Curaleaf Holdings, Inc.

Good day and welcome to the CuraLeaf Holdings, Inc., second quarter 2026 conference call. All participants will be in 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, then one on your telephone keypad. 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 Camilo Lyon, Chief Investment Officer. Please go ahead.

Camilo Lyon Good afternoon, everyone, and welcome to CURE Leaf Holdings' second quarter 2026 conference call. Today, I'm joined by Chairman and Chief Executive Officer Boris Jordan, President Rahul Pinto, and Chief and 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 a 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 release on CDAR and EDGAR. During today's conference call, in order to provide greater transparency regarding Curaleaf's 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 U.S. GAAP. Any non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by U.S. GAAP. should not be considered measures of Curaleaf's 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 U.S. GAAP financial measures 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, Camilo. Good morning, everyone, and thank you for joining us to discuss our second quarter results. This earnings call marks my two-year anniversary as CEO, making it an appropriate moment to reflect on the progress we have made. When I stepped into the role, our priorities were clear. Stabilize the business, improve margins and cash flow, sharpen execution, and rebuild the foundation for durable growth. Simply put, I wanted excellence to become our operating standard across Curaleaf. That was the purpose of our return to our root strategy. Over the first 18 months, that work has delivered meaningful results, stronger cultivation economics, improved flower quality and consistency, tighter merchandising discipline, greater operational efficiency, and a more focused organization. With that foundation substantially reset, we have moved from stabilization to acceleration. In March, we introduced Built for Growth. a disciplined framework focused on customer centricity, brand building, operational excellence, sustainable organic growth, international expansion, and value accretive opportunities as industry conditions improve. Our second quarter results reinforce that this strategy is gaining traction across the business. We have a strong, cohesive team aligned around one common goal, making Curaleaf the global leader in cannabis. While there is still work ahead, and significant opportunity capture, we are firmly on the right path with the team, strategy and operating discipline to lead the next phase of cannabis. Last quarter, I spoke to our operational, I spoke of our operational execution enhanced by tailwinds, specifically regulatory progress and an improving macro backdrop that's driving a market reset. This was the case in the second quarter as the team's disciplined execution drove revenue of $340 million, organic growth of 10% compared to last year, once again surpassing our guidance and internal projections. Our domestic and international segments grew 7% and 26% year-over-year, respectively, as we continued to leverage the operational improvements made over the last 24 months. Gross margin was 50% and adjusted EBITDA was $70 million, representing a 21% margin, despite a 140 basis point drag from international, consistent with an emerging business and a nascent growth curve. Net income from continuing operations was $12.5 million, compared to a net loss of $48 million last year. We ended the quarter with $107 million on the balance sheet. Overall, I'm encouraged by the momentum we are seeing across our markets and our business, and I believe we are well positioned for the second half. Our U.S. business has clearly regained momentum. This was our second consecutive quarter of year-over-year growth following a period of sales compression, an important proof point that our reset is taking hold in a durable way. We achieved this while also expanding gross margins. The foundational work we have done on our largest and most profitable geography is now visible across the business. Higher quality flour, averaging 31% potency, improving cultivation yields, tighter in-store assortments, and stronger execution at the market level. With those building blocks in place, we are now focused on the next phase of our built for growth strategy, customer centricity, operational excellence, and brand building, all supported by an efficiency mindset. Rahul will speak to each of these priorities in greater detail, but the key point is that our U.S. platform is no longer just stabilizing. It is beginning to scale with greater consistency and discipline. In addition to the organic growth we are generating across the existing footprint that should be boosted by the hemp loophole closing, we continue to evaluate new state opportunities that can provide another leg of domestic growth, including Georgia, Texas, and Virginia. I'm also encouraged by the potential for South Carolina and Wisconsin to advance to medical cannabis programs in their next legislative sessions in early 2027. When we combine the momentum we are seeing in the core business with the potential for selective acquisitions and new market expansion, the domestic growth outlook is increasingly compelling. Pure Leaf International delivered another strong quarter with revenue growing 26% year-over-year led by the UK, Germany, and Poland despite ongoing third-party supply volatility. In the UK, growth was driven by continued expansion in clinic patient counts and strong wholesale demand for curaleaf flour and non-flour form factors including oils, vapes, and pastilles. We also successfully launched our Huala value brand in both flour and vape formats, expanding access for patients while reinforcing our ability to serve multiple price points in the medical market. and Germany's sales growth was supported by strong demand for our QMID inhalation device, as well as our Koala and Curly branded flower strains. QMID has gained meaningful early traction since its launch last year, and we are evaluating opportunities to expand the platform into live resin and rosin formats. At the same time, we are closely monitoring price compression in Germany, particularly at the lower end of the pricing spectrum, and we remain disciplined in protecting margin rather than chasing volume at an economic price point. In April, we also completed the buyout of the remaining 45% minority interest in 420 Pharma, bringing Cureleaf International to 100% ownership. This gives us full strategic and economic control of the platform at a time when Europe is becoming an increasingly important growth vector for the company. On the regulatory front, we are encouraged by early signs that German regulators are beginning to take more proactive stance on enforcement against non-EU GMP products. Too much lower quality or non-compliant product has entered Europe through channels that circumvent regulations designed to protect patients. Stronger enforcement protects patient interests and should help create a healthier, more compliant market structure, one that benefits operators like CuraLeaf that have invested in quality, consistency, and regulatory discipline. Looking ahead, we believe Spain, France, and Turkey represent the three of the most Important new medical cannabis opportunities in Europe and the broader international market. These countries are advancing toward their respective medical program launches and together represent more than 200 million people, roughly equivalent to the population of 10 Floridas. In Spain, a market of 48 million people, Curaleaf became the first company to receive approvals for two cannabis medicines last month. We have already received order indications from Spanish pharmacies and expect to begin shipping imminently. In France, a market of 69 million people, we are working to establish a partnership with a leading pharmaceutical company for distribution. Similar to Spain, the French market is expected to begin with approved oil-based medicines sold through hospital pharmacies. In Turkey, a market of 87 million people, final program rules are expected by the end of the summer with the program anticipated to launch in 2027. Taken together, these developments reinforce our conviction that Cureleaf International is one of the most compelling growth platforms in global cannabis and our most distinct competitive differentiator. We are building a scaled compliant and medically focused business across large markets that remain in the early endings of adoption and while we believe the coming years represent a significant growth opportunity for our international segment. Turning to the regulatory tailwind, April marked a defining moment for U.S. cannabis industry as the Department of Justice moved state regulated medical cannabis and FDA-approved cannabis products to Schedule III under the Controlled Substances Act. This was the most consequential shift in federal cannabis policy in more than five decades and an important federal acknowledgement that medical cannabis has a legitimate and enduring role within the U.S. healthcare system. Last month, the second phase of the rescheduling addressing adult use cannabis began with the ALJ process, which concluded on July 15th. Thus far, the process has proceeded according to a fast-paced schedule. While there remain procedural steps before final rule is issued, our view that adult-use cannabis could be rescheduled by year-end and possibly before the midterms is unchanged. Rescheduling would set off a new chain of events, including a potential uplisting to a major exchange. We have been in close and constant communication with the U.S. exchanges, and we are prepared to uplist the entire company rather than deconsolidate adult use once cannabis rescheduling is made effective. In addition, we expect greater clarity on the retroactive treatment of 280E taxes as well as guidance from FinCEN that we believe will direct financial service providers to treat legal cannabis operators like all other Schedule III business. That should improve access to traditional financial services such as credit cards and our dispensaries. Longer term, we are also assessing a world in which exports and interstate commerce are permitted. We believe exports could begin within 12 to 18 months reflecting the time required to stand up to EU GMP ready facilities domestically. That would allow us to leverage the infrastructure we have built in the US and Europe to create a meaningful advantage as we optimize our established value chain from seed to patient. Interstate commerce could also materialize once the proper infrastructure is instituted by the DEA. However, the timeline to materialize will likely be longer than exports. Despite efforts by many to extend the hemp loophole permanently, Based on our discussions with numerous legislators, we believe that inhalables and edibles will be removed from the market when the pending hemp shutdown takes effect later this year. This should be a significant macro tailwind for the regulated cannabis industry when the roughly 25 billion unregulated competitor is expected to be forced offline. We believe the regulated industry is already beginning to see early traffic benefits as states move ahead of the federal change, prompting hemp consumers to migrate back to the dispensary channel. As more consumers turn to licensed dispensaries to replace hemp-derived products, we see a credible path towards pricing stabilization in 2027 that could yield a return to double-digit industry growth. Taken a step further, if demand shifts faster than supply can respond, the regulated market could enter a period of tighter supply, creating an even stronger 2027 growth algorithm driven by both traffic gains and positive pricing growth. Equally encouraging, we are seeing stronger enforcement activity by federal agencies against illicit operators in key markets such as Oklahoma, California, and Maine, three states that are hotbeds for illicit cannabis activity impacting the entire U.S. market. Removing illicit supply from the market should further support demand in the regulated channel and reinforce our view that 2027 is setting up to be a resurgent year for legal cannabis. For Cureleaf, these tailwinds bolster the strategy we have pursued for years, investing in quality, consistency, regulatory discipline, and a national platform capable of serving both medical and adult use consumers as the market continues to evolve. We believe that combination positions Cureleaf to lead as the industry becomes more regulated, more competitive, and more global. Before I close, I want to thank every Cureleaf team member for the focus, resilience, and execution that made this quarter possible. Over the past two years, we have asked a great deal of this organization, and our people have responded with discipline, urgency, and a shared commitment to building Cureleaf into the global leader in cannabis. I'm grateful for their hard work, proud of our progress, and excited about the opportunities ahead. With that, I'll turn the call over to President Rahul Pinto to discuss our domestic highlights. Rahul.

Thank you, Boris. The pillars of our Build for Growth strategy that we introduced last quarter, customer centricity, brand building, and operational excellence are now clearly translating into domestic results. In the second quarter, our domestic business grew 7% year over year, representing an impressive 500 basis point sequential acceleration from the first quarter. Growth was broad-based with Ohio, Utah, New York, Florida and Maryland, each delivering double-digit growth. That breadth is important. It shows the progress we are making is not dependent on one market or one initiative, but rather reflects stronger execution across the platform. Even as retail price compression remains a factor, the rate of compression is beginning to moderate in several markets, and we are staying disciplined, improving mix, elevating product quality, and growing without sacrificing margin. Let me unpack those three pillars with a few real-time examples. First is customer centricity. At retail, our teams continue to improve the customer experience, sharpen assortments and use data more effectively to match product, pricing and promotion to local market demand. One example this quarter was the launch of a Spanish language experience to our website, app, and kiosks, recognizing that the Latino community has been historically underserved in many of our markets. Meeting customers where they are in language, product offering, price point, and experience is essential to building trust, loyalty, and enduring relationships. Second, our brand building progress is also showing up in market share. According to Hoodie Analytics, our brand portfolio continues to hold a top market share position, underscoring the strength of our scale platform and the increasing relevance of our portfolio across key markets. Select continues to be the number one vape brand across our markets, while Anthem Infuse Pre-Rolls reached the number two market share position in Illinois and number five overall across its operating markets. These are important proof points that our focus on assortment, innovation, and brand architecture is translating into stronger consumer relevance and competitive momentum. Product innovation remains a key driver of that brand building strategy. We continue to build momentum behind our differentiated platforms, including DarkArt and Brick2, while expanding offerings that meet consumers across formats, occasions, and Price Points. This is the type of disciplined innovation we want to scale. Products that are relevant to consumers, supported by operational capabilities and accretive to the strength and consistency of the Cureleaf portfolio. Third, operational excellence was evident through Q2. As our retail team seamlessly serviced a 10% increase in transactions across the network, more than offsetting a 3.9 decline in average unit retail pricing, delivering 4% year over year revenue growth. That traffic growth was not coincidental. The states with the strongest transaction gains were also among our strongest overall performers, reinforcing the direct connection between local execution, customer engagement, and revenue growth as we drive national scale with Local Nuance. We also continue to expand access and convenience for our customers, opening two new dispensaries in Florida during the quarter, bringing our Florida footprint to 73 stores and our nationwide footprint to 174 operated and managed locations. Wholesale was another standout contributor to the quarter with branded sales growing 28% year over year. A clear indication that demand for our portfolio is strengthening beyond our own retail footprint. That performance reflects better cultivation output, more consistent flower quality, sharper commercial execution, and a brand architecture that is resonating with both consumers and third party partners. As we continue to raise product quality and bring more discipline to how we segment, price, and support our brands, All Fail is becoming a more powerful channel for expanding share, increasing brand visibility, and reinforcing Cureleaf's position as one of the most trusted scaled operators in cannabis. Underpinning each of these pillars is an efficiency mindset that allows us to invest behind growth while maintaining discipline across the cross-structure. We are continuing to take costs out of the system, simplify how we operate, and redeploy resources towards the highest return opportunities. The goal is not simply to be leaner. It is to build a more agile, scalable business that can drive sales, expand margin, and produce greater operating leverage as revenue grows. Taken together, the second quarter demonstrated The power of our domestic platform when strong local execution is paired with a clearer operating model. We are driving traffic, improving assortment, strengthening brands, and staying disciplined on margin. There is still work ahead, but the domestic business exited the quarter with better momentum, stronger execution, and a more scalable foundation for growth in the second half of the year. With that, I'll turn the call over to our CFO, Ed Kremer. Ed?

Thanks, Rahul. Total revenue for the second quarter was $340 million, a 5% sequential increase compared to the first quarter, and increased 10% organically compared to the same period last year. Strength in Ohio, Curaleaf International, Utah, New York, and Florida was partially offset by declines in Arizona and Illinois. Our domestic segment grew 7% year-over-year, with retail growing 4%, complemented by 20% year-over-year growth in domestic wholesale. International revenue grew 26% year-over-year, driven primarily by Germany, the UK, and Poland. Total retail revenue was $241 million, an increase of 5% compared to the second quarter of 2025, while strength in total wholesale increased 21% year-over-year to $96 million, representing 28% of total revenue. The growth in wholesale was driven by strong performance in New York, Ohio, Maryland, and robust growth in Cureleaf International. Our second quarter gross profit was $170 million, resulting in a 50% gross margin, an increase of 170 basis points compared to the prior year period. The primary drivers of this expansion were continued cultivation efficiency gains and disciplined labor expense controls in our cultivation facilities Higher vertical mix and third-party margins partially offset by faster growth of lower margin international and slightly lower domestic wholesale margins. Our domestic gross margin was 51% and increased of 170 basis points compared to the first quarter. As we saw last quarter, the rate of price compression continued to moderate in certain markets during the second quarter. At the same time, our operations team continued to raise the ceiling on cultivation productivity, quality, and efficiency for creating a more durable foundation for margin expansion. Importantly, our pricing initiatives are still in the early stages, and we believe there remains meaningful runway to improve price realization, optimize mix, and drive additional margin upside over time. International gross margin was 42%, a decrease of 20 basis points sequentially, driven by price compression in Germany and foreign currency translation, partially offset by stronger capacity utilization in Spain and an improved mix of value to premium. SG&A expenses were $132 million in the second quarter, an increase of $20 million from the year-ago period. Core SG&A was $115 million, an increase of $15 million from the prior year. The year-over-year increase in our core SG&A primarily reflects higher bonus accruals due to operational outperformance, international expansion, additional headcount and new store openings in Florida and Ohio. For SG&A was 34% of revenue in the second quarter, a 200 basis point increase compared to the prior year. For the remainder of 2026, we have instituted a series of cost initiatives that will drive expense leverage in the back half of the year. Second quarter adjusted EBITDA was $70 million, an increase of 3% compared to last year, while adjusted EBITDA margin was 21%, inclusive of 140 basis point drag from international. Second quarter net income from continuing operations was $12.5 million, or $0.05 per share, compared to a net loss of $48 million, or a loss of $0.24 per share in the prior year period. We recorded an income tax benefit of $38.8 million in the quarter. This reflects, among other items, the April 23rd reclassification of medical cannabis to Schedule III as our medical business is federally legal and no longer subject to Section 280E. which reduces the cash taxes we pay and a reassessment of our deferred tax assets and valuation allowances which resulted in the non-cash benefit. Going forward, 280E will only apply to our adult use business. We repurchased and retired a total of 1.01 million shares during the six-month end of June 30, 2026 for a total of 7.4 million. Now turning over to our balance sheet and cash flow. We ended the quarter with cash and cash equivalents of $107 million. Inventory increased $22 million, or 10%, compared to the second quarter of last year. This compares to 10% sales growth in the same period and is reflective of healthy inventory levels. Domestic inventory grew 4% year over year, while international inventory grew 50%, largely due to the lumpiness and timing of third-party deliveries. Capital expenditures in the second quarter were $16 million, and for 2026 we continue to expect capital expenditures to be approximately 80 million dollars. We generated second quarter operating and free cash flow from continuing operations of 29 million and 13 million respectively. We expect operating cash to continue building in the back half of the year consistent with the cadence of our business. In June we completed a one for three reverse split Thank you for joining us today. will continue experiencing strong increase in traffic due to the many initiatives we have in place. However, we are mindful of the global macro volatility, higher energy costs, and potential for rising interest rates that could impact the overall health of our consumer and CRIM demand. Taking these factors into account, coupled with seasonality of two of our biggest states, Florida and Arizona, we expect total revenue for the third quarter to increase low single digits sequentially from the second quarter, which at the midpoint implies approximately $347 million. And with that, I'll turn the call back over to the operator to open the line for questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. 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. And please note, we request that you ask one question and one follow-up question, please. At this time, we will pause momentarily to assemble our roster. The first question comes from Bill Kirk with Roth Capital Partners. Please go ahead.

Good evening, everyone. Boris, you talked about third-party supply volatility when selling into international markets. So what can your relationship with Kinera Biotech do to help remove that volatility, or what other ways can you improve sourcing? And what does international look like if you can remove those sourcing limitations?

Thank you, Bill, for that question. That's one of our biggest issues right now in our international business is supply chain, and I think it's not only for Curaleaf, it's for almost all operators, at least those operating in the regulated markets. and one of the problems is failed product and inconsistency of delivery of that product on time so that we can supply our customers and our pharmacies around the globe. And so we are looking at better ways to do it. We're first of all diversifying the amount of people we work with so we don't depend on any one flower provider. So today we provide about 20% of our supply comes from our own facilities. We'd like to increase that to somewhere between 50% and 75%. We intend to do that over the next 6 to 12 months. And for the balance, we're going to use people like Canara, people like Village Farms, and many other operators on the globe in order to supply those products. Now, the most important thing is to make sure that they're supplied at the right price, the right quality, and so that they're using genetics that are attractive to our customers. Several things will happen. One is by vertically integrating and getting our footprint to a 50% to 75% vertical, we will increase margins quite substantially in our European business because margins are much better. Secondly, we will bring down the amount of inventory we have to carry because today, because of a problem in supply chain, we have to carry more inventory than we would carry In normal situations, our cash conversion will also come down from about 120 days to less than 60 days. So all of these things will dramatically improve the quality of our supply chain, and it's something that we're going to be working on and are working on intensely here between the next 6 to 12 months.

Thank you. And if I can switch to the U.S., in the last few months, it seems like some of your larger MSO competitors got a little more aggressive on price in some of their top market share states. Now, they're not always some of your largest states, but in their top market share states, some of the large guys seem to have gotten more price competitive. Do you share this observation? And why do you think before some of these demand catalysts, the market share leaders would be the ones pushing price lower in some states?

Well, I think it's something to do with historical situation around inventory as well. A lot of the companies are right-sizing their inventories right now. For aging inventories, you know there's an aging inventory barrier in all of these states from the regulators, and so people are trying to bring those things in below. So that's what we're seeing. Also, obviously, continued proliferation of hemp, continued proliferation of Thank you for joining us. then end up being a long product. I think a lot of our competitors are now right-sizing that and moving potentially to a similar model that we use, which is growing only to our specific demand plan.

The next question is from Aaron Gray with Alliance Global Partners. Please go ahead.

Hi, good evening, and thank you for the questions. First one is regarding the potential hemp lift. Given your broad footprint, can you speak to what markets you believe are best positioned to benefit from the pending intoxicating hemp ban? And are there some initiatives or on-the-ground marketing you can do as we approach November to better make consumers aware of the legal cannabis offerings to ensure you capture that demand? Thanks.

Yes, so very good question. I think that the way to address it is let's be completely honest. Hemp is everywhere in every market. Thank you for joining us. Thank you for joining us. There's a risk of extension. We believe there's virtually zero risk of that extension. Extension beyond what I would say the December 11th timetable. That still is not certain either. I'm not going to get into whether that happens or not. I think that's a small point, but I do think they're giving people time to get products off the shelf. I also think that what's happening is the alcohol industry is trying to get some level of approval for beverage to get across the Congress, and they would like to have some more time. So I think there's a lot of drivers, but I can tell you one thing. We do not anticipate that inhalable products, and we've received this, I want to be firm, from many, many senators that I've personally spoken to over the last several days, there will be no extension, particularly from the Republican side, beyond the December 11th timetable if such a thing happens. at all, and we still have to wait and see.

Appreciate that color there. Second question for me. Just as we think about the EBITDA margin profile, you know, over maybe the medium term, I know during different parts over the years, you focus a little bit more on growth, more profitability. So how should we think about over the next year or two the evolution of the EBITDA margin profile as you look to focus and balance that growth and profitability?

Elizabeth, we're very, very focused on profitability and cash flow generation. I think you'll see that expand in the second half of the year as we're currently embarked on a very substantial cost reduction program that over the next 12 months will reduce $35 to $40 million of costs out of our SG&A. And so we're very, very focused on that. And I think that that's going to improve our numbers and our cash flow. We're also very focused, as I mentioned with the previous question, on bringing down our inventories. which will also contribute substantially to cash flow. One of the reasons our inventories are up is because of the international business and the rapid growth we're seeing there but more importantly because of a very inefficient global supply chain for cannabis which is raising our inventories there. So our focus is on margin, our focus is on pricing. I do think that you're going to see actually, I know I'm one of the few people in the industry who thinks this but I do think you might have Thank you for joining us. The one thing that you're going to see is a continued expansion around our margins rather than the other way. Now, one thing we have to be cognizant of is if our competitors continue to discount heavily, that could have an impact and obviously macro trends. But at the moment, we're hopeful for a settlement finally in the Middle East situation that if fuel prices come down, I think the consumer can be again emboldened. We can avoid an interest rate hike. These are all positive things for our sector, and we will continue to expand on profitability.

The next question is from Kenric Tai with Canaccord Genuity. Please go ahead.

Thank you, and good evening, and congrats on the quarter. Boris, just something of a follow-up or a parallel to one of the earlier questions, but with respect to Ohio and the hemp unlock, we all know it is a big quarter. for Ohio, but it seemed to have been a massive quarter for you in Ohio. Can you speak to what you did differently to perhaps better capture some of that hemp unlock or what you were doing with respect to your offering that allowed your position and share to grow as fast as it appears to have grown in Ohio in the quarter? It just seems to be a bit of a standout in my mind, and I thought perhaps you could provide some insight on how you did what you did in Ohio.

There's several factors in Ohio that expanded our growth in Ohio. Firstly, we opened several new stores. Obviously, in a limited store market, that's going to be very helpful in terms of your verticals, so that helped our growth. And we're still one more store away from our maximum amount of stores. That store should open up in the fourth quarter, I believe in October, so we'll have our full suite of stores. The other thing we did, and that only partially came through in the numbers, which will come through a lot more in the next several quarters, As we acquire an additional grow facility, increasing our capacity by more than double, we were still operating under one of the small initially licensed medical grow facilities at 25,000 square foot canopy. With no ability to expand that facility, we acquired a facility from Pharmacan. Thank you for joining us. For the last sort of month and a half, it's been still producing Pharmacan product. As of this week, it's solely curaleaf product and curaleaf flower and curaleaf quality. And so we think that our business, and particularly on the wholesale side now, in Ohio will continue to expand and continue to grow. And lastly, of course, it's the hemp market, right? Obviously, the shutdown of hemp in Ohio has had a huge contribution. And again, going back to my thesis that I outlined on earlier calls even last year after the hemp ban, I think that Ohio shows you what kind of growth our regulated industry can have and experience. If there's a full, not only shutdown, but enforcement of shutdown in these states of the hemp business, I want to remind everyone that before hemp came into play approximately three years ago, the cannabis industry was expanding at almost a 20% annual growth rate. And that was virtually sucked out by the hemp market from the cannabis sector as those products recede from shelves and as Enforcement continues. We think that, as I said earlier, that a 10-15% industry growth rate is very, very possible in 2027. And if the continued crackdown on grows, which we believe and understand and know has been substantial already in Oklahoma as the DEA moves in to now become the major regulator in the sector, that is going to help the market even more. So not only do we have hemp being removed from shelves, but we also have illicit cannabis supply. Now, albeit it won't completely disappear, we know that, But it is helpful that the DA is now taking an aggressive position on illicit cannabis grows across the country.

Great insight. Thank you, Boris. Just switching gears quickly, intrigued by your commentary around sort of Georgia, Texas, and Virginia. Just in the context of recent headlines, how is your thinking evolving on those markets or how has it evolved? And if you were to sort of, you know, rank order or provide a wish list around what you would like to see or what you think you can do in those markets. Can you give some indication of what that would look like?

Curaleaf, as obviously the biggest operator globally, we need to be in the biggest market. So we have set our sights on both Georgia and Texas for sure. And we're looking at different ways to engage in those markets. And we hopefully will have news shortly on our strategies in those markets. I wouldn't want to talk about it, but we intend to play in both Georgia and in Texas.

The next question is from Frederico Gomez with ATB Coremark. Please go ahead.

Good evening. Thanks for taking my questions. I'll go back to the comment about increased vertical integration internationally and how that can improve margins. It looks like bringing that to up to 50% to 70% seems like a significant expansion. Can you provide more follow-up on how are you looking to achieve that? Will that be done through organic investments and expanding some of your current facilities? Is it a bit about buying new assets? And if so, geographically, would you look to acquire assets in Europe or Canada? Or I guess, what do you think makes more sense for you strategically? Thank you.

Basically, it's all of the above. We will be expanding our existing facilities in Portugal and Canada. We'll be looking at opportunistic acquisitions in those areas where we think the pricing is right. to supply those markets. And thirdly, we are in active, obviously, monitoring mode and preparing for the ability to export out of the U.S. So all three of those are ones that are going to contribute to our verticality going into Europe. Obviously, the U.S. side of it is still probably some time away. We think probably within sort of 12 months So that's last on the list. And the other two are expanding current facility, which we're already doing, and potentially acquisitions of facilities that would meet our requirements in order to build up our supply chain to that level. Thank you.

And then my second question is just on Germany. You mentioned some price compression at the lower end of the spectrum there. I'm understanding that you play on the premium side of the market, but I guess what extender is seeing or do you expect to see that price compression to migrate to that premium side of things? And is that sort of a goal of increased verticality a way to prepare ahead of that, you know, maybe potential price compression premium side? Thank you.

Absolutely controlling. It's not only about price, it's also about quality, and it's about being able to plan your assortment. So these are all very important things. Many of the players in the German market are, in fact, brokers. They're just people that buy cannabis around the globe, greenwash it, which is an illegal process, and then flip it in the Canadian market. There's no branding, there's no marketing, there's nothing. And that's forced the compression in the German market. So there's several things happening. First of all, we anticipate in the fall more rigorous enforcement from the German authorities. We're now seeing it already in the UK and we've seen it actually start happening in the UK. We think it's going to happen in Germany very, very shortly in the fall. They'll hopefully stop this practice of greenwashing. Curaleaf's approach is very different. Our approach is very much a branding approach, branded product, our own product that's preplanned. and many more. specifically because our approach is one to create brands and to create stickiness with our customers so they continue to return to buy our products and not just buying at the lowest price because it's available in the market today. So that's very much our strategy.

This concludes our question and answer session. I would like to turn the conference back over to Camilo Lyon for any closing remarks.

Thanks everyone for dialing in. We will talk to you next in early November.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.