The Cannabist Company Holdings Inc. (CBSTQ) Earnings Call Transcript & Summary

Greetings and welcome to the Columbia Care First Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Gary Santo. Please go ahead, sir.

Thank you, Kevin. Good morning, everyone, and thank you for joining us for Columbia Care's First Quarter 2020 Earnings Conference Call. On our call with me today are Nicholas Vita, our Chief Executive Officer; Lars Boesgaard, our Chief Financial Officer; and David Hart, our Chief Operating Officer. Earlier this morning, we issued a press release reporting our first quarter results, which we also filed with the applicable Canadian securities regulatory authorities on SEDAR. Please note that the remarks we make today regarding future expectations, plans and prospects for the company constitute forward-looking statements within the meaning of applicable Canadian securities laws. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, which we disclose in more detail in the Risk Factors section of our annual information form dated March 31, 2020, filed with the applicable Canadian securities regulatory authorities and also found at www.sedar.com. We remind you that any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent date. While we may update any such forward-looking statements in the future, we specifically disclaim any obligation to do so, except as otherwise required by applicable law. Also, please note that on today's call, we will refer to certain non-IFRS financial measures, such as combined revenue, combined gross profit, combined EBITDA, adjusted EBITDA and gross profit margin, excluding changes in fair value of biological assets. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Columbia Care considers these certain non-IFRS measures to be meaningful indicators of the performance of its business, in addition to but not as a substitute for our IFRS results. A reconciliation of such non-IFRS financial measures to their nearest comparable IFRS measure is included in our press release issued earlier today. Nick will begin his comments with a high-level review of our first quarter, followed by Lars, who will provide an overview of our financial performance during the quarter. Nick will then discuss recent developments and operational highlights, after which the team will take questions. With that, I will turn the call over to Nick.

Thank you, Gary, and good morning, everyone. It's been just over 2 months since our last earnings call on March 10, 3 days before President Trump declared a national state of emergency. I don't believe any of us could have anticipated how volatile and uncertain our world would become and how rapidly everything about our lives would change. Before getting into operational updates, I want to first acknowledge the challenges that many people in our communities are facing as a result of COVID-19. Our thoughts and prayers are with all of those dealing with both the health and economic consequences of this pandemic. We are grateful to the workers and the first responders for the work they're doing on the front lines, and I'm proud of our team for their dedication to serving our communities during these unprecedented times. So let's begin there. At the outset of a pandemic, our top priority was to ensure the health and safety of our employees and communities while continuing to provide the highest quality service and products to our customers. We adopted the CDC guidelines and instituted strict routine cleaning and social distancing practices in all of our facilities and worked to ensure that the ground teams had the personal protective equipment they needed. Every market in which we operate deemed -- was deemed -- deemed cannabis as an essential service, with the exception being Massachusetts which limited cannabis sales to medical only. We are grateful that we have no reported cases of any member of the Columbia Care team having been diagnosed with COVID-19. As you may have seen in our operational updates in March and April, we experienced heightened demand for our products, resulting in record weekly sales in multiple markets. A number of factors drove this increase in growth rate, including the addition of new cultivation and manufacturing capacity. Even excluding these strong volumes, our business was already performing well as we worked to execute on our various market initiatives. And that momentum has continued into the second quarter, with consumer demand stronger than it was previously. If there were ever concerns about the cyclicality of the cannabis and how the industry may perform during volatile economic periods, I believe the recent industry and regulatory tailwinds validate the necessity of the products and services that the cannabis industry provides. As we announced last week, we significantly improved the liquidity through a series of transactions raising over $45 million, including roughly $34.5 million in senior secured first lien term debt notes and accompanying purchase warrants scheduled to close later on today. Our sale of a 10% minority stake in our non-U.S. business to Avalon Pharma, one of the largest pharmaceutical manufacturers in the MENA region, not only validated the Rest of the World business strategy but lay the foundation for a partnership to expand the reach of our proprietary pharmaceutical products beyond the EU. We continue to move forward with our plans to monetize real estate through one or more sale-leaseback transactions, bringing in additional nondilutive capital to our balance sheet later on this year. Taking into account today's term debt closing, the receipt of the remaining committed amounts of cash used for operations since the first -- at the end of the first quarter, our pro forma cash balance exceeds $40 million. And we feel very comfortable with our current liquidity and working capital position for the remainder of the year. Being inherently conservative, we expect to take advantage of financing opportunities should they surface and are prepared to do so if we have specific use of proceeds in mind. I'll have more to discuss regarding developments and operational highlights across our various markets later on. But first, I'd like to turn the call over to Lars to provide more details on our Q1 financial results. Lars?

Thanks, Nick, and good morning, everyone. Please note that when we discuss combined metrics, they include our reported financials as well as the results from our dispensary operations in Ohio. Starting with the revenue. Combined revenue in the first quarter was $28.9 million, a quarter-over-quarter increase of 18%. Quarter-over-quarter, our revenue growth was brought across markets, but driven especially by operations in Pennsylvania, Florida and Ohio. We realized revenue of $2.6 million from our 4 dispensaries in Ohio. We reported total revenues in the first quarter of $26.3 million, an increase of 105% compared to last year, and this was due entirely to organic growth. Combined with our Ohio operations, gross profit before fair value adjustments was $9.1 million, constituting a gross margin of 31%, also representing a 7 percentage points improvement over the previous quarter. Our reported gross profit before fair value adjustments was $8 million, an increase of $3.6 million or 83% over last year. And this increase was driven by volume growth of our business, offset by production costs of some of our facilities that are still ramping up production during this quarter. We recognized a positive impact from fair value adjustments related to biological assets of $4.6 million compared to a negative impact of $6.6 million in the first quarter of 2019. This increase was driven by higher volume of unharvested plants in our cultivation facilities. Reported operating expenses for the quarter was $31.6 million compared to $21.9 million last year. This increase was primarily caused by an increase of $6.2 million in salary, benefits and facilities expenses, $2.9 million in share-based compensation expense as well as increased promotional expenses and depreciation. These increases were partially offset by lower professional fees. Our combined adjusted EBITDA for the quarter, including the Ohio dispensaries, was negative $9.9 million for the quarter, with the Ohio dispensaries delivering positive EBITDA in only their second quarter of operations. Reported adjusted EBITDA for the first quarter was negative $10 million compared to negative $13.9 million in the previous quarter. The improvement to adjusted EBITDA was primarily caused by our higher gross profit. Capital expenditures in the first quarter was $22.9 million as we deliberately pulled forward the completion of substantially all of our remaining facilities, specifically our remaining dispensaries in Florida and our cultivation and manufacturing facilities in New Jersey and Virginia. As of March 31, 2020, our cash balance was $26.9 million compared to $47.5 million at December 31, 2019. This concludes my prepared remarks. I'll turn it back over to you, Nick.

Thank you, Lars. As I mentioned earlier, the majority of our market operations performed exceptionally well in the first quarter with ongoing momentum through April. New open dispensaries continue to ramp across the country, with over 85% of our dispensaries that have been opened for at least 12 months achieving positive EBITDA. We expect a similar trajectory for our latest additions. As we continue to scale in our recently opened cultivation and manufacturing facilities transition from initial planting to maximum canopy utilization and perpetual harvest, we expect to see ongoing improvement in both gross and operating margins across our markets. At the corporate level, we continue to identify opportunities to improve the efficiency of our shared services and deliver strong growth -- delivered strong growth through the quarter while simultaneously reducing corporate expenses by 6% sequentially and SG&A as a percentage of revenue by 10%. To call out a few key market highlights. In Pennsylvania, we've been averaging approximately 900 new patients per month and the lead market -- and lead the market with the largest product offering. Revenue is up month-over-month, and we have further strengthened our wholesale relationships in order to meet our growing demand. In Ohio, we opened our 56,000-square foot facility in Mt. Orab to cultivate during the first quarter and initiate our perpetual harvest strategy, having already completed 8 harvests this quarter and expect to be at maximum canopy by the end of June, with wholesale operations launching around the same time. Earlier this month, we opened our 7,000 square foot manufacturing facility in Corsa Verde and are now fully vertically integrated in the region. In New York, we expanded our product offerings to include 3 new lines that have been well received. Our ground flower pods are selling out as fast as we can put them on the shelves. And together with our high-THC tinkers and disposable vapes, it now represent 18% of sales since launch. In Virginia, we completed the build-out of our 65,000-square foot vertically integrated facility in Portsmouth and received approval earlier this year for the Board of Pharmacy to begin cultivation, production and dispensary sales. It was one of only 5 licensed operators in the state. We look forward to our first harvest and the opening of our dispensary later this year. I'm also excited to announce that in New Jersey, we already have plans on the ground and are actively hiring staff with the expectation of opening our Vineland dispensary in June. While we have executed incredibly well across our operations, we aren't perfect. We -- a few of our markets experienced COVID-19-related headwinds, including Illinois, where we had temporary -- we had to temporarily suspend adult use sales for a few weeks due to staffing disruptions caused by self quarantine. This occurred in Massachusetts as well, where the state temporarily suspended adult use sales despite declaring medical cannabis as an essential service. Our co-located adult use in medical dispensaries in Lowell and Greenfield were performing exceptionally well through the first quarter until the temporary suspension took effect. However, we have seen a strong increase in the medical side of our business partially offsetting the loss of adult use sales. As Massachusetts begins its phased reopening plan, we hope that this is resolved soon and adult use sales can resume in short order. We also look forward to completing the adult use approval process with the City of Boston for our Downtown dispensary location sometime in the second half. And in Florida, where product availability has been a constraining factor for our growth and profitability, I'm pleased to announce that we recently received approval to expand the canopy at our Lakeland facility, and we expect to receive GMP certification of final approval to begin manufacturing at that site later this year. We have already obtained regulatory approval for a number of new products scheduled to hit our shelves later this month and have more than 40 additional SKUs in process, pending approval, which will serve as a catalyst for a very strong second half of the year. Looking ahead, I could not be more proud of the resiliency of -- our team has shown at a time of uncertainty and in market turmoil that has broken competitors, and in some cases, entire industries. Our team has showed leadership, strength, discipline and cohesiveness, while opening new facilities, introducing novel products and developing technology solutions to ensure that our customers retain continuity of service and access to our products. As we slowly emerge into the -- into a new normal, this foundational strength and resiliency will allow Columbia Care to continue to deliver on its key business initiatives. And while COVID-19 continues to create uncertainty throughout the world based on the best information available to us at this time, I'm pleased to be able to reiterate our guidance for the year and share with you that the TGS acquisition continues to track online for a second quarter close. In closing, I would like to thank our investors, communities, policymakers and regulators for their willingness to innovate and focus on opportunities rather than obstacles. And on behalf of everyone at Columbia Care, we are proud to serve you all, and thank you for your support. Operator, we will now open up the call for Q&A.

[Operator Instructions] Our first question today is coming from Glenn Mattson from Ladenburg Thalmann.

On the results. So quick -- first on Massachusetts. Can you talk about what the recent updates are? I know there was a meeting with some officials this weekend. Maybe perhaps give your take on how you think that went as far as opening back up for Doric?

Certainly. So I mean, we certainly don't have a crystal ball, and this is a very sort of important decision point for the governor and his staff. We have worked very closely with our colleagues in the Massachusetts market to convey to the governor and to the regulating authorities that we have plans in place and precedents that have proven to work in other markets, that we'd be more than happy to incorporate into our standard operating procedures in Massachusetts. Those alternatives and those improvements and those suggestions are under consideration. And I think that there are a number of sort of stated sort of milestones that the governor's office has suggested may provide an opportunity to clarify what the position is on a variety of essential services, including adult use cannabis sales in Massachusetts. But for the time being, we're cautiously optimistic that things are moving in the right direction. We do not have a formal time line or anything to point at. But in the meantime, we're using this as an opportunity to increase our inventory supply and to negotiate attractive wholesale pricing for the products that we're basically putting on the back burner until adult use opens back up again. So in a sort of an unusual way, this has actually created an interesting opportunity for us to increase gross margin in that market and prepare for a snapback, which is likely to come the moment the governor gives the approvals.

Okay. Great. And in Ohio, things seem to be going quite well there. Can you give us an idea, best thought process on how to model that state in particular going forward? Just because it kind of is inherently broken out by the way you're reporting your numbers.

Absolutely. So we consider Ohio to be a consolidated market for functional purposes and for operating purposes. Now that we're fully integrated, I think that the market dynamics are very consistent to what we've seen in a state like Pennsylvania. And so as far as the total available market is concerned, while Ohio is a more restrictive regulatory framework, the regulators have been supportive. And frankly, we have seen that the communities we serve are -- have been very, very welcoming and eager to participate in the program. And so as far as the sort of the various assets, all of them will be contributing to sort of our margin profile and our revenue growth. The former licensing sort of transition process is expected to happen in the fourth quarter because, as you all know, that there's a statutory 12-month cooling off period from the time you sort of have that relationship in place to this point in time when you can actually transition the licenses. And so we've been obviously working very closely with the regulators to do what we can to make sure that, that's a pro forma event when the clock stops ticking. And if there's an opportunity to accelerate that, wonderful. But we're on time, and we're actually very happy with the way things have developed. And we're happy to say that the standards and the expectations and methods that we've seen to be successful in the rest of our markets throughout the country have been adopted and incorporated and applied in Ohio to our success as well. So we're very excited about that.

Last one for me. On the CNC Card, there was -- it's been widely publicized that the CARES 2.0 proposal from The House came through with banking reform, legislation side. Do you think if that were to -- taken out the fact that whether or not you think that will pass this time around or not, the idea that, that will eventually get through is maybe gaining momentum. So when that does happen, do you think that increases the value for the CNC Card? Because you're kind of a first-mover advantage and you're able to capture share quickly. Or do you think it kind of brings in a whole new wave of new entrants that maybe creates a more competitive market? That's all for me.

Well -- sure, and thank you for your questions. I think it's sort of a situation where it's heads we win, tails we win. If this provision actually goes through and is implemented by the federal government, it is a profoundly positive event for all of the major operators. And I say major operators because I think that the counterparties will still have their own internal compliance measures that they will look at to assess counterparty risk. And so let's just say it passes and there's a pathway to have credit card -- normal credit card access, that's not an overnight process. That's something that needs to be assessed by large companies and their vendors, including the banks. And then the banks need to figure out whether or not there is risk for money laundering or the KYC compliance requirements. And so it's a very, very sort of regulatory-intensive and time-consuming process to actually introduce competitors into the marketplace. As you all know, our plan is and continues to be to make the CNC Card and -- go through that launch program with a number of competitors. And we've actually had a number of folks reach out to us to express their interest in participating, and we're delighted to make it available to them. So the -- that was put on hold temporarily because it coincided with COVID. But now that sort of the COVID environment has stabilized, we continue to move forward with that and actually launch it nationally through other operators as well. But the reason why it's a net positive is this is a backfill, right? This is an opportunity for us to take advantage of a very odd inconsistency with that -- the large, let's call it, multinational financial institutions cannot participate in the U.S. market. So we're filling the void to enhance adoption. To the extent that all of a sudden, Visa and Mastercard decide tomorrow to make their services available to the cannabis market, well, that's a net positive for us, too. And we've always believed that access to consumer credit is one of the most significant rate living factors for adoption, especially among the populations that aren't necessarily as familiar as the first movers. So I think that no matter what happens, either CNC Card really gets a leg up and accelerates, which we're certainly going to push that as fast and hard as we can, or at some point, you have other sort of, let's call it, traditional consumer financing alternatives available, and that will do -- have the same impact, but -- on a national basis in terms of accelerating adoption among consumers. So we're sort of in a really good position right now. And we're very happy about, obviously, the development at the federal level because that would also, we think, give access to the U.S. capital markets, which would be huge. Because I'm sure as many of the people on the phone have had discussions, it's our view that NASDAQ and the New York Stock Exchange are not going to be wholesale available to every cannabis company. I think they're going to be very selective because this is a new industry, and it's still in some cases, very, very immature. And so the counterparty risk that the quasi-governmental institution may assume by allowing a company to list on their exchange has to go through a very significant vetting and review process. And so being one of the largest national players and having always focused on medical and now transitioning to adult use, but also having a very, very long and sort of well-vetted history of compliance, we think that obviously, we're well positioned for those discussions if this provision does pass. And that would really have a huge impact not only on our cost of capital but our access to capital to accelerate growth and expansion.

Our next question today is coming from Matt Bottomley, a private investor.

Congrats on solid performance in the quarter. Just wanted to touch on your cash balance and sort of view on capital allocation in this environment. So just with -- in terms of the timing of what came in before and after the quarter, if you could just give us a range of where your balance sheet sits as of today? And then also, are there particular markets where you think it makes sense to accelerate versus decelerate your capital allocation? I know a lot of your infrastructure projects saw good progress last quarter and into this quarter. So I don't think it is as significant as a potential issue as it would have been 6 months ago. But any color on that would be appreciated. And to what's been earmarked for current projects? And again, where that balance sheet sits?

Well, a couple of thoughts. And first, thanks for your question, Matt. The infrastructure and the investment we made in 2019 and the first quarter of 2020 will -- does more than give us the ability to hit our numbers from a guidance perspective in 2020 and beyond. And so we feel very comfortable with the infrastructure we had. We have 3 primary priorities for capital. Number one is to take advantage of the markets where we know that a transition isn't going to occur from medical to adult use. As we've seen in Massachusetts, where we're one of the market leaders, and in Illinois, where we've had a great deal of success when that transition occurs, the average impact to top line and the average impact to margin is profound. And so we're looking at overnight, an increase in revenue of almost 5x using the same fixed asset base, which obviously brings with it an enormous amount of margin improvement. And so when we look at the markets that we're in, by luck or by design, most of our markets are actually in that transition in the next 2 years. And I don't think we could have planned it that way, but that's the way the world is shaking out. And these are not small markets. These are very, very important critical markets. They are markets like New York and New Jersey, mainly in New York, where we have the #1 market position. And so as we look at that -- the impact to our financial model, it's been really simple. Imagine taking our portfolio today, and if we use our guidance, if you took a -- sort of a standard multiplier that we've seen historically, that occurs when you have a market transition from medical to adult use. And then if you assume that we have a number of markets where we have north of 25% EBITDA margins, we have -- when we do the four-walls analysis for our mature facilities, we're getting to north of 25% EBITDA margins. When we look at our gross margins, we're looking at a significant attractive gross margins on individual SKUs. Where all of a sudden, that becomes a very, very powerful national model that is incredibly well scaled. And so that's not to say that we have everything we need. Because when I look at the landscape, when I look at taking a market share in New York and driving it to a larger endpoint once conversion happens or doing the same thing in New Jersey, or doing the same thing in any of the markets that are going to be transitioning to adult use, the number one priority is to allocate additional capital and resources and infrastructure to the markets where we already have sort of a leadership position -- or the line of sight on the leadership position, where we have the people in place that have been operating long enough, so that we know that they can use those resources, not only appropriately and efficiently but in a targeted fashion to drive our KPIs. And so that's the number one use of cash for us today and number one use for future liquidity. If we look at the M&A market, it's probably not going to be something sort of terrifically strategic. There's no need for us with 19 markets to go out and look for a Hail Mary pass. We're already one of the largest. We got there, which is spending less money than anyone else. And we actually built out all of our infrastructure last year. So at this point, all we have to do is execute. We don't have to worry about integration. But as we think about the sort of the opportunities we're seeing in markets, because the multiples have fallen, there has been a significant decline in expectations, which is appropriate for sellers from a multiple perspective. But there are a few good operators out there in different target markets. And so we are looking at bolt-on acquisitions and small sort of tuck-in acquisitions to increase leverage and scale in individual markets, and we will continue to do so. But those are not massive transactions. Those are transactions that will be contributing cash flow on day 1, that will be contributing EBITDA on day 1, and they will be contributing revenue growth on day 1. And so it's -- for us, it's about finding good operators, finding good sort of tactical expertise that we don't have in-house and then layering that into our national footprint. And then, obviously, the third sort of use of proceeds is just to make sure we have enough for a rainy day. In an environment where you have 30% plus unemployment and you have a lot of instability, you have trillions of dollars of stimulus coming in, I don't know if anyone can really say with a great deal of certainty that they know what the market or the world would look like in 6 months. I think people have suspicions. But one thing is for sure, our Board has told us that they want us to maintain a minimum cash balance of $20 million, and which is what we've always done and what we will continue to do. And so when we look at strategic alternatives, reinvestment sort of deploying capital resources, the -- underpinning that is always a very disciplined, methodical approach to maintaining liquidity. And the reason why we're going to continue, even though we just raised capital, we're going to continue looking for non-dilutive capital sources, like sale leasebacks, is because we think it's the prudent thing to do, and we think people with cash will win. And it doesn't mean we need to necessarily overspend or we need to go out looking for sort of things to stretch ourselves quite the contrary. We just want to start layering in and leveraging the infrastructure and the human capital that we have in place that's been proven to be successful.

Great. That's very, very comprehensive and helpful. Just wondering if you can also provide where your current cash balance sits? I know that you had a $27 or so million at period end, but then there was the financing, which straddled the period. So I think it's somewhere between $40 million and $45 million. And then just as a follow-up question, if you could provide just a little bit of color. Within your revenue sequential increase of 18%, can you give any more color on how much of that was retail versus wholesale versus maybe new markets, like Illinois adult use coming on? And I'll leave it there.

So in no particular order, your assumptions on cash balance is right, it's north of $40 million. And obviously, we feel pretty good about that level of liquidity. In terms of the performance and where -- what was really driving it, we actually lost adult use in Illinois for a period of time. And Illinois for us is -- we weren't really operating our wholesale business because our cultivation center hasn't come online yet. So we did have a facility. It was a single sort of dispensary in Chicago that was performing well and it opened up on January 1. But it was disruptive when the governor shut down -- when we had to shut down adult use for a period of time. And there were a couple of contributing factors. One was we had a lot of people self-quarantining. So the staffing model got changed very quickly. Number two, there were limitations on the amount of people we could actually have in our facility, and so the social distancing had a real impact. We actually received phone calls from regulators who are watching our cameras, telling us that we need to sort of move people outside of the facility, which we did immediately. And so it's -- it was a new world of oversight and sort of scrutiny that I think we accommodated very quickly. But we'd always built into our plan a couple of really important factors in Illinois. Number one is that we had our cultivation and manufacturing facility that is now producing in earnest on a consistent basis. And that's going to be a driver, not only of margin but of revenue and cash flow. Number two, we have a second dispensary that we're opening up in the Chicago land area, and we're very excited about that, too. So we are building -- we are now building wholesale relationships. We're very proud to say that we had our first sale -- wholesale sales to other operators in Illinois just a couple of weeks ago. And so that wasn't a first quarter phenomena. That was the second quarter phenomena. But we're delighted to be in that position. And now that we have kind of our feet beneath this, and I think that the regulators and sort of we're beginning to kind of stabilize in this COVID environment, we're actually very excited about what Illinois will do for us as an organization. In Massachusetts, obviously, the contrary, right, where we lost adult use. That was a big contributor to our growth sort of in the second half of last year, in the first quarter. But what we're proud to say is that for every Massachusetts, we had a Delaware, New York and Pennsylvania that we're able to kind of offset some of that loss. And in Massachusetts, we also had a significant increase in medical. So the market is efficient, and I think the diversity of revenue base really did help us in this environment. Because the -- lightning strikes happen even without COVID. I'm sure many of you recall, the THC cap that was being contemplated in Florida, I mean, can you imagine what would happen if something like that made it through a legislative process in one market and you only have one market. That becomes a real problem. So we really are happy with the capital sort of plan that we completed already and with the infrastructure we have in place and the way it's actually been able to give us balance in the portfolio. And we're also very, very lucky that more of our states were, frankly, supportive of our business as, again, an essential in every single market, with that one exception in Massachusetts. Was really meaningful. And so it allowed us to, I think, continue to provide continuity of service and access to products that mattered. And Matt, I apologize, there was another question in there you had asked. What -- I just can't remember what it was.

No, no, you hit it all. I was just wondering if there was any other consideration of increases in your retail, vertically integrated sales versus wholesale contribution that had outsized performance that explains or reconciles the 18% increase?

Yes. So just to give you all some insight there. If you recall, and you'll see this in the numbers in the table in the press release, we always told everyone we would have sort of a dip in that J-curve because of the impact on gross margin when we had facilities that were opened, but not producing revenue, and basically pre-EBITDA positive dispensaries that we're opening that needed to mature. We're now beginning to emerge from that. And so you can see how that looks from a financial perspective. But at this point, we're still supply constrained. And so we're not participating in the wholesale market as much as we would like because we're literally selling everything we can. Now I hope we actually are able to change that dynamic. But we're -- our products and our methods of manufacturing and our -- there are certain markets where you have regulatory requirements to sell to others like Illinois. There are certain markets where you cannot sell to others like Florida. And so it's -- we are still predominantly driven by, let's call it, our own supply chain through our own distribution channel, but we'd like to build those relationships with others. And in some cases, it's been through the wholesale market. In other cases, it's been by sort of giving them access to the CNC Card. And those relationships are not easy to build, but we're excited about it because we think in a place like California, where we just started producing out of our Balboa manufacturing facility, that's a GMP quality facility, right? It is one of the most amazing facilities in terms of efficiency, of productivity that we've seen. And the first products that are coming off the line there have been wildly successful. And so there are opportunities not only to sort of sell into the wholesale market there, but also to actually manufacture for others under the standards that people are accustomed to. So we're really looking at ways to really sweat our assets and to basically allow our people to sort of be creative and innovative in the way they drive profitability and growth.

Our next question today is coming from Jason Zandberg from PI Financial.

I wanted to dig into the $7.5 million in annual savings that you mentioned in the press release. Just wondered if you could provide some more color? And also you mentioned that there are measures to reduce this further. I just wanted to get an idea of the magnitude. Is this sort of small incremental changes beyond this? Or are there opportunities for some big savings as well?

So a couple of things, and I'm going to actually turn this over to David. But one of the areas that we have always really been focused on is corporate overhead. We have a shared services model, as you all know. And we built that up in 2019 with the expectation of seeing high growth and high turnaround in terms of margin in 2020. What we've found is that we've been able to automate a little bit more, and we've been able to sort of create synergies among jobs and to basically reduce the burden. And so corporate, on an absolute dollar basis year-over-year, will actually be down in spite of our revenue and our margin profile materially improving year-over-year. And so that's one example. But I'll give -- let me turn it over to David, so he can describe some of the ways we're thinking about it. Because this is not about just sort of losing personnel, this is about creating efficiency and making sure the productivity sort of per unit -- per economic unit is actually optimized, so he can talk a little bit about the data systems we have, about the way we monitor it, both on the manufacturing and the cultivation side as well as in the dispensary setting. And then talk a little bit about how we think about trying to navigate these waters in a way that sort of not -- only sort of is constructive from a morale perspective, but also gives people sort of the ability to really kind of lean in and take advantage of their own skills.

Thanks, Nick. Yes, so I think we continue to be hyper-focused on perfecting what is known as the MSO model, which obviously has, as Nick mentioned, a shared services components that should be scaled over as many built-out markets as possible. We have found efficiencies at the shared services level. We have regional operational leaders that now have multiple years of productivity gains under their belt across the supply chain. And so we are finding ways in all of our new builds to do things such as automated trim, automated irrigation, improved climate control infrastructure, all of which can, at the end of the day, results in our ability to have lower cost -- labor costs per transaction through sort of cultivation through distribution. On top of that, we look to every one of our vendors starting from the beginning of the year, including security, which in this industry is a significant cost throughout our supply chain across the facilities. And we were able to realize a significant go-forward cost savings on the security line, which in some of our markets were as expensive as our lease costs. And so that's a combination of optimizing our staffing models on the security side as well as working with our vendors on the security side to realize those savings. So we are attempting to leave no stone unturned and driving efficiency, not only at the corporate level but also at the operational level across the supply chain. And so our staffing models continue to be tweaked across the supply chain. We use best practices that we've harvested from legacy markets, whether it's cultivation and number of [ cortex ] per square foot of canopy; two, transaction volume metrics at the dispensary level for staffing. So we're trying to take lessons learned, whether sometimes it's better to be lucky than good. So for example, if we -- I think Nick has said this to probably everybody in this call, but we've always made mistakes in this business, and we try to never make the same mistake twice. And I think over the last 6 months, we've really, really been able to leverage the operational success, both wins and losses to drive efficiency gains forward. So I think we'll continue to do that as just normal course and best practice. But we are hyper-focused on getting the MSO model to make sense which, at the end of the day, is to have scaled-out businesses across multiple jurisdictions and driving that shared services expense as a percentage of sales to as low as possible, while still being operationally efficient across the organization and in compliance.

Yes. And just not to put too fine a point on it, so we would expect to see continued efficiency improvements as time goes on. But we're not really looking for a Hail Mary, right? None of this was reactive. And so the first phase of, let's call it, efficiency measures we implemented in 1Q that were expected to take hold in 2Q, were done independent of COVID. They were done because we were looking at ways to sort of be circumspect and think about our business and try to really drive -- try to drive some of the -- kind of the opportunities that we saw in our own business. And one of the things that David's done, which I think is really interesting, is that as the model has matured, we are becoming less focused on pursuit and opening up new markets because there are fewer new markets to open and there are fewer target markets that we have in mind in the U.S. And so we have an enormously talented pursuit team that has effectively become our internal consulting and SWAT team. And so they're going around looking at every facility, every operation and taking their expertise from a regulatory and operating perspective and what they've seen in every market. And then we're reinforcing those good practices on an ongoing basis through the data that is now available through the different systems that are in place that allow us to track the minutia of what happens on a minute-by-minute, hour-by-hour basis. And I think it's the combination of all those things that allow us to reach these conclusions, but they're not sort of seismic and sudden. They're very planned out, methodical and they're rational.

Okay. Perfect. And if I could ask just one more question. New York has been particularly hard hit by COVID. As you mentioned, you've got the #1 market position in that state. I just wanted to get an idea of how those operations have performed? And just giving any sort of insight into that New York market and how you fared.

So New York has been a good performer for us. And I think it's been for a couple of reasons. One, we have an amazing team and very, very strong leadership. Number two, we have a very unique position in New York because we approached it -- we've built our brand based on a reputation of quality, of not only products but service. And three, the regulators have been very supportive of us in trying to expand connectivity and access as well as introducing new products. And so the fact that we were able to adjust our staffing model for home delivery in New York was very meaningful because it allowed us to scale up home delivery faster. The fact that we now have sort of flower on the shelves was a big, big deal. And our ability to sort of introduce additional SKUs allows us to not only be competitive relative to other programs nationally, but actually be more competitive than the illicit market. And I'll give you a little fun fact that I'm very proud of. So we have high -- very, very high-quality flower that is packaged in very, very -- and manufactured in very, very sort of stringent circumstances that are all monitored and tested by the State of New York. And so there is no opportunity or room for any deviation from quality standards in this state, or any state for that matter, but particularly in New York. And so we have enough efficiency in our facilities that we are able to -- we were able to take basically all of our flower production, put it through our system and sell it on a kind of relative basis that is actually less expensive than the illicit market. So not only are we giving the access to consumers to higher-quality product at a lower price, but we're doing it in a way that is legitimate, that is legal, that is reliable. And especially in a COVID environment, that is incredibly valuable. So one of the -- what many of you may have seen in our balance sheet, we built up a lot of inventory in New York on the concentrate side over the past several years in anticipation of having this transition from medical to adult use. We are now using that inventory because 100% of our canopy has been dedicated to producing flower. And so we've been able to transition very, very quickly to sort of this new regulatory regime. We're doing it in a professional way. We're doing it within the expectations of the standards of the regulators and communities we serve. And we're doing it in a way that is actually going to be financially impactful and beneficial for the entire state. And so we're really proud of that. But that's the sort of stuff we see happening in New York on a pretty consistent basis. And we're fortunate to be part of the -- sort of all the things that have been -- that have effectively allowed us to sort of make those gains. Dave, do you have anything to add?

I think you covered it well for New York. We continue to try to find ways to take incremental market share and respond to what patients are asking for in terms of form factors. So I think it's all systems go in New York for us.

Our next question today is coming from Russell Stanley from Beacon Securities.

First, around Pennsylvania, if we could. You mentioned having taken some steps to strengthen the -- or improve upon your supply chain relationships there to drive margins. Can you elaborate on that, provide some specific color, I guess, as to what you're doing differently?

Certainly. So we're flexing and we're using our balance sheet well and efficiently. And so we're able to help capitalize some of our counterparties and make sure that they have the working capital they need in order to produce enough products that we need to put on our shelves. So we're able to effectively enter into longer-term relationships that are economically fair to both sides and basically solve for some of the working capital requirements. Because in an environment where the capital markets are effectively shut down and you can't really raise third-party capital, unless your Columbia Care, of course, then you really need your vendors and your partners to step up and help out. And so we've been very proactive in doing that. And because we have such a significant footprint and we've been very, very reliable counterparties for all of our vendors and all of our partners in Pennsylvania, they've been willing to work with us. And so we're delighted to say that, that's been a very healthy dynamic that we continue to enjoy.

Great. That's helpful color. And I want to ask about Virginia. It is probably an overlooked market, but some recently enacted legislation might make it more attractive. Has this the state, I guess, climbed in terms of its ranking on your priorities? You mentioned it being one of the states where you brought forward the CapEx spend. And I just wanted to get a sense there. You've kind of talked your initial build-out plans, but I guess, you've now got some additional dispensaries you can add. And any thoughts on the time lines behind those?

So we haven't really given time lines for the new dispensaries. But what I can tell you is that Virginia has always been a priority for us. It is a fantastic state, it is in a very, very supportive regulatory framework. The governor -- everyone from the governor down to the legislature and both sides of the political aisle have been very supportive of this program and expanding the program. It's close to a 10 million-person market, so roughly the size of something like in Illinois. But there are only 5 operators. So we think that this is one of those sort of jewels in that is being weighted to kind of -- become part of the conventional wisdom of the industry. Fortunately, a lot of people aren't in Virginia. We are. And so I think the reason why it's overlooked is because I don't have a lot of promotional people talking about how they're going to be $1 billion revenue opportunities in Virginia because they simply aren't there, and they're focused on other markets like Nevada. And so we think that the dynamics and the way in which that state is sort of approaching the market is not only very constructive to build a sustainable long-term industry, but it also sets a very good presence for the entire southeast United States. And so Virginia is a regional leader, right? What happens in Virginia affects what happens in North Carolina, South Carolina and Georgia. It affects what happens in West Virginia. So the fact that we are now able to use that as a talking point when we think about expansion down the road, not today, is I think very important. But Virginia is going to be up and running this year. We expect it to be a high performer. We think that the governor and his team have done a wonderful job of sort of setting very, very clear guardrails for what is -- what their expectations are. And we think we can meet those expectations very effectively. And the fact that we're in Virginia, DC, Maryland and Delaware, Pennsylvania, were kind of the acts in the mid-Atlantic, and that's a very important region to be in, not only because it's the seat of the federal government, but because you have a very significant population of potential consumers and patients and a very significant mass affluent series of communities with disposable income that are very well suited to discretionary purchases. So we're very excited about being Virginia -- being in Virginia. We're very excited about opening Virginia, and we think that we're very well positioned to be the #1 player in Virginia.

Great. If I could sneak in just one last question before getting back in the queue. In New Jersey, you mentioned having your first dispensary opened, hopefully, in June. Just wondering what your latest thoughts are around your second and third in front of the referendum in November.

So we plan on opening up the second and third this year. We have not told people where we're going to put them yet. But we are -- there's some debate at the -- in Trenton about where we can put them, meaning they may actually give us a little bit of flexibility there, but we're keeping our fingers crossed. The fact is that New Jersey is a great state. And again, we have that New York, New Jersey, Pennsylvania, the whole mid-Atlantic area is kind of in our wheelhouse. So we love the fact that New Jersey is not only going to be a great kind of, let's call it, wholesale opportunity, but a great retail opportunity for us as we open up those, not only our first but our second and third dispensaries.

And one question...

One more comment on New Jersey, is that New Jersey is notoriously supply constrained. And so the more supply we can bring into that market, the more we think that you'll actually create a sustainable environment. And by the way, the regulators there have been very, very supportive of the industry throughout the COVID crisis. So we're incredibly, incredibly lucky to sort of have such good partners in the State of New Jersey. They've accelerated a lot of access methodologies that will frankly be hopefully sustained beyond COVID and allow us to kind of really provide the right access in the right way to the State of New Jersey.

Our next question is coming from Andrew Semple from Echelon Wealth Partners.

Just the first one here on TGS. Just looking for an update on how that business has fared in Q2 with the introduction of COVID-19 emergency measures and how that's kind of trended in recent weeks.

So it's funny. They were ahead of budget in 1Q. They obviously know their market better than anybody. They're the market leader. And Q2 has -- what we've seen this is naturally, by the way, there's more week-over-week volatility than I think we had seen in the past. So you have a very strong week, you have a soft week, but the trend lines seem to be generally positive. We're working very closely with them, and we're watching sort of what's happening in all of our markets, including Colorado. Colorado has had historically a significant benefit from the tourism community, and that tourism community has actually been more focused on -- in the second and third quarter rather than the first or fourth quarter. And so we are sort of working very closely with them to what was happening. But Colorado is also beginning to emerge from the COVID crisis. And so -- and they're seeing a lot -- they're seeing more traffic than they had, let's call it, 2 weeks ago, 3 weeks ago. And so there's an ebb and flow. And then I think the one thing that we're learning is that having density in population centers matters, especially in environments like this. So they have facilities -- they have a facility in Aspen, they have facilities in Denver. They have facilities in Aurora. They have facilities in Pueblo. And so it's a very diversified portfolio. All of those things have created a type of -- sort of durability that we look for in our portfolio nationally. And so we think that they have done a great job of sort of doing what they needed to do to accommodate the changes in their markets. We think that if there was softness in their market, it's not because people don't wake up to -- I don't worry about waking up every day and thinking to myself, "Will there be more or fewer people interested in using or purchasing our products?" It's more, right? It's just, by definition, more. And you can come up with 1,001 explanations as to why that's the case. And so if there is softness, it's not really something that I think concerns us because it's a well managed business. And if we have to use some provisions to the contract to sort of think about structuring or applying those sort of -- those structures to the way in which we think about purchase price adjustments, we certainly can. But it's not something that's front of mind. What we're really focused on right now is the integration, the regulatory process and making sure that we can be the best partners we can for the TGS team as they're doing for us. And so we're very, very happy that things have gone as well they have.

Great. Just switching gears a bit. Just want to talk about your sale of the minority stake in your international business. Just wondering how you were able to reach that valuation? And on your partner, Avalon Pharma, can you comment whether that partner may bring any strategic value to your international business?

Let me first focus on the second part of your question. They are -- Avalon is one of the largest manufacturers and distributors of pharmaceutical products in the MENA region. It's in a region that is oftentimes overlooked by kind of traditional consumer goods players. But there are 1 billion people in that area. And so CBD is one of those products that we think actually has a significant amount of not only consumer relevance, but from a [ Sharia ] perspective, it's actually permissible. So there's no prohibition on it and -- which we think is very important because it's a holistic and natural product that can be very well adopted. So the economic arrangement we have with them translates into our relationship with them as a manufacturer and distributor in the MENA region. Separately, they have, obviously, GMP, very high-quality manufacturing capacity throughout the MENA region that we can leverage and basically manufacture products and sell into Europe if we needed to. But the valuation was very simple. We have products. This is not -- this is as part of the business that has not been a focus of ours. It is a call option of the European market, which is potentially as large as, if not larger, than the U.S. market. And we've resourced it appropriately. But the leadership team that we've assembled to sort of oversee that expansion has been focused on taking our CBD products that are manufactured in the U.S. and exporting them into the European markets, which we're now selling into Germany and the U.K., taking sort of an asset-light approach in having our intellectual property turned into products that are manufactured and are now being sold in the U.K. and Germany. And so we've taken a very disciplined approach, unlike many other sort of, let's call it, cannabis competitors, which have been undisciplined in the way they've spent money and built out resources and overspent. And now they're trying to retract. We've taken the exact opposite approach, and I think that resonated with our partners at Avalon. And it also -- what also resonate with them is that we have real medical products, right? And Europe is a medical environment. And so being able to take that history of data and data collection and analysis and manufacturing standards and intellectual property, and being able to export that into Europe, gives you very clear to see why our products have a natural fit in Europe that can be scaled and leveraged exceptionally quickly if we wanted to, if we wanted to allocate the resources there. And Avalon was delighted to see that because we weren't just out there trying to sell the same product everyone else was. We're actually giving providers and regulators something new to think about, which was much more efficacious and, frankly, precisely dosed. So it's a way of leveraging our reputation and leveraging our initiatives without necessarily taking our -- out the ball in the U.S. because the U.S. is still our #1 focus.

Excellent. And just one more quick one, if I may. Just going back to the Q4 '19 earnings call. At the time, it sounded like you were getting pretty near on another potential sale leaseback transaction. Is that something we could possibly still see in Q2? Or is that perhaps a Q3 item?

So I would say it's in the next 3 to 4 months. And I'll tell you what happened. We were actually at the finish line, actually were about to sign the binding documents. And the single worst day in the Dow Jones -- in the Dow happened that day. And candidly, the main GP in the company, that was basically the sale leaseback provider, got cold feet, said, "I can't do anything right now. I don't know what's happening." And it was it was understandable considering the freakish nature of the drop in the markets. But we learned a couple of lessons from that. So one, we learned that there's -- the minute that person disappeared, we had a couple of other alternatives to talk to. And we have a group that we're in deep discussions with, and we're very happy with that relationship. So the -- I -- will we announce this quarter? Maybe. Will we announce by the end of next quarter? Absolutely. But with the announcement of the term debt and the sale of the minority interest in Europe, we don't really have a lot of pressure to sort of get something done immediately. For us, it's just about having opportunistic liquidity at this point. And -- but we feel very good that, that liquidity will come in. I just don't want to sort of commit to a specific date because what I learned from COVID is when something is not in our control, we just have to be a little bit more conservative in providing guidance.

The next question today is coming from Scott Fortune from ROTH Capital Partners.

This is [ Nick ] stepping in for Scott. Congrats on the good quarter. Just wondering if you could give some color around, at what percent of your operational states are currently adjusted EBITDA-positive? And just from there, do you have a sort of road map to ramp those negative states looking forward in this environment?

So we haven't provided that level of granularity. But what I can tell you is that -- how do I phrase it the right way? If we look at Q1 and Q2 and we look at the trends we're seeing in market, we feel very good about the guidance we've given in terms of transitioning to EBITDA-positive. I would also say that if there was almost -- well, I would say this. I would expect the -- well -- maybe, David, you can give me a little bit of a lifeline here to talk a little bit about sort of the specific details on digital markets. We just haven't given that guidance yet. I will put it this way. Our expectation is that every business will be contributing cash flow back to the parent company before the end of this year. And I think that the -- sort of the performance we saw in 1Q and that transition, particularly in the context of some of the cost reductions and efficiencies we've incorporated, we're seeing -- obviously, as you see the gross margin improve, we're getting very, very close on a consolidated basis to sort of EBITDA-positive. And at the operating level, I would be willing to bet that most of our markets will be -- they ought to be positive sort of going into the third quarter. So the question is, do we have enough contributing EBITDA to sort of offset the -- sort of the expenses at the corporate level? And I don't know the answer to that. I think so, but we'll see.

Got it. And if I could just squeeze in one more. Kind of touching on COVID 19, do you believe there may be a chance we see legalization earlier than expected in states due to the tax collection potential? We know your guidance doesn't assume much movement on the legislative front, but do you see any potential for states moving earlier than expected kind of given the current situation here?

I do. I do.

Our next question today is coming from Vivien Azer from Cowen and Company.

I hope everyone is safe and healthy. Nick, I just wanted to touch back on New York. Obviously, there was more momentum around adult use legalization pre-COVID. What is your assessment of the progress towards market evolution today?

Vivien, so I think that New York is a really interesting case study. I think when the curve flattens and when the governor has a moment to sort of take a step back from kind of responding to sort of an emergency, I suspect that there will be movement. It's an unfortunate reality, but we were literally a day away from the sort of the, call it, the agreement on what an adult use framework would look like before COVID really came -- really hit in New York state. So I think that -- look, the assembly, I think that the Senate, and I think that the governor all have kind of a vision that has become much more aligned over the past, let's call it, 6 months in terms of what adults -- adult use should look like. But I think that there will be more of a transition, meaning I think you're going to see a significant increase in the fluidity of the regulations, meaning there will be a broadening of the medical program in anticipation of an expansion into adult use. And I think that will actually serve as a catalyst to facilitate adult use. So we're cautiously optimistic. We think the governor has said that this is a policy priority. The Head of the assembly has sort of telegraphed to the world that she has strong views and in support of. The Head of the Senate, the same thing. And so unlike most states, New York doesn't have a provision for a voter referendum. But in this environment, I think to the prior question -- set of questions, the tax opportunity and the revenue opportunity and the overall good that the sector can contribute back to New York state is so important and so valuable, especially at this moment in time. I just don't see there being a situation where it goes out too much further because politics, politicians, all of the stars have really aligned for us even at the -- frankly, and they're starting to align for us even at the federal level. So if that's an indication, I think we feel pretty good about it.

That's really helpful. And if I could squeeze in just one more. Nick, some of the job loss numbers that came out this morning are pretty alarming. And I'm just curious, are you seeing down-trading in any of your markets at this point?

So we're not. What we're seeing though -- I think there are a couple of phenomenas. And this is one of those very interesting case studies that I hope that they begin to teach in business schools. Because when I was a kid, I thought who wouldn't pay their mortgage off first. And the reality is people pay their cell phones before their mortgage. They pay for -- off their car loans before their mortgages, right? They pay for groceries after their cell phones. And so you think about the way individual consumers actually prioritize their -- sort of their discretionary spending in an environment like this. What we're seeing rather than a drop-off in use in adoption and volumes in terms of visits, we're seeing a reduction in the -- and a focus more so on lower-cost product lines. So think about a grocery store where people, maybe 6 or 7 weeks ago, would have been buying organic this, organic that and paying a premium for it. Now they're just going out and saying, "I want eggs, I want milk, I want butter." Today, it's very, very much the same. So we're seeing a sort of -- maybe a sort of -- even though we did see an increase in average basket size, I suspect that average basket size will either normalize, and so you'll see fewer visits. If you see fewer visits, you'll see basket size increases. But I think you'll see fewer -- less utilization among the higher-cost products, unless you're talking about a really acute circumstance or a medical sort of traditional -- or medical circumstance. And people will be looking for sort of, let's call it, cheap and cheerful options that are well manufactured but don't necessarily come with the prettiest box and the best branding. They're just looking for something that works and that sort of hits their mark.

Our next question is coming from Aaron Grey from Alliance Global Partners.

Congrats on the quarter. A pretty robust call. So just a quick one for me here. Could you just speak to -- when we look at the sequential growth, maybe between what's driven that between new and existing consumers? And then also how virtual care -- that care -- that platform has helped to, number one, onboard new consumers, and also in terms of retaining current consumers? And just what you've seen in terms of average [ usage ] as well?

So it's -- to answer your first question, we have had consistent organic growth in every single market. And we -- I think what's been better than in the past has been our ability to retain customers. And so there -- our offering additional SKUs at lower -- at different price points has allowed us to retain consumers more effectively than we have in the past. In addition, sort of our service model has been continually upgraded, and I think that has contributed to it as well. And that would include things like home delivery, curbside pickup, just facilitating transactions through the CNC Card, all of that is sort of, let's call it, an envelope of support that I think has contributed to that organic growth. But it's been very steady. When we look at the numbers, it's a question of how many new consumers do we bring in and how much of the old consumer do we keep? And we're doing a better job on both fronts. From the standpoint of -- what was the second question?

It was...

Just virtual care.

Virtual care, yes, I'm sorry. So virtual care has actually been a really interesting innovation. And I would say that it is not -- it is gaining steam very quickly. So as is the case with anything like this, providing somebody with a -- sort of a one -- single point of access that can not only give them sort of, let's call that customer journey experience, the personalized customer journey experience, but also establish the access to the program itself, in some cases, to home delivery, to the credit card, all of those things, it takes some education. But what we're seeing now is that people who use it love it. And all of a sudden, that becomes a very unique asset for us. We're also seeing that the traditional retail model has changed, right? It's not about Amazon because people -- how many times have you order something from Amazon? You get it, you say, this is not at all what I wanted. This is just garbage. And then -- but at the same time, people don't necessarily want to go into a dispensary and stand in the line because the lines are longer because everyone is 6 feet apart. So there's this middle ground that we really, I think, have hit in this -- with a sweet spot that's going to allow us to provide that continuity of service and that sort of high-touch experience. It's scalable. It is -- it can be done off hours, on hours, whenever we want. It allows us to sort of utilize all the other services we provide along -- beyond just the 4 walls of the dispensary. And we're rolling -- we rolled it out into multiple markets. And so that to us is a long-term sort of steady Eddie form of innovation that will continue to differentiate us. And by the way, there are other versions of things like that, that are coming out very shortly. So it will -- it's about a pipeline of creativity that will help sort of attract the marginal consumer or the new consumer to our facilities and to our platform as opposed to going somewhere else. And it's also to distinguish ourselves relative to our competitors in some environments where there is a lot of competition.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to Mr. Vita for any further or closing comments.

So thank you all very much for your time today. We really appreciate your support and your interest. And I would just encourage everyone on the phone, whether we were able to answer your questions or not, please reach out to us. Engagement with the investors and transparency is something that is very important, especially when markets are volatile. And so whatever we can do to help sort of facilitate those conversations and to make sure that everyone knows that the ship is not only sort of righted, but going in the best direction in the industry, we'd love to do. I see articles come out all the time, and people are just using bad information and wrong information. And no one seems to be sort of focused on -- thought back fighting. And so we want to fill that voice and give people the information they need, so they can see all the strides we've made and all of the things we've done to shore up the business and really drive performance. And COVID or no COVID, we continue to sort of muscle through this and actually performed quite well. So thank you all very much for your support.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.