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Operator
Good day and welcome to Green Thumb Industries' fourth quarter and full year 2023 earnings conference call and webcast. All participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. On today's call, management will provide prepared remarks and then we will open up the call for your questions. To ask a question, analysts may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Shannon Weaver, VP of Communications. Please go ahead, ma'am.
spk10
Thanks, Betsy. Good afternoon, and welcome to Green Bump's fourth quarter and full year 2023 earnings call. I'm here today with founder and CEO, Ben Kobler, President Anthony Georgiades, and 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 our most recent 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. Greensum 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, Greensum 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.
Betsy
Thank you, Shannon. Good afternoon, everyone. Thank you for joining our fourth quarter and 2023 year-end conference call. I'll lead off with an overview of our results and some quick observations on the industry. Anthony will discuss the progress we made in 2023, designed to carry momentum into 2024 and beyond. Then Matt will dive into the financials, and after that we'll open the call up to questions. I'm pleased to report that our team delivered a strong finish to 2023. Even with price compression in some markets and inflationary impacts on consumer spending, we saw our year-over-year revenues increase 7.3% in Q4. This performance contributed to a record fourth quarter for revenues, cash flow from operations, and adjusted EBITDA. On a GAAP net income basis, we reported $3 million, or one cent, per basic and diluted share for the fourth quarter. Importantly, for 2023, cash flow from operations was $225 million. And at year end, we had $162 million in cash on our balance sheet, net of share buybacks, debt repurchases, and fully funded tax payments. Green Thumb is in strong financial shape that largely reflects a capital allocation strategy focused on generating cash flows. Over the past few years, we have deployed considerable capital within our key markets in anticipation of expansion. When New Jersey, Maryland, Connecticut, and New York launched adult-use sales, we had an expanded infrastructure in place to serve a greater market demand. Adult-use sales are on the horizon for Virginia, Ohio, and Minnesota, and potentially other states where we operate like Florida and Pennsylvania. We are ahead of the curve when those markets open for adult-use retail sales. While our major CapEx cycle is behind us, we will continue to invest in scaling growth within our operating markets. As part of our capital allocation strategy, in September our board authorized our first share repurchase program for up to $50 million. We believe that this share repurchase program is an appropriate tool for creating shareholder value without compromising our growth initiatives. To date, we have purchased approximately $40 million or 3.8 million shares. We paid a reasonable price and now every shareholder owns a slightly bigger piece of the pie. In addition, the board approved an additional $50 million for the repurchase program, bringing the remaining authority to repurchase shares to approximately $60 million for a total of $100 million for the program. Additionally, as it relates to the senior debt, we repurchased $25 million of that debt at a 5% discount during the fourth quarter, bringing our remaining principal balance to $225 million at the end of 2023. We continue to focus on building a business to succeed regardless of federal change, while remaining hopeful for the potential reclassification of cannabis to Schedule III, a move that would eliminate the punitive impact of 280E This would be helpful for GreenThumb, especially since we paid over $100 million in cash taxes for 2023. Separately, we also look forward to the day that U.S. cannabis companies can list on a U.S. exchange, which would increase the company's access to capital and the marketability of our stock. Turning to consumer demand, we see positive indicators that consumer sentiment will continue to drive the long-term growth prospects of cannabis. Number one, acceptance of cannabis for health and well-being is evident, with 70% of U.S. adults believing cannabis should be legal. Number two, U.S. legal cannabis sales are estimated at approximately $30 billion for 2023, with more growth expected ahead. And number three, my favorite, over the next five years, there are expected to be 18 million new cannabis consumers in the U.S., while there will be 2 million less alcohol consumers. And that's what drives us. Now, more than ever, we remain hyper-focused on our patients and customers. We are growing our family of award-winning cannabis brands, Rhythm, Dog Walkers, Incredibles, and Bebo, to provide our customers with an even wider array of choices that suit their preferences and price points. We're on a mission to continue building brands that will be part of the American experience for decades to come. And we will continue to explore innovative ways to connect people to cannabis. Whether it's the first of its kind, Miracle and Mundelein, legal cannabis consumption music festival that I mentioned last quarter, the expansion of our Rhythm Artist Series, including the exciting momentum around Tinashe's Green Tea Strain, or new collaborations like the one with Magnolia Bakery and our Incredibles brand. Our strong brand recognition is opening doors to engage and excite our customers in new ways. And as our brands grow, the stars are aligning to create even more opportunities to increase brand awareness and attract new customers. We believe this is just the beginning for Rhythm, Dog Walkers, Incredibles, and Bebop. My confidence in the future of cannabis has continued to grow since we founded DreamThump 10 years ago. That said, outsized opportunity is only as good as an organization's ability to optimize its potential. We are continuously studying what separates success from failure, and it all comes down to long-term planning paired with strong execution that delivers organic growth and cash flow. For us, it's about focusing on investing capital for the greatest risk-adjusted returns, our obsession on providing customers with the best, most authentic cannabis products and experiences, and our intensity around strategically executing our growth plan. Every day is still day one and we are always looking forward to ways to get better as we evolve and continue to win. The team accomplished a great deal in 2023 and that sets us up well for 2024 and beyond, as Anthony will discuss in a moment. However, No achievement, whether big or small, happens without an amazing and committed team across all aspects of the business. We can build cultivation facilities, open stores, and develop new products, but it's the people who care about promoting well-being through the power of cannabis and who are dedicated to treating people well that matters most. And this dedication extends beyond the doors of Green Thumb out into our communities. On February 8th, we published our second annual social impact report that shares many stories of our Growing for Good program and positive impact it's having in the communities we serve. The report highlights the causes we support to promote a more inclusive and equitable industry, the ways we advocate for social and restorative justice, and how we seek to be more environmentally aware. Above all, our social impact report celebrates our team's dedication and achievements, and I could not be prouder of our 4,600 plus team members who make it happen every day in every way. Now, I'll turn the call over to Anthony to add his thoughts on 2023 and beyond. Anthony?
Anthony
Thanks, Ben.
Ben
As you just heard, despite substantial industry, inflationary, and consumer headwinds, the company posted robust fourth quarter results, tapping off an incredibly successful year for our team. Let's look at some of the highlights. First, throughout the year, we invested $220 million in CapEx and opened 15 new stores across six states, ending the year with 91 stores. We also made major wholesale investments in New York, Minnesota, Virginia, New Jersey, and Florida, markets that we anticipate will grow considerably in the years to come. Second, continued strong performance across our award-winning family of brands, Rhythm, Dog Walkers, Incredibles, and Bebo. We're incredibly proud of our BDS market share gains, Illinois, Maryland, and Pennsylvania, along with our 12 high times cannabis cup wins in Illinois and Massachusetts, including six gold cups. Third, an incredibly successful adult use launch in Maryland. Since July 1st, our team has established the leading market position in the state and has not looked back. And last, successful launch of the first open cannabis consumption music experience, Miracle in Mundelein, as well as the launch of our Rhythm Artist Series with Mitchell Tenpenny, Marcus King, State Champs, These results represent the culmination of a tremendous amount of hard work, discipline, and passion with which our team approaches the work we do for patients and consumers every day. Two months into 2024, some of last year's themes continue to ring true. One, we remain skeptical on the timing of any fundamental federal reform, including rescheduling and capital market accessibility. As a reminder, we were left at the altar on safe banking around this time last year. Two, we anticipate continued price erosion in many of our markets. The confluence of supply-demand balances, competition from unregulated and or Farm Bill compliant product, and the current state of the consumer leads us to believe that industry pricing and margins will continue to be under pressure throughout the year. While we prefer wind at our back versus in our face, this setup plays to our strengths. as cash flow generation and balance sheet management have been core to our DNA since day one. Despite regulatory challenges in industry pricing, we are cautiously optimistic on the state adult use discussions happening in Ohio, Minnesota, Virginia, Florida, and Pennsylvania. In the last 24 months, we've deployed significant capital into these markets, and our well-timed investments should provide strong shareholder cash-on-cash returns. For the year, we anticipate CapEx spend to be approximately 50% less than 2023. The bulk of the spend will be focused on 10 to 15 retail store buildouts and renovations in Florida, Nevada, Minnesota, Virginia, and Ohio, along with some wholesale investment in Connecticut and potentially others. In terms of business strategy, within CPG, we plan to operationalize our recent facility expansions in New Jersey, Virginia, and Minnesota, continue to innovate and expand our brand and product portfolios, and last, improve our overall operational efficiency and product quality. In retail, we plan to continue to build out our physical store presence, taking a hard look at those states that convert to adult-use markets soon, invest further into our omnichannel strategy, and refine our curated product selection and consumer experience in each market with the stated goal of being best in class. Our success in implementing these various strategies will be defined by our ability to obsessively focus on the consumer, continue to optimize our competitive market positions, deploy capital to projects that optimize shareholder returns, and continue investing in our team, who remain the heartbeat of our organization and core to everything that we do.
Anthony
With that, I'll turn the call over to Matt to review our financial results.
Matt
Thanks, Anthony, and hello, everyone. We reported fourth quarter revenue of $278.2 million, a 7% increase for the fourth quarter of last year, while sequential revenue saw an increase of 1%. The year-over-year increase was primarily driven by the legalization of adult-use sales in Maryland and Connecticut. While the effect of price compression continues to pressure the top line, continued unit growth, as well as revenue generated from 15 new stores open during the year, also contributed to the increase in revenue. Overall retail revenue increased 6% versus the fourth quarter of 2022 and 2% sequentially. Fourth quarter comparable sales increased 1.3% over the prior year on a base of 76 stores, while growing 1% sequentially on a base of 82 stores. Consumer packaged goods net revenue increased 13% over the prior year quarter and 3% for the full year. Looking forward, digits, much like we saw sequentially last year. Gross profit for the fourth quarter was $142.7 million or 51% compared to $124 million or 48% of revenue for the fourth quarter last year. For the full year, gross profit Turning to OpEx, selling, general, and administrative expenses for the fourth quarter were $92.3 million for 33% of revenue compared to $80 million for 31% of revenue for the fourth quarter of 2022. SG&A excluded depreciation, amortization, one-time transaction costs, and stock-based comp, which we refer to as normalized operating costs, for approximately $61 million this quarter compared to $59 million in Q3 and $53 million last year. Normalized operating costs for the full year increased 4% to $233 million from $224 million last year. The increase in total expenses primarily reflected costs associated with opening new stores and supporting adult use launches. Continued cost management and discipline enabled us to carefully manage our cost base. Fourth quarter net income was $3.2 million included a non-cash impairment charge. Adjusted EBITDA, which includes non-cash stock-based compensation and other non-operating costs, was $90.8 million, or 32.6% of revenue, as compared to $81.2 million, or 31.3% of revenue, for the fourth quarter of 2022. Adjusted EBITDA for the full year was $325.8 million, or 30.9% of revenue, compared to $311.5 million, or 30.6% revenue last year. On the liquidity front, we ended the year with a strong balance sheet including cash of $162 million. Operating cash flows increased $66 million to $225 million from $159 million last year, with $71 million generated during Q4 alone. In closing, we're pleased with our fourth quarter results and we are in a strong financial position to We look forward to speaking with you soon when we report first quarter 2024 results.
Anthony
With that, we'll open the call to your questions. Operator?
Operator
We will now begin the question and answer session. 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 2. In the interest of time, please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question today comes from Matt Bottomley with Canaccord Genuity. Please go ahead.
Matt Bottomley
Good morning, everyone. Thanks for the question. I'm just wondering if we can get a little more granularity on the outsized performance in your adjusted EBITDA margins and operating margins. considering that SG&A was up a little bit and we did see maybe a 1% increase in revenue. It looks like on a year-over-year basis, some of this might have to do with non-cash charges in SG&A on the back of M&A, but I'm just wondering to kind of triangulate the sort of outperformance we saw in adjusted EBITDA given a higher cost base on the SG&A.
Matt
Well, thanks for the question, Matt. So we did see some But, you know, at the end of the day, we continue to manage costs and focus on our goal of just even of 30 percent and less concerned about the components there.
Anthony
Great. Thanks, guys. Thanks, Matt.
Operator
The next question comes from Matt McGinley with Needham. Please go ahead.
Matt McGinley
Thanks. Maybe I'll have a follow-up on that one. I mean, there was something unique about the fourth quarter where you were able to generate the highest gross margin in two years. I mean, was there something with regard to production efficiency or less pricing pressure or some sort of shift in geographic mix that enabled you to get that margin rate up so much? You did have an increase in revenue, and it did increase sequentially in year over year, but the dollar amount there, it's incongruent with the amount of margin increase you got there and you did note that you could see some pressure going forward but you know i guess what i'm trying to get out there is like was there something different this quarter in terms of gross margin uh that you know i'm not sure if that's unique or if that's just good good uh good good management of the business that uh you can you can sustain that level on a go-forward basis yeah matt anthony here i'll take that so um look we definitely had strong performance on the cpg side of the business better operational utilization
Ben
You know, we also, you know, took a hard look at discounting at the retail store level and maybe made some adjustments there that kind of flowed to the bottom line. But, you know, I mean, look, at the end of the day, you know, the other contributing factor was that some of the states that are big contributors of the overall business, you know, had a strong quarter. So that, you know, that was also a contributing factor. You know, but again, kind of looking back as we look ahead, you know, our North Star is really kind of 30%. It was a strong quarter.
spk09
um we took some learnings from it i'm already on the q1 and we're looking ahead at this point okay thank you the next question comes from eric deloria with craig hallam please go ahead uh thanks for taking my questions and uh congrats again on you have another strong quarter here um a bit of a qualitative question for me um so given this outlook for you know continued elevated competition obviously you're operational efficiency kind of gives you more room to uh absorb price compression but wondering if you can comment um on your assessment of your product quality um just how that's trended uh you know whether that's sort of over the past year or in in individuals um uh situations and then maybe just sort of comment on you know how you're seeing maybe market average quality sort of trending over the past year um you know obviously quality having a big impact on pricing here. I'm just wondering if you can kind of comment on your overall quality and how that's performing in the market. Thanks.
Ben
Yeah, Eric. This is Sam here. Great question. So, you know, look, this is something we take a lot of pride in. We're very focused on product quality. And, you know, starting at the beginning of the year, we really leaned into this effort, and we saw a lot of nice progression over the course of the year. You know, in my prepared remarks, I talked about the market share gains that we saw in in Illinois, Pennsylvania, and Maryland. And we think, you know, product quality was a big contributor to that. In addition, you know, we talk about the cannabis cup wins, you know, where we're, you know, up against every other operator out there. And, you know, very strong performance. So, you know, really kudos to the team for just continuing to do really strong work out there. The flower quality is incredibly strong. We're leading with the brands, you know, obviously with Rhythm being kind of the lead horse there. But, you know, is front and center for us and will continue to be.
Anthony
Thank you.
Operator
The next question comes from Pablo Zuanek with Zuanek and Associates. Please go ahead.
Matt
Good afternoon, everyone. Ben, I guess one question regarding rescheduling. Do you have an estimate of the cash savings for Green Thumb if you were to have rescheduling, and what would you do with that cash? And related to that, we've seen other companies take a more, I guess, proactive stance against 280E, and they have either stopped paying their taxes or even started providing for a normal corporate tax rate as opposed to being a cannabis company. So is that something you're also looking at in terms of how you deal with 280E at present? Thank you.
Matt
Hey, Pablo. This is Matt. I can take that question. So with rescheduling, we think the savings there from a tax perspective, it should cut our tax burn in about half or so. When we look at what we would do with that cash, we have options on what we could do with there. And when we get to that point, we would evaluate all of those. looking at things such as stock buyback, debt pay down, M&A, and cap back. So no definitive plans. We're waiting to see what happens there before we can count on any real tax savings. As far as others in the industry, we are definitely aware and familiar with their position. But at this time, we continue to follow and apply the tax code as we have in the past.
Matt
Thank you. And can I ask a follow-up just quickly regarding New York? I know you opened your Rochester store. If you can comment on how that's going. And also, when do you start planning to supply the wholesale market in New York State? Thank you.
Ben
Hey, Pablo. Anthony here. Yeah, look, we opened Rochester just recently. Things are going well. We also entered the wholesale market in January, and that, you know, That's really where we're leading it at this point. You know, we have indoor capacity that we built out, and we're really leading that through rhythm. And we've got, so far, it's, you know, we've got warm reception from the market. We're adding doors kind of by the week, and so far, so good. So I think we have a lot more visibility probably on our next call, but we're cautiously optimistic. We've got a pretty good start in New York and hope we can build from here. Thank you.
Operator
The next question comes from Gerald Pasquarelli with Wedbush Securities. Please go ahead.
Gerald Pasquarelli
Hi, this is Antoine. I'm for Gerald. Thanks for taking the question. Can you provide an outlook on your expectations for the cannabis category dynamics in general headed into 2024? Do you expect performance to improve relative to 2023 considering most major operators meaningfully cut back on CapEx, which in theory should improve the supply-demand imbalance. And lastly, there looks to be some top-down tailwinds on the horizon just related to the lower-income consumer, including the cycling removal of SNAP benefits in March and the potential for lower interest rates to result in higher disposable income. So any color on category health and your broad outlook would be great. Thank you.
Betsy
Sure. I can take that. Hey, it's Ben. Thank you. see the the question was the the consumer health what was the first question that was the second black capex and supply demand oh yeah i think that's a good first question on what's going to happen in the industry and overall supply demand we've certainly watched the capex numbers come cratering down to freakishly low numbers um you know we continue to spend 2023 was a big year for us and we have a real number going into 2024 however the ebitda is very strong so know we can continue to play offense we're continuing to spend it's hard for me to comment on others but i'd be curious what's going on how that growth gets there how that balance sheet rectifies and other kinds of core questions in terms of the state of the consumer again good question you know what we see in terms of some of those pressures you mentioned which are real which are macro which may hit the more you know staples i guess would be the term we're seeing a lot of growth new markets open and some of like the step function up towards war of those sorts of things but those are very real But I would say broadly the cannabis consumer remains resilient. People still like the product. We see it behave like other products in this space, you know, and they're not giving it up. Particularly for us, it's an investment in the brands. I think you're seeing it with Rhythm. You're at the very early stage. We've talked about this on these calls over the years. But, you know, watch out for what happens with Rhythm and Incredibles, Dog Walkers, and Bebo over the next decade. And, you know, we're pretty optimistic about that.
Anthony
Thank you. Thank you.
Operator
The next question comes from Aaron Gray with Alliance Global Partners. Please go ahead.
Aaron Gray
Hi, good evening, and thank you for the question. I just wanted to talk a little bit about, you know, CPG and wholesale opportunities in third-party stores, you know, particularly maybe states such as, you know, Illinois, New Jersey, and New York. We have new stores opening. Just any color you could provide on strategy in terms of getting on shelf, how that might differ in new stores ahead of them opening versus, you know, trying to get on shelf. of already open stores, you might not be there. And then any company you might be able to provide in terms of how you're looking to approach that in these markets would be appreciated. Thank you.
Ben
Sure, and I'll take that one. You know, look, we're very focused on building out our CPG presence within third-party doors, right? We're leaning into our brands. You know, in terms of market-to-market kind of strategies, the reality is All these are different games given the different components of regulation, product sets available, supply and demand and whatnot. So it's not a one size fits all approach. But look, we just talked about product quality. That's one area that we're really leaning in because at the end of the day, we think we can win there. And so it's really just establishing the ground game, building the sales team, and having products that are demanded by consumers. And if you can do that and you can maintain product quality, The rest largely takes care of itself. So that's what we're focused on. Product quality is kind of the tip of the spear there. And then all the other kind of operational kind of, you know, execution type things associated with servicing third-party accounts in terms of delivery, fulfillment, and everything else. We're just incredibly focused on building that part of the business and doing it in the right way.
Anthony
Okay, great. Thanks for the call.
Operator
The next question comes from Sunny Rondwa with Seaport. Please go ahead.
spk02
Great. Thanks for the question. I just wanted to talk about the Florida investments you guys have made. How many locations, I guess on the retail side, do you think that that investment could support once it's fully ramped? Just trying to think about 2024 modeling out additional locations in Florida. So kind of wanted to see what what the constraints there were.
Ben
Yeah, sure, Sonny. This is Anthony again. I'll provide some context on that. So as everyone is probably aware of, given the verticality in Florida, you really have to build out wholesale first before retail. So we did that with our first real phase in Ocala. We have 14 stores open today. We've got another one opening in the next few days. then we've got you know several more that we anticipate opening throughout the rest of 24. what we are doing is obviously watching the ballot initiative um in florida pretty closely because you know if things things head in a positive direction you know we're probably going to have to reinvest into the wholesale capacity and then revisit kind of our retail plan so that's really where we are at the moment um you know we'll have a lot more kind of visibility on our next call is my guess, but, you know, in Florida, it's build a wholesale first and then the retail second.
Anthony
That's really how we did it. The next question comes from Scott Fortune with Roth Capital.
Operator
Please go ahead.
spk17
Yeah, good afternoon. Thanks for the question. I just want to dig in a little, unpack the fourth quarter a little bit. You guys anticipated a low single-digit decline, and you called out... Better states kind of contributing a little more strength there. But just kind of understand, was it less discounting, price compression there? And kind of calling out for the same thing in first quarter. But are you starting to see in some states some pricing stabilization here in your kind of key states? Just kind of call out some of the better pricing opportunities that you see in some of your key states kind of going forward.
Ben
Hey, Scott. Anthony here. I'll take that as well. So let's do that. Obviously, a very strong quarter from a profitability standpoint for the business. We talked about the operating leverage at wholesale. We talked about really looking at the retail gross margin line. Those were the two biggest drivers. Now, look, we had a very strong December, particularly late December. And given the overall operating leverage of the business, with us, the way we manage kind of the SG&A line, every incremental dollar of gross profit really just drops to the bottom line. So, you know, in terms of pricing, you know, we started to see a slowdown in a few markets, but it's just too early to say that, you know, we're out of the woods yet. The reality is we continue to see price erosion in most of the markets that we operate in. So, you know, we saw a slight slowdown in the fourth quarter, but, you know, too early to say if that slowdown is systemic and, you know, not going to continue. But it's really, again, it just comes back to running the business and trying to optimize wholesale retail by state and just running a good, clean business with, you know, keeping fixed costs low.
Anthony
Appreciate the call there. Thanks.
Operator
The next question comes from Ty Collin with 8 Capital. Please go ahead.
Ty Collin
Hey guys, thanks for the question. As you're thinking about your capital allocation options for the year ahead, especially with the pretty significant step down in CapEx, how are you guys weighing share buybacks against debt repurchases at this moment? And do you think that share repurchases are still a good use of capital considering the repricing we've seen in your stock over the last few months and compared to where you guys were buying in the second half of last year?
Betsy
Sure, I can take that. It's Ben. Great question. You know, what I would say at the core is we remain opportunistic. Things are set up pretty well given where the balance sheet is. However, debt is due in April of 2025, so we want to be sure we cover that. I think in the last call and maybe two or three calls, we've talked about the progression of CapEx one, handle the debt two, and think about the share repurchases and how to return capital or what else we could do. Obviously, there's always an overlay of M&A, and we've given thoughts on that before. So that really remains what it is. We want to be sure we handle all those things. We feel good about the CapEx. Obviously, some regulatory changes could come that make 25, 26, 27, and beyond look a little different. We obviously plan pretty far in advance. We've shown a tendency to do that. We're optimistic about the stock. I don't think that's a secret. It's the first time in a while we've been able to talk about that over the last few quarters now that the board has authorized buyback. We want to be opportunistic on the price. It's very volatile, so we'll see what happens, but we want to be able to be in there and see what happens.
Anthony
You never know, but obviously the price we pay matters.
Operator
The next question comes from Mike Reagan with Excelsior Equities. Please go ahead.
Mike Reagan
Hey, guys. Great quarter, and thanks for taking the question. In terms of sort of more recently the first time you've been mentioning M&A as a potential use of capital, could you please give us a little more color on sort of what types of things you'd be looking to acquire? Is that sort of new markets, fill-in markets, things like that? Thanks.
Betsy
Sure. Hey, it's Ben. Didn't mean to apply any difference in the answer last time. You know, We answer the phone, we talk to a lot of people. Things are always on the table. We're down to be creative and think through stuff, but given where multiples are, given the cost of capital, given where balance sheets are, given the non-believability of most people's quoted EBITDA, we tend to sit where we are and sort of take the calls. We're always interested in looking and seeing what's out there and trying to be a creator for shareholders. You never know what's going to happen in the future, so we want to be up to speed.
Mike Reagan
but right now we're pretty focused inward all right great and it's a good follow-up um is there sort of any update on how the regulators are looking at the co-located rides express stores with the circle k agreement and uh which could allow to really expand florida pretty rapidly if they approve that sure mike anthony here um unfortunately no no real tangible update there you know we continue to work with state regulators to uh to get the requisite permits
Ben
And look, we continue to believe that, you know, at some point in time, we're going to open up a rod dispensary adjacent to a Circle K. Great.
Anthony
Thanks. Thanks, Mike.
Operator
The next question comes from Andrew Semple with Echelon Capital Markets. Please go ahead.
Andrew Semple
Hi there. Congrats on the results. Just want to return to the question of capital allocation. i think it'd be helpful maybe if you could uh provide some sort of a sense of what you think an appropriate minimum cash balance would be for green sum or maybe even like a minimum or maximum leverage ratio that you'd be comfortable bringing the business to just to give us a longer term sense of what sort of spare capital uh you would think is available for capital investment share buybacks or m a any thoughts on that sure i can take it you know this is more of an art than a science
Betsy
We read Buffett's letter over the weekend, and we like their cash balance. We certainly not that many decimal places yet. But we like to sleep well, and we like to have a lot of cash. As the debt comes due, we want to be sure we're in a position to figure it out and protect the balance sheet over we don't know what happens for the long term for shareholders, but we feel really good about where we are. So I can't really give you an exact number, but we like where things are. We have some room to play offense, and we continue to produce cash as a business despite 280E. And despite paying taxes, which I never thought would have to be something we'd actually have to call out. But paying taxes, paying the interest produces additional cash for us to figure out what to do. And we're measuring those returns inside the business, M&A, debt, equity, and what we can do to best position the business for medium and long-term growth and not next quarter or next year even, but trying to really think outside the box and think long-term.
Anthony
So that puts us in a pretty good position. Thank you.
Operator
The next question comes from Frederick Obain with APB Capital. Please go ahead.
Frederick Obain
Hi, thanks for taking my question. Just coming back to the margin side, I'm just curious, as you come off the large capex cycle this year, how far along are you in utilizing your capacity and achieving efficiencies in some of the facilities you have invested in this year? And do you see any sort of low-hanging fruit there to continue to optimize and improve their margins. Thank you.
Ben
Frederick, Anthony here. If I can provide some context on that. So, you know, that question really, to answer that correctly, you have to look at it on a state-by-state basis. So, there are some states where we have excess capacity. I'll tell you that, you know, those are states where we're also having adult use discussions today. And so, you know, when we look ahead, you know, as Ben mentioned, you know, a lot of the CapEx building that we did over the last two years is really in advance of what we think is to come. So in some ways we're operating those facilities at a less than ideal kind of, you know, perfect scale, but we've got a lot of optionality that we can kind of grow into. So, you know, we don't talk specifics on kind of capacity utilization and things like that, but we are well-positioned to take advantage of some of the adult use discussions that are taking place today, such that we effectively, in a number of the markets, we already have the capacity built. So I feel very comfortable with where we sit there and our ability to continue to kind of grow into the facilities that we've built out.
Anthony
Thank you.
Operator
This concludes our question and answer session. I would like to turn the conference back over to Ben Kovler for any closing remarks.
Betsy
All right. Thanks, everybody, for joining us. Look forward to our next update in the spring.
Anthony
Thanks, everybody.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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