Curaleaf Holdings, Inc.

Good afternoon and welcome to the Curaleaf Holdings, Inc. First Quarter 2026 Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touch-tone telephones. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Camilo Lyon, Chief Investment Officer. Sir, please go ahead.

Good afternoon, everyone, and welcome to Curaleaf Holdings' first quarter 2026 conference call. Today, I'm joined by Chairman and Chief Executive Officer Boris Jordan, President Rahul Pinto, and Chief Financial Officer Ed Kremer. Before we begin, I'd like to remind everyone that the comments on today's call will include forward-looking statements within the meaning of Canadian and United States securities laws, which by their nature involve estimates, projections, plans, goals, forecasts, and assumptions, including the successful integration of acquisitions, and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements on certain material factors or assumptions that were applied in drawing the conclusion or making a forecast in such statements. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Additional information about the material factors and assumptions forming the basis of the forward-looking statements and risk factors can be found in the company's filings and press releases on CDAR and EDGAR. During today's conference call, in order to provide greater transparency regarding Curelease operating performance, we will refer to certain non-GAAP financial measures and non-GAAP financial ratios that involve adjustments to GAAP results. Such non-GAAP measures and ratios do not have a standardized meaning under US GAAP. Any non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by US GAAP, should not be considered measures of cure-lease liquidity, and are unlikely to be comparable to non-GAAP financial measures provided by other companies. Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable US GAAP financial measure under the heading Reconciliation of Non-GAAP Financial Measures, in our earnings press release issued today, and available on our investor relations website at ir.curaleaf.com. With that, I'll turn the call over to Chairman and CEO Boris Jordan. Boris?

Thank you, Camillo. Good afternoon, everyone, and thank you for joining us to discuss our first quarter results. 2026 is off to a strong start across macro, fundamental, and regulatory landscapes, And more importantly, we are seeing a clear shift in the trajectory of our business and the industry. The macro headwinds that constrain growth over the past three years are now beginning to turn into meaningful tailwinds. In the U.S., consumer spending remained healthy in the first quarter. However, we are closely monitoring current inflationary pressures. Stronger income tax refunds versus last year have supported spending power to the benefit of robust cannabis sales. reinforcing the resilience of underlying demand even in the face of higher gas prices. At the same time, we believe the anticipated hemp ban is already benefiting the regulated market. Alcohol retailers have begun destocking hemp-derived products, and we expect that trend to accelerate as we approach the November 11th hemp ban implementation deadline, driving consumers back into the regulated channel, increasing traffic, and further strengthening the position of skilled operators like Curalee. From a fundamental standpoint, our strategy is delivering. The investments we've made in the core pillars of our Built for Growth framework, customer centricity, brand building, and operational excellence are translating directly into tangible P&L performance. First quarter revenue of $324 million grew 6% year over year, exceeding both our guidance and internal expectations. Our domestic and international segments grew 2% and 35% respectively, underscoring the durability of our core business and the strength and scalability of our global platform. Without question, Curaleaf International is a key differentiator and an increasingly important driver of long-term value. Gross margin was 49% and adjusted EBITDA was 63 million or 20% margin, including 170 basis point drag from our international as we continue to invest in driving growth and market share gains abroad. We ended the quarter with $106 million in cash in the balance sheet. Net income from continuing operations was $70 million or $0.09 per share compared to a net loss of $50 million or $0.09 per share last year. We also continued to strengthen our balance sheet. We reduced our acquisition-related debt by $9 million and successfully refinanced our $475 million senior secured note with an oversubscribed $500 million three-year facility backed by strong demand from both new and existing investors. This transaction is a clear signal of investor confidence in our strategy, execution, and credit profile. Additionally, we completed the buyout of the remaining 45% minority interest in our German subsidiary, 420 Pharma, bringing our ownership of Curaleaf International to 100%. Based on a recent comparable public market transaction, the implied value of Curaleaf International is approximately $1 billion, highlighting the significant embedded value within our global platform that we believe is not yet fully reflected in our current valuation. The U.S. cannabis industry has now entered what we believe is the most important regulatory inflection point in 55 years. Two weeks ago, under the direction of President Trump, Acting Attorney General Todd Blanch formally rescheduled medical cannabis from Schedule 1 to Schedule 3, while simultaneously restarting the broader rescheduling process, with an ALJ hearing set to commence on June 29 and conclude no later than July 15. This dual-track approach is deliberate, designed to move with urgency while ensuring a durable and legally sound outcome. practical and financial implications are highly transformative to the industry first federal funding for medical research will be allowed our uk team has been conducting research in concert with imperial college in london on cannabis derived solutions for neuropathic pain we plan to share this research with the da and fda while also leveraging our partnership with the university of pennsylvania whose cannabis research we also support under our special research license Access to cannabis research should shed light on the medicinal properties of the plant and further remove the stigma that cannabis carries. Second, the removal of 280E taxation on medical cannabis expected to be retroactive to at least January 1st immediately unlocks meaningful balance sheet benefits. 60% of Curalee's business is medical and stands to get substantial 280E relief. When the adult use process concludes, which we expect later this summer, these benefits should extend across the adult use portion of our business as well. The remaining open question relates to the IRS look-back period for retroactive 280 relief, and we expect further clarity in due course. Equally important, the DOJ's order opens an unexpected step that reforms medical cannabis beyond Schedule III. The order provides that we can get DEA licenses for our medical cannabis businesses, which would make our business fully legal under the CSA. In fact, earlier today, we filed applications to register with the DEA. Proceeds from the CSA cannabis cannot be deemed money laundering. The practical implications of this are yet to be seen, but we and the industry are racing to explore increased access to banking, financial services, and credit card use for our medical cannabis business. Normalized banking relationships and, critically, the ability to accept major credit cards would remove friction at the point of sale, improve conversion, lower transaction costs, continuing the normalization of the consumer experience. It would also improve cash management and expand access to credit, representing another meaningful step change in profitability and scalability for curators. Our adult use business may also benefit from increased access to financial services when the expected adult use rescheduling happens later this year. Furthermore, after adult use rescheduling, the probability of uplisting to a major exchange meaningfully increases once guidance from Treasury is provided later this year. With the glass ceiling now broken, we are seeing an increased momentum at the state level as non-cannabis states, including North Carolina, South Carolina, Tennessee, and Indiana, are actively exploring medical programs. The upside here goes well beyond tax relief and banking access. The DOJ framework introduces a catalyst from which cure relief is particularly well positioned to gain. The issue is the DEA licenses to state legal cannabis operators makes them compliant providers of cannabis under the CSA and in the international treaty. This opens the door for us to participate in import and export transactions. A real import-export market will require permits from the DEA, and many states have already indicated that they would support both exports and interstate commerce. For AcuraLeaf, this represents a significant and highly strategic opportunity. We already have built one of the largest and most sophisticated cultivation and manufacturing footprints in the United States. This established network of facilities positions us to supply our international operations with domestically grown product, dramatically improving margins, and strengthening control over our supply chain. Today we produce approximately 20% of our product we sell internationally. That leaves a substantial opportunity to vertically integrate, expand margins, and unlock incremental profitability at scale, while further leveraging our existing domestic infrastructure. Interestingly, in the U.S., the mix has flipped. We produce approximately 80% of our own products and by 20% third-party products. Put simply, we believe we're uniquely positioned not just to benefit from the regulatory shift, but to lead the next phase of industry growth. Fairleaf International delivered a strong start to the year with revenue growing 35% year-over-year, ahead of our internal expectations. Performance was led by continued momentum in Germany and the UK with early signs of recovery in Poland. In Germany, after a soft January reflecting accelerated pharmacy stocking late last year, sales rebuilt through the quarter and March was our strongest month, a positive setup heading into quarter two. In the UK, consistent with patient growth at Curaleaf Clinic, more than offset competitive pricing dynamics and patient fees. Margins were pressured this quarter as we worked through transitional dynamics in our international supply chain. Prior to the recent U.S. rescheduling developments, we had been evaluating meaningful capex to expand our international cultivation footprint. We are now reassessing that investment in light of a more compelling alternative, leveraging our domestic cultivation assets and award-winning U.S. genetics to supply international markets. would not only avoid significant capex but also unlock meaningful gross margin expansion as we scale looking ahead we remain optimistic that spain france and turkey will begin contributing in 2027 as those programs finalize their frameworks and importantly u.s rescheduling could act as a catalyst for other countries to embrace medical cannabis we're actively monitoring each market and will share more as visibility increases With that, I'd like to hand the call over to our president, Rahul Pinto, to discuss our U.S. strategy and operations. Rahul has been with us for nearly a year, bringing his CPG experience from Pepsi and Albertsons securely, and has already made impact on the business. Rahul.

Thank you, Boris. Our domestic business grew 2% year over year, and more importantly, we are seeing clear proof points that our strategy is working. The three pillars of our Built for Growth framework, customer centricity, operational excellence, and brand building are coming together to create a durable and scalable foundation for growth. We saw the clearest early success in Florida, where we implemented the strategy first. By improving flower quality and strain diversity, introducing new products, aligning assortment with demand, and delivering a seamless customer experience, we drove 15% transaction growth year over year, more than offsetting price compression. We have now taken this playbook and are deploying it across other key markets, including Utah, Ohio, and Pennsylvania, with similarly encouraging early results. Ultimately, our entire network of states will benefit from these actions. Let's discuss the pillars of our Build for Growth strategy, beginning with the first, customer centricity. Our R&D efforts have always started with a deep understanding of our customer, and that focus continues to drive meaningful insights and innovation. BRIC2, which launched in March, is a clear example. addressing key consumer pain points like clogging while enhancing the overall experience through flavor protection technology and meter mode intelligence, providing a measurable draw each time. Soon, the flavor series and legacy series of BRIC2 strains will be complemented by the live series consisting of live resin and rosin to round out the portfolio. Similarly, the launch of Dark Heart last month establishes a new benchmark in ultra-premium flour. With best-in-class genetics, limited drops, and disciplined distribution, the brand is driving strong, full-price sell-through and re-establishing Curaleaf as a leader in the premium segment. is operational excellence, which speaks to delivering consistent improvements across our business, as we've seen in our cultivation facilities and more recently in our retail store experience. By matching retail assortments with customer demand and optimizing pricing, we are driving steady gains in key metrics such as traffic and units per transactions. These incremental improvements are compounding into meaningful financial performance. Third is brand building, which is critical to long-term staying power as the market evolves. In select, we've simplified the product architecture to clearly communicate its value proposition, and we're seeing positive consumer reception that will add to its market-leading position. We are also investing in trade marketing, elevated visual merchandising in partner doors, with encouraging results as domestic wholesale grew 19% this quarter. At the same time, we're expanding distribution with a disciplined focus on profitable growth. For example, last month's takeover of the travel agency in New York showcased our brands across both physical and digital channels, delivering outstanding results by significantly increasing traffic and AOV, benefiting both Curaleaf and the travel agency. As the industry scales, we believe leading brands will capture disproportionate share. Today, according to Hoodie Analytics, SecureLeaf portfolio holds a top share position, which select maintaining the number one position in vapes, and we see substantial opportunity to expand on that leadership. When these three strategic pillars come together, they create a powerful flywheel, driving repeatable revenue growth margin expansion, and increasing returns over time. I'll close by recognizing that these results and the opportunity ahead are a direct reflection of the execution, discipline, and commitment of our over 5,000 member team across the organization. As we look forward, we believe the three-year down cycle the cannabis industry has navigated is now turning upwards. The combination of improving fundamentals, accelerating regulatory momentum, and our scaled global platform position positions us exceptionally well for what comes next. We thank President Trump for delivering on his commitments, turning promises into tangible results. Promises made, promises kept. Alongside acting AG Blanche, he achieved what others had started but weren't able to complete. As a result, patients, consumers, cure relief, and the burgeoning cannabis industry are meaningfully better today. With that, I'll turn the call over to our CFO, Ed Kramer. Ed?

Thank you, Rahul. Total revenue for the first quarter was $324 million, a 3% sequential decline compared to the fourth quarter due to normal seasonality and increased 6% compared to the same period last year. Strength in Ohio, Curaleaf International, New York, Utah, and Massachusetts was offset by challenges in Nevada and Illinois. By geography, our domestic segment grew 2% year-over-year, with retail contracting 2%, which was more than offset by 19% year-over-year growth in domestic wholesale. International revenue grew 35% year-over-year, beating our internal plan, driven primarily by Germany and the U.K. By channel, total revenue was $231 million flat to the first quarter of 2025, while strength in wholesale increased 21% year-over-year to $90 million, representing 28% of total revenue. The growth in wholesale was driven by strong performance in New York, Massachusetts, Ohio, and solid growth in Pure Leaf International. Our first quarter gross profit was $157 million, resulting in a 49% gross margin. a decrease of 220 basis points compared to the prior year period. The primary drivers of this contraction were price compression and discounts partially offset by continued cultivation efficiency gains and disciplined labor expense controls. Our domestic gross margin was 50%, flat with the fourth quarter, underscoring the stabilization we're seeing in our U.S. business. While price compression remained present in most of our markets, We continue to find ways to offset that impact through cultivation efficiencies, product innovation, and selective price increases in states where demand is outstripping supply. Notably, we have recently begun to see the rate of price compression decelerate. International gross margin was 42%, a decrease of 190 basis points sequentially, driven by pricing pressure in our UK business and in German flour, and lower service volume sales, which carry a higher margin. SG&A expenses were $113 million in the first quarter, an increase of $7 million from the year-ago period. Core SG&A was $108 million, an increase of $5 million from the prior year. The year-over-year increase in our Core SG&A primarily reflects international expansion, additional headcount, and new store openings in Florida and Ohio. 4 SG&A was 33% of revenue in the first quarter, a 35 basis point decrease compared to the prior year due to leverage on stronger sales. First quarter adjusted EBITDA was $63 million, a decrease of 4% compared to last year. While adjusted EBITDA margin was 20%, inclusive of 170 basis point drag from international, a decrease of 200 basis points versus last year. First quarter net income, from continuing operations with $70 million or $0.09 per share compared to a net loss of $50 million or negative $0.09 per share in the year-ago period. During the quarter, prior to the rescheduling news, we completed a routine tax review with external counsel based on new information that came to light in which we determined that certain tax positions in previous years met the more likely than not standard required under ASC 740. This conclusion allowed us to release a significant portion of our previously recorded tax reserves and accrued interest from our balance sheet. These positions will also reduce our uncertain tax position liabilities going forward. Separately, following the Treasury and IRS guidance on medical cannabis rescheduling, we expect to recognize additional 280e tax benefit in future periods. Now turning to our balance sheet and cash flow. We ended the quarter with cash and cash equivalents of $106 million. Inventory increased $16 million or 7% compared to the fourth quarter due to planned inventory builds in anticipation of our Break 2 and Dark Hard launches, coupled with inventory stocking ahead of the 420 holiday. Capital expenditures in the first quarter were $17 million, and for 2026, we continue to expect capital expenditures to be roughly $80 million. We generated first quarter operating free cash flow from continuing operations of $21 million and $4 million respectively, largely due to the aforementioned inventory investments ahead of two product launches. We expect operating cash to build as the year progresses, consistent with the cadence of our business. Our outstanding debt was $565 million. During the quarter, we reduced our acquisition-related debt by $9 million and completed the refinancing of our $475 million note with a three-year $500 million note. Before moving on to guidance, I'd like to announce that we are transitioning independent audit partners to BDO. BDO is the fifth-ranked global accounting firm known for its expertise, innovation, and global reach. The move reflects our commitment to strengthening transparency, enhancing financial oversight, and aligning with the best-in-class partners who can support our continued growth. Notably, we are the first in the cannabis industry to make this shift. setting a new benchmark for operational excellence and forward-thinking leadership. By partnering with a firm of BDO's caliber, we're positioning ourselves to navigate an increasingly complex business landscape with greater confidence and precision as we get closer to U.S. exchange uplisting. I want to extend my sincere thanks to our accounting team for their exceptional work in making this transition possible. This achievement is a direct result of their dedication, expertise, and tireless efforts. And I'd like to thank PKF for their support and partnership over the past seven years. Now on to our outlook. While we are experiencing strong increases in traffic due to the many initiatives we have in place, we're closely watching the impact higher energy prices will have on our consumers' disposable income as inflationary pressures rise. Taking these macroeconomic factors into account, And assuming current market conditions persist, we expect total revenue for the second quarter to increase 2% to 3% sequentially from the first quarter, which at the midpoint implies approximately $333 million. And with that, I'd like to turn the call over to the operator to open the line for questions.

Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then 1 on your touchtone phones. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys. To withdraw your questions, you may press star and two. In the interest of time, we do ask that you please limit yourselves to one question and a follow-up. Once again, that is star and then one to join the question queue. Our first question today comes from Erin Gray from Alliance Global Partners. Please go ahead with your question.

Hi, good evening, and thank you for the question here. Nice to see that growth continue on international. You know, I know it's decelerated a bit from 2025. So, you know, first off, we'd just love to hear in terms of your outlook for growth for international for 2026, and then second, Boris, in terms of your prepared remarks for potential exports in the U.S. to international. Is there any color you could give potentially on timing? And then as we think about whether or not the existing cultivation footprint would suffice or potentially you'd want to acquire just given the climate that your current cultivation is in and also the potential need for, or the need for EU GMP or GACP? Thank you.

Thank you for that question. Let me first start with the international supply chain. As everyone knows, the international supply chain has been very difficult for everybody in the sector, a lot of cultivators. aren't producing the type of flour that passes very strict regulations and therefore we have been looking both in Canada mostly in Canada for increasing our own production our own growing of product to ship to the international markets however this recent rescheduling the language and rescheduling really has given us pause and because we can use our U.S. infrastructure. The timing of that, we don't know. It very explicitly says that we should be able to. Upon my return from Europe, I'm in Europe now. Upon my return from Europe, I plan to spend some time in Washington meeting with the DEA as well as the DOJ to see what the timing could be. But because we're deemed, once we submit our application, we're deemed rescheduled from Schedule 1 to Schedule 3, in theory, we could start very quickly. We do need state cooperation as well. We need export permits from them. So there will be some time. So I really expect not to be able to do this probably until the end of the year. And we'll see at that point in time. Sorry, what was the first question that you had?

Just outlook for international growth for 2026.

Yeah, international growth, I think we mentioned in the last call, we're looking at around 25% to 30% growth internationally this year, reduced down from over 50% last year due to no new markets. We expect that to accelerate significantly going into 2027.

Our next question comes from Bill Kirk from Roth. Please go ahead with your question.

Thank you, everybody. During the prepared remarks, Rahul gave transaction numbers for the quarter. I think he said plus 15% year-over-year, I believe was how he said it. What is that on a same-store sales basis, and how has that number, the transaction growth year-over-year, how has it been trending the last couple quarters? Rahul?

So, sorry, from a same store sales basis, we're not gonna comment on that, but the trends are moving in the right direction in general, and we will be able to talk about that on the next cycle. But overall, as we look at transactions, they're moving up and they are eclipsing right now the price compression that we see in the marketplace.

Okay, thank you. And then a separate kind of follow-up question. You know, we've seen some comments today or some reported comments out of Senator Tim Scott about banking. I guess my question would be how much of what we need to see or want to see from here requires some sort of congressional action or versus things that can be done by the administration and the agencies who appear to be pretty well aligned?

I'll take that. I think that we knew that Senator Scott was going to say this. As a matter of fact, I think last year on several of the various podcasts and things I did, I mentioned that Senator Scott had said that once we got rescheduling, as chairman of the federal committee, he would move safe banking. So we do expect him to do that. I think we'll probably see that in the third quarter, most likely. I don't think it'll fit the agenda for the second quarter. And maybe we could even get a vote before the midterm elections. I don't know, but certainly I think we could get a vote before year end. It's a very popular issue, as you know. It's passed the House many, many times. I suspect that it will pass the Senate now. It seems to be more bipartisan today than it was under the previous Senate. The main person blocking it was Senator McConnell. As we know, Senator McConnell is retiring in 2027. So I do expect that safe banking should be able to make it through. However, there is a chance also that we could get guidance from, like the crypto industry did, guidance from FinCEN and from Secretary Besant that would indicate that the banking industry could start to serve the sector. However, I believe that that will be good enough for certain institutions, but I believe other institutions will want to see some level of legislation because, as we all know, one presidential administration to another could change the view. ramping up banking operations to then have to shut them down if the next president, for instance, had a different view or the next attorney general or finance minister had a different view, Secretary. I think that they'll want to see, certainly money center banks, I believe, will want to see safe banking legislation go through before they get involved. But I do think a lot of other financial institutions, including credit card companies and and mid-sized regional banks, I think, as well as, for instance, credit, you know, working capital facilities, things like that, can open up with a simple guidance from FinCEN and the Treasury.

Thank you, Boris. I'll pass that along, and congratulations, guys.

Thank you. Our next question comes from Kendrick Tithe from Canaccord Genuity. Please go ahead with your question.

Thank you, and good evening. This is at least the second quarter, I can recall, where you've highlighted the lower price compression and better sort of domestic environment in terms of that price compression actually decreasing. Could you sort of speak to, one, how broad-based that lower promotional intensity is? And two, Boris, the extent to which you think that that hemp relief that you were calling out with alcohol retailers, destocking and increased traffic into the regulated channel being a factor? Thank you.

I think there's several factors that are driving our comments on price compression. The first one is Curaleaf has substantially over the last year and six months that I've been a CEO increased the quality of our products. We've rationalized our product SKUs. We've increased the quality of our flour substantially. And so we've been able to start to increase prices ourselves. because of that. And so we're seeing better margins both in our wholesale business and our retail business based on our own product quality. The second thing I would say is there are certain markets in the U.S. I'll bring two as an example, Florida and Massachusetts, that are starting to see stabilization in pricing, and we're not seeing the type of decline or maybe even any decline in those markets at this point in time. There are other markets, however, that are still compressing. But we are starting to see stabilization in certain markets. So overall, I would say that I'm getting a slightly better feeling that partially maybe because hemp products are starting to disappear, even though we still have many hemp sellers still have until November. We definitely think that the supply chains are starting to break down. We think that there's less product availability. We think certain retailers are already starting to, as they sell their inventory, they're not replenishing it. And so I think we are starting to see the only part of a recurrence of that. I don't believe that that will really hit until early 2027 when I do expect somewhere between 10% and 15% organic growth in the sector just based on the hemp shutdown.

Our next question comes from Frederico Gomez from ATD, Cormark Markets. Please go ahead with your question.

Hi, thanks. Good evening. Congrats on the great quarter here, guys. Just a question, more big picture on rescheduling. Obviously, we got the medical portion and we're probably going to get the recreational portion in the second half. We know about the 280 impact, but could you talk about the potential impact that rescheduling could have on sales, margins, the overall competitive environment, M&A? Could it accelerate consolidation? Would it maybe Let some companies that are struggling survive for longer. What do you think are some of the puts and takes here in terms of a post-rescheduling world in the industry?

I think that it's too early to tell whether it will or won't have an impact on pricing. Let's be honest. Most companies were not paying but accruing UTPs in their balance sheets. So I don't know yet whether we can talk about pricing changes in the marketplace at this point in time. I don't expect it to have a significant effect there. I do, however, think that it will have a significant effect on consolidation in M&A. We're already seeing a tremendous amount of tuck-in acquisitions across the country. Many companies have not announced them yet, but I can tell you we know of literally probably 10 to 15 transactions that have been done in the last two quarters regionally. Maybe they're waiting for approvals or something. And I do also expect, as I've said earlier, I do expect to see larger consolidations Between MSOs as well. This is a very much a velocity business A lot of these companies compete literally across the street from each other with stores We're seeing more transactions and we're seeing Transactions increasing and with the price compression that happened during with hemp We're seeing less capacity availability and less product availability in markets and shortages of products in the regulated market and so by combining a growth facilities, you're going to have massive cost savings, and you're also going to have massive synergies to be able to provide the market with product and branding. And so I do think you're going to see, it's a compelling story to see significant MSOs starting to merge on the back of 280. I think you will see it because now you have certainty on the balance sheet. And so certainly after We get the IRS guidance on 280E, and we get hopefully the rescheduling of adult use in the second quarter. At that point in time, I do think that you're going to start seeing consolidation in the sector.

Our next question comes from Russell Stanley from Beacon.

Please go ahead with your question.

Good afternoon. Thanks for the question. Just around the scheduled hemp ban, and efforts to start to interfere with the implementation data. That's so far fallen short, so I'd love to hear your confidence level that it will go into effect as scheduled. Do you see any risk to the date at this point? Thanks.

Listen, I think that, you know, obviously the hemp industry is doing everything they can to raise quite a bit of money. And they're, you know, they're lobbying very aggressively. And so, you know, this is politics and it's Washington and never say never. But at the moment, as we speak right now, I can tell you, I believe there's very little appetite within the House and Senate to change the rules that they set last year at this early stage. I do think, however, going forward, maybe a few years from now, I do think that you might get some changes, particularly around beverages, but I don't think you're going to get any changes here between now and November, no.

Our next question comes from Pablo Zwanek from Zwanek and Associates. Please go ahead with your question.

Thank you. Two quick questions. One, in the past, Boris, you've talked about spinning off part of the international business. On the math, you're giving 1 billion. That's about five, six times sales. Your domestic business is trading around two and a half times. Is that still in the cards, especially with stocks? Although they have moved up, stocks, they haven't moved up as much as we would have expected, given all this good news. So if you can comment on that. And then the second question, which is somewhat related, I know we're all, including myself, very excited about the news flow and about the fact that the companies that registered with the DEA will become federally legal, supposedly, but the product will remain federally illegal, right? And will that create a problem as we move forward trying to implement a lot of these changes? When I say federally legal, you know, Iowa, Kansas, Indiana, it's still illegal there, right, for medical even. So I'm just trying to reconcile one and the other, an illegal product and a fairly legal company. Thank you.

So the product, medical product in those states where medical product is approved will be legal under federal law. And I believe many of the states will be passing medical cannabis legislation. We already know of at least five states that in the past have not even considered it that are already now looking at passing medical cannabis legislation in those states. Some of the states you mentioned are part of that group that is looking at doing that. And so I do think that you'll have that. But under the CSA, you have to understand, medical cannabis is going to be legal. So I want to stress that point. Under our plans on international, you know, we always have that option if we want to do it. Right now, we would like to see what happens with the rescheduling of adult use in the second quarter. Our business, if you take a look at Curaleaf, in fact, if you add in our European business, 80% of our business is medical. And so if you combine the U.S. and the European business, 80% of our revenues actually come from medical. However, the impact of 280 will only impact our U.S. business, which is 60% medical. And so we have a lot of options available to us if we decide. But at the moment, I'm assuming and hoping that as this legislation passes in the second quarter, I do think that at that point in time, and as we get banking legislation, I do think at that point in time that you will have significant institutional interest in the sector. I have spoken to many large-scale investors, you know, large but long-only funds that manage trillions of dollars today. They cannot really look at this sector until they have one visibility into adult use, visibility into what effect that has on the balance sheet. And at that point in time, you know, they need to start doing their research. They need to go to their compliance committees. So I believe that it will take six to 12 months post final rescheduling for large institutional players to start participating in the market. And if that's the case, I don't see a reason for us to have to split the business up. However, I will never say never because the European business is growing very, very aggressively. I do believe our margins, as we start to vertically integrate that business, are going to improve also quite dramatically, obviously helping the overall margin of the business because Europe is starting to become a bigger part of our business. And so we will take a look at things at the time that we feel necessary. Right now, I feel pretty good about keeping the business together.

Thank you. That's good, Gordon. Thanks.

And with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Camilo Lyon for closing remarks.

Thank you, everyone, for joining us today. We look forward to speaking with you again in about 90 days. Have a great day.

And with that, ladies and gentlemen, we'll be concluding today's conference call and presentation. We thank you for joining. You may now disconnect your lines.