portfolio in action, We want everyone to have access to safe, satisfying, and personally affordable well-being. It's easy to be passionate about your business when you know you're contributing to the well-being of millions of Americans. I want to thank our entire team for never losing sight of that. It drives each of us every day. We also will never lose sight of people left behind, those incarcerated for cannabis possession, the black and brown communities that have been disproportionately harmed by the failed war on drugs, and those struggling to participate in this great American growth story. Reversing this damage won't happen overnight, but we will continue to fight the good fight. Now, I'll turn the call over to Anthony to discuss our operations in more detail. Anthony?
spk19: Thanks, Ben. Good afternoon, everyone. Thanks for joining. As Ben mentioned, we had a solid start to 2023. Despite continued price compression in many of our markets, along with persistent inflationary pressure, the company was able to deliver close to $250 million of revenue and over $76 million in adjusted EBITDA in the first quarter. This allowed us to generate over $75 million in cash flow from operations, solidifying our strong capital position. While macro factors remain outside of our control, we continue to manage the business using a cautious lens that obsesses over cash flow generation and balance sheet stability. During the quarter, the company continued its aggressive capital spend investing $65 million across its fleet. CPG CapEx accounted for approximately 80% of our spend as the company continued making substantial progress on its facility investments in New York, New Jersey, Minnesota, and Virginia. All four projects remain on track to open late this year and will provide meaningful commercial opportunities in 2024 and beyond. In retail, the company is focused on expanding its overall footprint as we anticipate opening approximately 15 new stores this year. As Ben mentioned, we opened our Grove City, Pennsylvania and New Hope, Minnesota stores in April and have about a dozen or so additional stores under development in Nevada, Pennsylvania, Virginia, Minnesota, and Florida that should open before year end. Throughout the rest of the year, in addition to completing our capital projects, our team is focused on the following. One, driving operating efficiencies to combat continued pricing and cost pressures. Given the rate of growth the company experienced since 2018, we have an opportunity to continue to refine our processes, especially within the CPG side of our business. In addition, any revenue growth should provide incremental leverage to our fixed cost infrastructure. Two, continuing to allocate our resources and capital to markets and activities that optimize the current operating environment along with long-term company objectives. This means focusing on the consumer through innovation and expansion of our product portfolios, as well as driving further development of our omnichannel strategy. Last, optimize our opportunity in Maryland come July 1st. As a reminder, we have four stores and an established wholesale business in Maryland, and we are all excited to celebrate this historic event with our team in one of Green Thumb's earliest medical cannabis markets. Should any listeners find themselves in Maryland, Please come see us in Hagerstown, Jamba, Silver Springs, or Bethesda. We'll be sure to have something special, especially for our Rise Rewards members. Kudos to the state for quickly establishing a framework that provides consumers with accessibility to high-quality, lab-tested cannabis products. In conclusion, while we recognize our industry is experiencing a challenging time, we remain incredibly bullish on our business and the demand for cannabis by the consumer. We never anticipated our growth to be linear, yet we remain confident in our team and our ability to achieve strong, profitable growth over the long term. With that, I'll turn the call over to Matt to review our financial results.
spk08: Thanks, Anthony, and hello, everyone. As Ben mentioned, we generated over $248 million in revenue in the first quarter of 2023, a 2.4% increase compared to the prior year quarter. revenue increase was primarily driven by the operations of the retail segment our strong retail performance in the first quarter was supported by the commencement of adult use sales in new jersey rhode island and connecticut along with the increased store traffic in our open and operating retail stores particularly in virginia minnesota and maryland overall retail The decline in gross margin was primarily driven by price compression. Turning to OPEX, selling general administrative expense for the first quarter was $80.5 million, or 32.4% of revenue, compared to $68.4 million, or 28.2% of revenue for the first quarter of 2022. SG&A excluded depreciation, amortization, one-time Disciplined expense management remains a top priority as we navigate this challenging environment. The company generated net income of $9.1 million, or $0.04, for basic and diluted share during the quarter. This compares to net income of $28.9 million, or $0.12, for basic and diluted share reported last year. Adjusted EBITDA, which excludes non-cash stock-based We ended the first quarter with a strong balance sheet, including cash of $185.4 million and working capital of $170.7 million compared to $149.2 million a year ago. At quarter end, we had $277.8 million in debt, with the majority being the $250 million of senior notes at 7% due in April of 2025. In closing, I'm very proud of our execution in the first quarter. cannabis to our patients and customers and generate strong returns for our shareholders.
spk03: With that, I'll open the call to questions. Operator.
spk02: We will now begin the question and answer session.
spk11: To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then two. During our Q&A session, we would ask for a limit of one question per person. At this time, we will pause momentarily to assemble our roster.
spk02: The first question today comes from Gerald Pasquarelli with Wedbush Security.
spk11: Please go ahead.
spk14: Hi, good evening. Thanks very much for the question. So it looks like your growth margin definitely came in a little better than expected, just given the sequential improvement and then an improvement just in the magnitude of the year-on-year contraction. So Matt, maybe just a little bit of color on the cost environment, whether or not that is improving at all relative to last year, how we should think about margins on a go-forward basis using this as a benchmark, just trying to reconcile it back with some of the commentary that you made previously. Thank you.
spk19: Hey, Gerald. This is Anthony here. I'll take it. That's a great question. So look, we're pleased with the year-over-year margin improvement. Shout out to the team for their execution. As you know, it's hard to predict margins on a quarter-to-quarter basis. And as we said before, despite some of the price compression that we're seeing, we've got a number of levers within the business that we can pull to try to minimize the impact on the overall profitability. So really what we're doing is we're focusing on the long-term, taking it market-to-market, and really just focusing on cash flow generation on a per-market basis.
spk03: Got it.
spk13: Thanks very much for the color. I'll pass it on.
spk02: The next question comes from Matt McGinley with Piedmont. Please go ahead.
spk18: Thank you. So on the G&A, I'm a little bit surprised at the $6 million quarter-over-quarter bump in G&A dollars, given that you didn't add any stores. Is that $56 million in core G&A the new base to build from that will then build, I guess, with new store growth? Or was there some spend in the first quarter that may not repeat again, and maybe there's something in corporate or what have you that won't repeat later on in the year? Just trying to understand kind of what the big driver of the sequential increase was.
spk08: Thanks, Matt. This is Matt. I'll take that. So when we think about SG&A, yes, we're pleased with performance in the first quarter. But at the same time, when we look forward, we're constantly watching the SG&A line in conjunction with top line performance. But we do expect the SG&A line to grow, especially in the second half of the year when we're talking about the number of new stores we're projected to come the back half of the year.
spk18: And what drove that increase in this quarter?
spk08: There are a number of items, Matt, that we can point to, but a lot of it is really just staying disciplined on what we're incurring, what costs we are willing to take on for the business, and how we can manage those on a go-forward basis. So there's nothing as a single driver, it was a confluence of a series of events. Okay.
spk01: Thank you.
spk02: The next question comes from Michael Lavery with Piper Sandler. Please go ahead.
spk04: Thank you. Good afternoon.
spk07: I just would love to get your sense of the industry landscape and how you think and what it takes for it to evolve. Obviously, price compression is still an issue pretty broadly. You're in a position to be acquisitive if you find the right thing, but are there interesting assets? What does it take to get some rationalization in the industry or consolidation? Just would love to get some of your thoughts of how that might play out and what it would take to see some improvement there.
spk10: Sure. Hey, Michael, it's Ben. Thanks for the question. I think you summed it up well. We're seeing pricing depression in the mid-double digits, depends on which markets you look at. And they were seeing much higher 20% to 30% unit growth year over year across the country. So we're seeing continued demand for the products. And we're seeing this capital cycle continue to take shape. I would say for us in the M&A environment, phone rings a lot. We understand what's going on out there. But don't look for massive or transformational M&A from us as you go forward. Certainly, there are some things that are interesting. It's been the same strategy for a while. Integrating deals is hard. Closing big deals is hard. Then it's even harder to measure those returns. So we love our portfolio today. We love the states we're in. As I tried to say in the prayer remarks, we have the growth embedded in the portfolio now. And we're putting in massive amounts of capital into our business directly that's far cheaper than even these bargain basement quote unquote M&A prices that are out there because there's hair on the story. So I love to cleanly build a brand new facility in Cottage Grove, Minnesota. and understand that investment and what the returns on those are going to be, or in Virginia or in Hackettstown, New Jersey, that are essentially us buying our own business at much, much cheaper than any M&A with less problems because we ground up or we know what we're doing, we think, after this many years. So that's a little bit how we look at it. There's market share for us to take. There's massive growth out there. And we think we're in a position to play offense and initiate things, begin new projects, new product innovations, and new investments in the brands that now have national reach. to develop that relationship here in some of these middle innings with the consumer, which is where we should start to see our dial shift as we scale down this CapEx cycle into the next middle innings of the industry.
spk04: That's great color. Thank you. Sure.
spk02: The next question comes from Eric DeLaurier with Craig Allum.
spk11: Please go ahead.
spk14: Just wondering if you could comment on some of the working capital changes in the quarter that impacted cash flow from ops.
spk03: Thanks. Well, this is Matt. I can take that.
spk08: One of the main things when we think about cash flow from operations in the quarter, a reminder there's not a Q1 tax payment in the in this quarter, but on the downside, you have two tax payments that will be coming in the second quarter. So when we look forward to the second quarter, we'll see a more flat-ish cash flow from operations.
spk03: So when you balance the two out, we should be in good shape there. Thank you.
spk02: The next question comes from Andrew Partheno with Stifel. Please go ahead.
spk00: Hi, good evening. Thanks for taking my questions and congrats on the cash generation. I'd like to continue the theme on that, please. So, you know, you talked about a little bit on the tax payment here, but wondering about, you know, other working capital items like your inventory. You know, last quarter you did achieve a record-breaking number and this quarter you beat it. Last quarter you had... a working capital drag and a tax payment. So just wondering if you can parse out, how did you achieve this impressive cash flow number? Are there any markets to call out here that were maybe outside contributors or was this more broad-based? Just wondering if you can break that out, how you achieved that impressive number.
spk08: Certainly, I can take that. This is Matt. So, you know, I think we were talking about cash flow in the first three months of the year. Yes, we were definitely pleased with the results there. And I think a lot of it is really coming from a number of factors, where we didn't see our inventory balloon in the first quarter. So we've maintained a line in the sand on inventory that we feel good about on the balance sheet. our accounts receivable also towing the line there. And at the same time, we're not inflating, artificially inflating, obviously, our accounts payable or our accrued expenses to achieve that. So I think a lot of it really just comes down to good discipline actions that we're taking to control the finances of the business. And it's nothing really, you know, one action. It's It's the compilation of all the actions we take on a daily basis to achieve those results.
spk10: Yeah, I would just jump in. I totally agree with what Matt said. And Andrea, you asked a good question. And I think sitting where I'm at, it's not one thing. This has been part of our ethos. We've been thinking about the cash, managing the business as if it's our own. As I think about whether we talk about cashish or Anthony preaches to the team to spend treasury like it's your own, it's part of how we operate. So we don't have a lot of slippage of cash. The fortunate thing in the first quarter, as Matt said in the last question, which is totally true, is there's no tax payment. We pay our taxes on time in full when they're due. So the second quarter, we'll have two payments. So that will balance it out. Same thing happened last year. Just look at our quarterly cash flow. Same deal there. But in terms of managing the cash, in an industry that's tough, for four to six quarters in a row, we've been talking about that ethos with our team and publicly. And so we're sitting with the 188. We like our situation. We like the visibility we have. And, you know, we can continue to do it. But there's not some big revelation of what we're doing. It's more of an ethos, a culture, and a mentality. And we like it, and we want to continue with that sort of head down, execute, build the cash, and be opportunistic mentality.
spk05: Appreciate that. I'll get back in the queue.
spk02: The next question comes from Aaron Gray with Alliance Global Partners.
spk11: Please go ahead.
spk15: Hi, good evening, and thank you for the question. So verticality has been a key theme. So I want to get some color in terms of how comfortable you feel today where you stand in terms of in-house brands being sold in your stores. Is there still a lever to be pulled there to increase that for some price insulation? And also, do you believe we might start to see more of a CPG growth in terms of third-party stores? I know in terms of the wholesale, it's been around the low 60s now for the past
spk19: know four quarters now so you know how i we might see some more growth on that wholesale side or if we still keep the look to keep it in-house with that insulation on the verticality thanks hey aaron uh anthony here uh great question so i'll start holistically with the business and then give a little bit more detail um you know when you zoom out so you know verticality for the quarter not materially different from q4 um you know do we have any more opportunity there within the business certainly You know, the way we look at it again, it just comes down to a market to market kind of assessment that we make. But there's definitely, we've got some, we have some dry powder there if we need it. You know, what I'll also say is that, you know, on the CPG side, look, we're working hard to continue to introduce brands that can really stand on their own two feet and sell on any shelf, whether they be ours or someone else's. And so, you know, what Ben talks about the show dogs and some of the other things that we're doing behind the scenes, You know, that's the hard work that we're putting in now that hopefully will pay big rewards for shareholders in the future. But, you know, we're certainly focused on continuing to kind of drive, you know, third-party CPG distribution. We're going to continue to do that. And then, obviously, at the same time, we're looking to optimize our business on a market-to-market basis. And verticality is one of the levers that we use to effectively do that.
spk03: All right, great. Thanks for the call, Eric.
spk02: The next question comes from Ty Collin with Ace Capital. Please go ahead.
spk12: Hey, thanks for taking the questions. Ben, I'm curious to get your thoughts on the M&A landscape as things sit today. Obviously, that's an area where you've been very methodical in the past and it's paid off, but are you starting to see any actionable opportunities out there given the stress that's emerging and maybe seeing somewhere to put that cash pile to work?
spk04: Yeah, thanks for the question.
spk10: Like I said before, we're out there, we're listening, we're talking, but we're really focused on our own business and how to drive the highest returns for what we're doing. So I wouldn't look for massive transformational M&A. We know the difficulties of integration and what's associated with that. So the bar remains very, very high. We have a lot of opportunity within our business to spend our capital, your capital, your shareholder money into the business versus to buy somebody else's problems theoretical EBITDA and you know non-existent cash flow because there aren't businesses that have that we're talking to everybody so are you guys and there's just so much noise and hair and problems all over the place so we're like our spot listening we're talking trying to help where we can but you know it's not so attractive out there so how to measure the returns on what we do whereas like I said investments in the business which is why you see our capex you know we're putting our money where our mouth is by investing in the business And we hope we can produce those returns that should benefit all the shareholders. So on the run rate of whatever the EBITDA is today, where we can take it into the future, we think that growth is here in the business. All that said, spending the equity, spending the cash versus the alternatives we have, given the multiple, given what's out there and the lack of anything really positive available for sale or even existent, makes us love what we're doing, makes us just continue to preach to the team, head down and execute, and let's go execute into this next level, these middle innings of growth.
spk03: cannabis in the U.S. because we've got a really good formula going.
spk02: The next question comes from Scott Fortune with Roth Capital. Please go ahead.
spk17: Yeah, good afternoon. Thanks for the questions. As we've seen kind of normalization play out here, maybe, Ben, can you walk us through the last couple quarters with the sequential down growth here? And how much of that is seasonal versus kind of industry challenges? And with your current footprint, do you expect kind of seasonal 2Q pickup? And how much or limited do the pricing or the challenges that you've indicated in the market? And then just on top of that, can you provide some light on kind of new adult youth markets and the runway there, you know, with New Jersey, Connecticut, and likely Minnesota and Maryland turning on here pretty quickly?
spk10: Yeah, hey, Scott. It's Ben. I think your first question was around top line, right? What's going to happen?
spk17: Yeah, is that more seasonal or industry challenges? And how do you look at Q2 kind of playing out as we see usually a stronger Q2?
spk10: Yeah, I think it's a combo of things. I would say, you know, we expect Q2 to be in the flat zone, but we have a lot of confidence in the back half of the year. We've got new store openings. We've got Maryland adult use turning on July 1st. which, as Anthony mentioned in his prepared remarks, is something we've been getting ready for for a while. And we have facility expansions coming on really at the very tail end of the year that should impact first quarter 24. So all that puts us in a position with the new stores in Maryland to see growth in the back half of the year. That's some of the SG&A Matt was talking about before. But, yeah, there is seasonal. We've seen it over time. And you just have to look at which markets we're in and what's happening to understand it. Again, the business is really bottom up. It's the sum of the parts versus a top-down macro call.
spk03: And that's why the bottom up, we're able to put chips on the table for where that future growth is coming.
spk17: And with that, can you provide a little color on New Jersey, Connecticut, and those states as they turn on, how you're viewing it from a bottoms up standpoint?
spk19: Sure. Yes, Scott, I'll take that. Look, I'd say that all are progressing nicely. These are markets that went live in the last 12, 18 months. know continue to see nice economics we haven't seen you know any real deterioration uh the step function up has really already happened you know we do have a couple stores in connecticut that we have not converted over to adult use we've got one in new jersey as well that's still um you know uh 100 medical so we have some kind of embedded growth once we can uh figure those out but generally you know they're they're performing uh according to plan and you know like i said the step function up on the top line was really already felt. And so now it's, you know, now it's just continuing to optimize each of the markets themselves.
spk03: Appreciate the color. Thanks.
spk02: The next question comes from Sunny Renhawa with Seaport. Please go ahead.
spk06: Hi. So what percentage of the industry-wide pricing weakness that we're experiencing right now do you think it's coming from the value segment taking on more share versus just overall industry oversupply? And then where do you guys stand in terms of the value segment as a percentage of revenues? And where are you in terms of, I guess, a rollout across all your markets for your value brands?
spk19: Sure. So, Sonny, I'll take a couple pieces to that puzzle. Great first question. You know, I mean, look, that's very difficult to measure, right? You have a couple of things happening within that. You know, yes, we have seen a trade down. However, we've seen, you know, compression really within all facets of the value curve. So, you know, how much is really the consumer trading down versus, you know, other portions and other factors, really tough to say. You know, look, this is something we saw early and we reacted as quickly as we could to it. We've obviously continued to make additional investments into the Goodgreen and Anshine brands that Ben mentioned in his prepared remarks. We're seeing nice progress, you know, according to the, you know, BDS data that we all look at. You know, and we're continuing to introduce products not only at the, you know, at our Rhythm and Dog Walker brands, but also at the Anshine and Goodgreen brand because we think this is here to stay. So, you know, as the market segmentation really kind of settles, you know, which is something that we anticipated in the middle endings of this industry, you know, that's probably just going to continue to happen. So, I mean, it's just premature to really guess, you know, is the value factor, how much of that is really impacting the overall compression that we're seeing. It's difficult to say, but what we're doing is we're making investments into all facets of the value chain so that we're kind of well prepared to take, you know, to optimize the business today, but also take advantage of the time when perhaps, you know, the consumer is looking to trade up versus trade down.
spk06: okay um and just i guess as a unrelated follow-up um i think we've got the bulk of the store openings in in the second half of the year if you could just give a little bit of color uh in in terms of you know the quarterly world out there yeah so um you know we've got approximately 15 new stores opening you know we've already opened two uh this quarter
spk19: We've got a few more that should turn on, and then really the balance, call it anywhere from eight to 10-ish in the second half of the year. It's hard to guess right now exactly Q3 versus Q4. These projects are at various stages of build out. They're generally well spaced out, kind of equally spaced effectively. It just kind of happened by design. Well, not by design, but just kind of naturally. um you know so from here on out you know we think we've got call it 12 to 13 additional stores that should open up uh you know through the end of the year great i'll turn it back as a reminder we would ask for a limit of one question per person the next question comes from matt bottomley with canaccord please go ahead
spk09: Good evening, everyone. Thanks for taking the questions here. Just wanted to go back to free cash flow. It's obviously a question a lot of the analysts are getting on the inbounds just given where valuations are and perceived sort of access to capital anytime in the near term. So I know if you look at any individual quarter, it can get convoluted with different things that don't necessarily relate period over period. But if you take the $75 million that you did given that there's no tax payments there, and then compare it to Q2 where there's two tax payments. It seems like about $150 million of cash flow, which is similar to what you did last year, is kind of where it looks like everything's falling, assuming a flattened environment. I'm not trying to put that assessment to you guys, but just assuming that everything is flat. Can you talk to the $150 million of operating cash flows in relation to your PP&E spend last year, which I think was about $180 million, and then where you perceive interest payments or cash interest payments over the next 12 months to be, just in relation to those three dynamics, which I know people are often asking about?
spk10: Yeah, sure. Thanks, Matt. Good question. So, yeah, the CapEx, there's a lot to that. So, where the CapEx is this year, we spent about $60 so far in the first quarter, a little more than that. comfortable with where we're putting that capital. That capital is funded with cash on the balance sheet and, as you nicely articulated, cash flow from operations after tax after interest. They're the I and the T of EBITDA. They cost real cash. So we expect about another 100 for the rest of the year in CapEx into the business. In the projects that we've talked about, no news there. Finishing those off. And we do not think 24 looks like 23. Just as 23 is less than 22, it's coming off on those big ones. And so what do we do with that cap, that free cash flow that you articulated, again, out of basically, like you said, a flat environment of 300, is we want CapEx. We have that funded. We have that well done. Two, we're thinking about the debt. Yes, we have a low level of debt, but it's something we're talking about and thinking about. We have 250 at 7% due in April of 25. And then we look at what other things we could do with the cash, whether it's M&A on our own equity, certainly looking at things in this environment that could be exciting as we look at a medium and long-term lens in the best interest of shareholders. So it's a fortunate spot that we're in with that kind of powder to play with, given the balance sheet we have and the cash it produces. But it's important that people understand the tax rate, which you obviously do, and then interest, because interest is real cash out the window. So we like the situation. It produces cash. We have the projects well-funded, fully funded on the balance sheet today. The business produces the cash and then puts us in a position to wait for a few good things or a few good ideas to come along, which we're excited about.
spk09: Got it. Appreciate that. And just as a, not a follow-up, but maybe just if we can, maybe in context of last year, if you're able to tell us what the actual 280E payments were. It was at around $150 million. That's kind of where our market, I'm just not sure if that's been said in the past.
spk10: Total tax about last year, and Matt can be honest here, was about $120 plus of cash taxes to Uncle Sam's. Anthony's talked about our largest financial partner. 280E is responsible for a big portion of that. We've been hesitant to give exact guidance given accelerated depreciation on capital and all kinds of deduction things, but a significant portion of that could have been saved in cash to either invest in the business, buyback stock, M&A, anything, you name it. But 280E takes away a lot of our cash. We think about $120 last year. Total taxes. Got it.
spk03: Thanks so much. Sure.
spk02: The next question comes from Andrew Parthena with Spiegel. Please go ahead.
spk00: Hi, thanks for taking my follow-up question. And I kind of wanted to continue that line from the last question. You know, your CapEx seems to be coming down substantially in 2024. You mentioned thinking about debt. I'm wondering specifically about share buybacks, if you have any thoughts about that, given where stocks are now and where they might go. Is there any point in particular that you would see this as very attractive?
spk10: The short answer to your last question is yes, of course. Prices can get silly. We want to be ready to play offense if that were to happen. the business at about 300 with what he said, 300 to be without 120 taxes. Our total cash interest to Matt's question last is under 20 million, about 18 a year annual, which leaves cash available. So once we cover the CapEx, once we understand the debt, we're certainly out there thinking about it. Uh, everything's on the table if it makes sense. Um, and we're watching what's going on out there, but we're not in this in a short term game, the stock issue, a press release or something like that. We're thinking about longterm owners of an enterprise. And if we could certainly own more of the enterprise, it was a good use of company capital, and we were covered in the other places, it's on the table.
spk03: So we're evaluating everything.
spk02: This concludes our question and answer session.
spk11: I would like to turn the conference back over to Ben Kober for any closing remarks.
spk10: Thanks, everybody, for dialing in.
spk03: Great questions, and look forward to giving you an update on the second quarter in a few months. Thank you.
spk02: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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