Ascend Wellness Holdings, Inc. (AAWHU) Earnings Call Transcript & Summary

Good morning, and welcome, everyone. Thank you for joining us at the 24th Annual Needham Growth Conference. My name is Matt McGinley, and I'm the equity research analyst that covers cannabis at Needham. Today, I'm joined with -- in this session with Abner Kurtin, who's the Founder and CEO of Ascend Wellness Holdings. Prior to founding Ascend, Abner had about a 20-year career in managing capital on the buy side before he branched off into cannabis. And we'll have about 40 minutes here to discuss the industry and Ascend with him. [Operator Instructions] We will have time at the end for questions from the audience. [Operator Instructions] So with that, -- and I guess, Abner, maybe you can just give us a few minutes to provide like a status state of the company. How would you describe Ascend to somebody who is just looking at this company or the cannabis space for the first time.

Yes. Well, obviously, we're an MSO, so seed to sale. We grow it, we manufacture it, we distribute it, we sell it, both wholesale and retail. And we do that in the kind of Midwest, Mid-Atlantic, Northeast sector. So we like to say we're east of the Mississippi and north of Florida. So right now, we're operating in Mass and New Jersey on the East Coast, Ohio, Illinois and Michigan in the Midwest. We have a pending acquisition in the state of New York. And Illinois has been our dominant market to date where we are about the #3 or 4 player in the state, both on the wholesale and on the retail side, including having the #1 store in the state in Collinsville, right by the St. Louis border. Our goal, as a company, is to take really the success in operating methods that we have in Illinois and roll them out to the other 4 states. I think another differentiation point is -- as you pointed out, my background managing capital, we take a very capital-disciplined approach, very focused on high-return projects, high-return investments, corporate governance focused on high-level corporate governance SEC registered. And we also, we kind of consider ourselves MSO 2.0. We're really focused on the adult use markets. We tend to focus on medical states that are about to go and transfer to adult use. We also are not -- we haven't won any of our licenses. We bought them. So we kind of view it more as a private equity kind of approach to build an MSO. So that's us.

With -- not everyone in your location, but most of your locations have this like flagship-type model to them where they're in very good locations and that should theoretically insulate you from competitive threats. I guess can you walk us through why it makes sense with that model to have that kind of flagship bent where you have these very high-volume locations? And why is that quality better than quantity that you see across a lot of the that maybe go for units?

I mean, just simplistically in most of our states, really all of our states except Michigan, there are caps. So if you're in Mass and you only get 3 bullets because there's a 3 cap, you better have 3 good stores. Illinois with 10, Ohio with 5, New Jersey with 4 -- sorry, with 3, New York with 4. So we believe that, that -- with the cap, it's really important. Secondly, like a lot of retail, we're moving from an industry where you'd be lucky to get a cannabis dispensary anywhere to traditional retail where you want the best locations with the best car counts, the best foot traffic, the best parking, the best visibility. And so we think there's a lot of first-mover disadvantage. A lot of the early dispensary locations are challenged as we move into a more traditional retail environment. And we also, I think, with the adult-use market, it's a more traditional customer and shopper. The medical customer is when you're like a pharmacy or something else, you're more willing to go off the beaten path than a traditional shopper. Finally, in terms of wholesale and branding, we think flagship stores become a real opportunity to bring the Ozone brand to the consumer in a real way. So if you take our -- our downtown Boston store right by Faneuil Hall and TD Garden, you might get a number of suburban shoppers who have a different home dispensary, but through their -- they stop in a sand, they buy some Ozone and then maybe they go home and they buy Ozone. So controlling the shell flagship locations, we think, is critical for brand building.

Great. Abner, why don't we talk about some of the bigger picture stuff and then we'll dial down on your specific assets. But in the big picture, the industry is roughly $24 billion, $25 billion in 2021. We think that probably gets to $45 billion to $50 billion by 2026. So just about a double in overall revenue. Overall, the more recent demand trends have not been all that hot. We've been fairly stagnant since the summer with West Coast markets are down a little bit in Midwest and East Coast markets have slowed a little bit. My sense of that is that a lot of it has to do with macro factors, like less consumer stimulus and return to work, and there are some supply/demand equilibrium probably is a little bit closer there in the Rockies or the West Coast. There's long-term issues with oversupply in the West and illicit market supply. But I guess specific to what you kind of saw Abner in the third quarter. I mean, with that macro drop in mind, I guess, what have you seen with your customers in terms of the basket size and purchase frequency? How is their interaction with Ascend and the dispensaries change over the past couple of months? And I guess, how does that manifest itself in terms of what you saw with traffic and ticket?

Yes. Look, I think there's fundamental trends in the industry. The first is if you look on the organic side, it's a slow, steady build. In some of these states, once you get that huge pop when you go rec and then you get a slow, steady build as more and more customers, over time, get more comfortable with purchasing cannabis. I mean I think in some of the more developed states like Colorado, penetration is about 18%, 19% of the adult, versus some of the less mature states, it's about 11%. So going from that 11% to 18%, that's the organic trend. But the counter trend against that, as you identified was, we got this big pop from COVID because there's much less competition for the consumers' dollars, and we basically had a reversal of that as the world opened up a little bit. So if you look at that organic trend over 2 years, it looks pretty good. I think in the more recent period, you have a bit of a catch-up with the post-COVID reduction. But the bigger macro trend is just additional markets coming online. What -- what takes us from $25 billion to $45 billion is New Jersey and New York and more states coming online to adult use. And that's where we think you see the big pop. And that's where Ascend is positioned with our New Jersey, Ohio and when we closed New York, those transactions being able to move the ball forward. The other macro trend, which is getting a lot of press, is the price -- a little bit of price competition in the market. I think 2021 ended with about a 15% drop in cannabis prices over the course of the year. That's consistent with what we expected. It's consistent with our modeling long term. I think a 15% drop plus or minus per year. And if you look at other early-stage industries, whether it be Intel with microchips or others, that's to be expected. I think the idea that we're not in Pennsylvania, but the idea that people are just going to sell unlimited mediocre product at $4,000 a pound in Pennsylvania is just not realistic. So unfortunately, you don't see it in a steady decline, you see even more of a stair step. So think about a market, whether it be Illinois or Mass, when they come online, particularly adult use. Obviously, there's a shortage of supply, the shelves are empty, a lot of stores only went adult use a couple of days. Then you move to -- but it takes 2 to 3 years for grows to get approved, financed, built, grow mass. So now we're entering that 2- to 3-year time frame, and there's more biomass coming online. And so you get that increase in biomass. And in some cases, like Illinois, where they haven't been able to add stores, that flips the market. Massachusetts, same thing, flips the market. And then we go to a new equilibrium down 15%, 20%. And the companies that benefit are the ones with the better products, better brands and better distribution with retail stores. So I think it shakes out very well for MSOs that are positioned. I think it makes it much, much tougher for smaller operators. In the short term, you do get -- we get wholesale -- from your question, the short-term macro term, your wholesale market pressure, you see decline in wholesale prices. And on the retail side, you see a -- we're not seeing margin pressure, but we're seeing a little reduction in average ticket, more -- a bigger reduction on ASP, but offset by higher unit purchases by the customer. So the customer is coming in with about the same amount of money to spend. They feel they can get what they want and a little bit more for slightly less because of the wholesale price reduction, and that reflects -- but it's not the consumer consuming less. If anything, the consumer is buying a little bit more. They're just getting a little bit more of a bargain for it, but it's not hurting our margins because we're basically getting a little bit more of a discount from the wholesaler. And on the wholesale side, we're facing a little bit of margin pressure. I think the industry might have done itself a little bit of disservice where in searching for this aggressive, aggressive growth we basically put ourselves in an oversupply of inventory position. And so probably took bigger price breaks in the third, fourth, maybe into the first quarter, while that kind of evens out. So I think from a projection, we were very aggressive. We saw this trend into the third quarter. We were very aggressive in the fourth quarter trying to align expectations. And I think that's correct. I think I don't think there's a problem with how these businesses are doing. There may be a problem with some companies in terms of how effectively they've communicated where the business is relative to projections. And I can't speak for other people. I think we've done a good job. But just from my background on the buy side, I think that's always the risk. Some companies are much more reluctant to temper expectations when they see the beginning of a trend. And so there'll be a little catch up with those companies coming down. And then also companies on the biomass side, I think investors really need to look at inventory positions of the companies and start to see are companies starting to back up with increased inventory because basically, if you don't cut price and you hold inventory, your margins will hold up, but your cash conversion will go down and you'll start to see ballooning inventory. So that's the other trend just as a financial analyst, people are going to have to start to take a look at.

Yes. So how would you rate that supply relative to demand in some of your core markets like Illinois or Massachusetts? And I guess how do you think about some of those markets that are 2 or 3 years as you noted, into the development or adult-use programs versus a state like New Jersey, which should be open here in a couple of months? Like how long do you think it would take New Jersey to look like a state like Illinois or Massachusetts?

I mean like I said, 2 to 3 years feels right to me. It feels like that's the amount of time it takes by the time you get the expansion of the existing assets and new licenses online. If states have stricter canopy caps, that's going to go longer, right? I mean in cases like Illinois, when people like Cresco because they're really, really large growers, that was able to bring us into equilibrium sooner, which was good. But if you -- basically, if you end up in New York and New Jersey with tighter Canopy caps, then you don't get anyone who has a giant grow. And that can delay and then the other question is with the new licenses. The trend has been for social equity micro licenses. Those would be probably smaller and longer, which would do less, if you look like a state like Mass where there's about 85 cultivators. All of them have 100,000-foot cap and the gating factor really is capital and execution, not canopy size. So yes, I think 2 to 3 years is the right time frame. But when you look at it, it's not really a collapse of prices. If you look at the prices for premium flower, premium edibles, vapes, they tend to be -- vapes might be coming down because it's more of a commodity product than distillate. But certainly, on the flower and edible side, you're seeing the premium pricing of product hold up very well. What you're just seeing is more of a penalty for mediocre product. We had a problem earlier in the year in Massachusetts with a virus former part of our biomass. We ended up liquidating that portfolio between $1,000 and $1,500 a pound. It was lower THC, and that's life growing and agricultural product. If that was Illinois, we could have -- we could have turned that into distillate and realized $2,500 a pound. Same thing, I think, from what I've heard of what's going on in Pennsylvania. The top flower, the flower that's being sold vertically into their stores, is holding up a healthy margin. But if you're a wholesaler with need over product, you're facing a much more aggressive price cut. So it's really much more of a bifurcation based on quality. And I think the beginning of what will be a lower-tiered product coming into the market, which you do see in Oregon, California. You see those under $30 8ths. In the case of Oregon, it could be under $20 8ths. But in these larger states, you're seeing $45 to $50 8ths. I think you're going to see, we've launched a low-priced brand in Mass. We're going to bring it to our other states. We do think the $30 to $35 8ths is coming in all of our markets. And that's a good thing for the customer. It's a place we can make a lot of money. So we're good with it.

Yes. And then what's your -- the short version of how you view prospects for federal reform? And does that -- does that -- any change at the federal level? Does that impact how you view capital deployment in the states? Like would you do things differently if you knew that a set period of time, 2 years, 3 years, 10 years down the line, we'll have some level of federal legalization and perhaps interstate commerce?

Well, look, we all want federal reform, in particular, for us public companies, as you see from the stock prices, our inability to trade on major exchanges, our inability to get access to the investor groups, our inability to get banking and other things. I mean I'll give you an example. On December -- you think this industry is all big and grown up, the week before Christmas, our credit card company shut down our cards. We have drivers on the road who couldn't -- didn't have the money to fill up gas. So time that our managers should be spending on product and operations is spent just trying to make sure our cars on the road don't run out of gas. And that's just one of a thousand examples that industry executives could give you of challenges in the industry. Now all that said, this is also a barrier to entry, right? I can hope that we don't get pressure from private equities, CPG, the Canadians. I mean, at this rate, the Canadians will run out of money before they -- we get the federal legalization, so they won't be a player at all. But -- the -- we have a competitive advantage. No one can do this, except well-financed MSOs, and that's great. Once we get better legalization, that becomes a much longer -- a much more competitive landscape. So part of you wants that to happen tomorrow, so they could trade up to NASDAQ and the stocks to triple, I mean, who wouldn't want that. But part of you from a business perspective, likes having that competitive advantage for a little bit of a longer period of time. In the case of interstate commerce, I'm a little pessimistic on the time frame of that just because I see the time frame of everything taking a long time. But if you told me that in 2026, we're -- there was going to be a full interstate commerce, I probably wouldn't do much different now because I still have an opportunity in New Jersey. I've got to supply that market. And if I build good quality indoor flower, that is irrelevant for interstate commerce, right? Because there's no -- I mean, I guess there's a power labor, a slight advantage. But you can grow quality of your flower anywhere. So I don't really have -- is not as much of a big deal. The other problem you have with interstate commerce is it's a buzzword, but what does it mean, right? We've got testing issues. We've got packaging issues. We've got a line. We've got state businesses. And if I look back here, 90 years after interstate -- federal legalization of alcohol, a distributor in Mass can't sell liquor into a Connecticut store or restaurant. So it's likely that this will be a state-by-state system with some interstate availability to move certain biomasses, but it's a long time coming. So to me, it's like even when you get something passed for interstate commerce at some level, then you've got who is going to be -- is it going to be FDA managing it? Who's going to manage that? And what's the process of the testing? So that's not something I worry about in the short term.

Yes. Got it. Looks like on your balance sheet, capital markets activity and I guess your CapEx spend for this year and next. Your balance sheet, you had about $200 million in cash at the end of the third quarter. Your CapEx dropped off in the back half, and I think, you'll still have $60 million on your balance sheet from the MedMen deal that we thought would have gone out by now, but hopefully, that money gets spent. But can you walk a little through the debt refi and kind of where you see your balance sheet at, at this point and kind of what the big buckets for sources and uses that you would expect to have over the course of '22?

Yes. Look, I think we ended '21 with about $150 million, but we have some money come in on -- right after. So we're probably in the $160 million to $180 million kind of range of cash on the balance sheet. We're -- we feel pretty good about that. As you suggested, we have $60 million [indiscernible] for the MedMen acquisition when that's closed. Right now, Tilray wants to finance that money losing operation. So that's fine where -- we'll close it when we close it. And we -- and we are in a pretty good position where we have -- from our financing perspective, we have another $65 million of access to capital for additional acquisitions. So we kind of view this as a pretty self-financing business at this point. We are closing -- we're right around breakeven on an after-tax basis for operations. And then by the end of the year, we should be positive, including all kind of uses of free cash flow, including CapEx and working capital primarily. So we're going up that J curve, entering the area of self-sufficient business on all capital kind of buy by the end of the year. And we've got another $65 million available for additional acquisitions on a cash basis. So whenever you're in a business that is -- this capital-intensive, growing this quickly, you're always nervous about cash. You always want to have enough, but I feel very good about our current situation.

So with that use of cash and your -- Ascend has a narrow but pretty deep footprint based on what you have in Illinois, Massachusetts. As you noted before, you're 3 or 4 in Illinois and you're a fairly substantial operator in Massachusetts. I guess how do you assess that present operating footprint on a state footprint? And I guess, where do you look to get exposure in other states? Is it more critical to build scale in existing markets where, I guess, in Ohio or in Illinois, you could still add a few additional assets? Or is it more critical to go to these new markets where there could be -- Nevada or Arizona or something where it's just a completely new market for you where the returns in economics can still be reasonably high, but perhaps not as great as you would see in states of the east of the Mississippi? But I guess, overall, how do you holistically think about M&A and what form should we expect that to take going forward?

Yes. Look, I mean it's no surprise. I mean you look at the industry, you look at companies that are deep in very mature states or somewhat mature states like a Trulieve in Florida and Arizona, and they're having huge margins. Then you look at a company like that's more spread out, like a Columbia Care, and they've got a huge portfolio of assets and much lower profitability. It's an asset strategy versus an operating strategy. The market can choose which they like over time. But that's a difference in the strategy. Then when you look within each of these companies, us included, you see states that are mature and generating a lot of cash flow. And then you see states that are coming up. And so it's really a mix issue, which is kind of why I have always thought that the analysts' focus on margins, even short- or medium-term margins doesn't make a lot of sense because a lot of the margin difference can be explained really by the portfolio. If you want to expand aggressively into states that aren't rack or early medical states, you're going to have lower margins. That may or may not be good long term, depending on what your view is. But that's just different. So I think looking at Trulieve's versus -- Trulieve's margins, for instance, which people talk about. I'm not sure -- look, it's great. I don't want to -- Trulieve does an amazing job, but I'm not sure that is necessarily fully reflective of operating performance as well as kind of a strategic decision to be in more places. But I do think what is correct is you need to be scale in each market. So if you -- what seems apparent to me is you need to be a top 5 player in most places, that's going to mean being at the cap in the retail, and it's going to be over 100,000 feet of canopy, though that differs by each state. And we see that the ability of a wholesaler to deliver every form factor every week to every dispensary in the state being kind of the driver of scale. And even in Illinois, there's probably only about 4 players that can do that right now, maybe 5. So -- and you see that also in Mass, where everything's pretty fragmented. And I think you're going to see the business is going to get away from these 20,000, 30,000 foot cultivators. We've got a couple of good strains and a couple of good relationships, and it's going to go more to the larger players. So I think that's critical and I think that was important to us. Instead of going out there when we started and building cultivation facilities in all our places, we basically put all our chips in Illinois because we saw the opportunity. That got us to scale. That led us to kind of drive past companies like PharmaCann, Grassroots, Trulieve, Rev, people that have been in the business for years and years, through scale. We weren't geniuses. We didn't grow the best weed. We just -- we really scaled up for adult use. And that's a game plan that we want to do again and again because we think why do I want to go to, let's say, name New Hampshire, Delaware and build 3 grow facilities when I could double my facility in New Jersey and Illinois have an access to 10 million to 15 million people. So we think the best way to add revenue is through getting scale in our businesses and selectively going into new businesses, like we think Ohio, which we're still pulling together portfolio, it's going to be a great rec market. And we're excited about that, and that's still a few years away. New York is at least 1 year away, maybe 2 years away. So that's basically the plan. But when you look at -- back to your original question of additional states, where we -- first of all, in Illinois, we can have 2 more retail stores. We're looking to get those 2 more retail stores. We had focused on the new licenses that keeps getting delayed, but that's where we expected to get our additional 2 stores. We've looked at in Ohio. We can still get another few stores. We can get a larger cultivation. Michigan is an area which we haven't really focused on, but it's an area where we could get additional retail distribution. And then when you look at contiguous states within the geography, which we defined, obviously, Pennsylvania, is right there, incase you like Connecticut, it's right there, Maryland, Virginia, I mean those are all states that make sense. Obviously, what's for sale and their dynamics, states like Virginia and Connecticut, really have very limited number of licenses and most of them have been bought already. But those are all states where we'd like to be and to have that footprint because then we think that in whatever happens next in the business, from a consolidation of MSOs to new players coming in, if you want to get into that Midwest, Northeast Corridor, this time is going to be your best option. And so maybe we merge with somebody who has a West Coast portfolio, maybe we work with a private equity, but that high barrier to entry, great license portfolio, we think will significantly distinguish us. And I think a lot of other players who have this kind of portfolio have kind of beefed up revenue, so to speak, beefed up their short-term numbers by going after places like Colorado, Nevada, California. I wish them luck. It's not a strategy we want to do. We want to keep the quality of our assets very high in high barriers to entry states and build the business that way.

And let's talk a little bit about the individual states. So your revenue, I think, in the third quarter is roughly 80%, came from Illinois, but you'll have New Jersey will come online here, talk about that in a second, but it will come on here in the next few months. Your assets have been added to in Massachusetts. And so we assume that Illinois probably drops below 50% by probably 2023 of your overall revenue. New York was to be a critical kind of addition here. Ascend and MedMen signed a binding agreement for Ascend to acquire those MedMen assets that was signed, I think, in February '21. You see regulatory approvals in December, and then in January, MedMed moved to terminate the acquisition agreement.

I think we consider binding. But we believe in the rule of law in -- at Ascend. I think certain Canadian operators have viewed the law as a gray area. We don't the consider the law a gray area.

So I guess what are your next steps there? So if we assume the path forward from you in New York is probably going to involve litigation, I guess, help us think through the timing of what are the next steps? And I guess, what ultimately -- how could that look? And then what would have been the time line? I know you would have expanded the cultivation with near immediate effect in New York probably in short order. As you noted before, it takes quite some time to build those facilities. Even if this does close, I guess, what is -- what setbacks would this have put in front of you? And I guess, how would this business overall look depending on when we could expect to see this consolidated?

Look, this -- I was in the real estate business. So this -- some people are just horrified. This is classic, right? You sell a house, markets rise, you go to close and you're like, s***, my house is worth more. I don't want to sell it. Most people's lawyers advise them that that's a bad idea. You got to fill your contracts. Some people -- some people choose to not and you got to get evicted or whatever. But when you have a binding contract with final approval from the state, we're going to get the license, and we're going to get our legal fees paid. And if people want to play games, if they want to like try to promote their stock price or whatever they want to do, we'll be patient to deal with it. The -- we would hope that we would go to court and we would be able to get a quick resolution through a summary judgment and injunction from the courts, and that would be a few months. If it went to trial, that would be a longer process. And the -- even though we'd win, a longer process would have some cost to us because, as you suggested, it's probably going to take a year to ramp up the cultivation. And so if we wait a year for litigation, that hurts us from a time perspective. And so it's kind of that lever that, I think, the sellers want to use to extort money from the process. But at the same time, look, this is a business which is cash flow negative. You got -- remember, MedMen created a mess, right? They've got landlords foreclosing. They've got regulators that hate them. They've got kid. They're bleeding everywhere. The $100 million from Serruya is burning hot and quick. So we'll let it unfold and, hopefully, we'll be able to do it because the sad thing is we had an agreement with the unions, and we're going to bring 500, 600 jobs. MedMen hasn't even paid their union medical due. You have a situation where the state regulators really wanted a good operator. The medical patients in the state wanted more access to product at better prices. MedMen has the lowest selection and the highest prices in any of this country's state. So unfortunately, everyone is a loser in this, but we think we get the asset and it works out. Unfortunately, for the industry, but positive for us is New York is not moving any time quickly. We still don't have a semblance of staff, regs, all the things that you need to start to move ahead with adult use, which leads me to believe it's kind of a mid '23 kind of open. You never know, right? I mean, it's like New Jersey keeps getting delayed. States, regulators, state-controlled businesses tend to move very slowly. So the thought might be is when New Jersey opens and Connecticut is moving quicker, if New Jersey and Connecticut both go rec, then potentially the political pressure starts to come out to New York and they're like, wait, why are these 2 states around us rec and we aren't, and maybe it starts to accelerate. But as of now, these -- look, whenever you go from a medical program, which was nowhere, right, this was a very small medical program, they didn't even have flower 2 or 3 months ago, to a full-blown rec, that's a huge regulatory undertaking, and that's what these guys have to do.

Yes. Right. I got 2 questions here from the audience. The first is what are your overall thoughts on how adult use sales will roll out in New Jersey? And the second one is around -- Illinois currently is 110 operational adult-use dispensaries and there's a next round with 180 that will likely not be operational until the -- at least the end of '22. How would you expect those dispensary additions to impact your wholesale business? And what impact could that have on your retail profitability. So an easy one on New Jersey? What are your thoughts on that? And then how do you think those additional stores will impact your wholesale business in Illinois?

We've said all along we viewed April 1 as the starting date for New Jersey. I know a lot of people had looked at the February regulatory statute date and speaking a date when it would start. I'm starting to think April 1 is at risk. You could drift on to May and June. And when I say that, look, I imagine sometime in March or April, you very well could get an adult-use sale here or there. But in terms of when you get reasonable scale and people get at least 1 or 2 of their 3 stores open to really drive revenue, but we were looking to April, that could slip to May and June. I hope I'm wrong. But I'm looking -- for instance, the state just hired a metric to do seed to sale. We still don't have -- we only have 4 operators that have submitted applications for adult use. We don't have any regs or emergency regs. So the things that you'd be looking for to say we're 60 days out aren't in place right now. But I never want to underestimate the ability. If the state wants to get it done, they can do it. So -- but when I look at the things, from my experience in Illinois and Mass, when I look at the things that have to happen to open 60 days from now, I'm not seeing them yet in New Jersey, which is disappointing, but I'm hoping. I'm still hoping that April 1, but you start to -- if you don't get some movement in the next few weeks, you might start looking at later in the second quarter, but I hope I'm wrong there. In the case of New Jersey -- I mean, in case of Illinois, obviously, the fact that the next 180 licenses haven't been issued and that we're still in litigation now 2-plus years after is very disappointing. It's disappointing to those people who applied in one to a social equity program but also to us wholesalers. This -- the next step up in the market from a whole to sale perspective is more stores. And we -- we're looking forward to that. Also, from a retail perspective, yes, there will be some more competition. I mean, I think the good news is, first of all, half of our stores are medical, but there's no -- they're making no new medical stores. We've had the ability for 2 years to build a really strong business. We'll face some competitive pressure. I don't think it's enough to really generate much margin pressure. I think like we see in Massachusetts and Illinois now is that the price declines come from the wholesale side and that filters through the retail side, we're not seeing a lot of retail margin. Obviously, at some point, whether it be 400, 500, some number of stores, obviously, there is some more retail pressure. I'm not seeing it in the short term in Illinois.

Right, Abner, with that, we're just about out of time. I appreciate your participating here, and thanks for your thoughts and insights, and look forward to hearing from you in the next couple of weeks.

Thanks, Matt.

Have a good one.