Green Thumb Industries Inc. (GTBIF) Q4 2023 Earnings Call Transcript

Green Thumb Industries Inc. (OTCQX:GTBIF) Q4 2023 Earnings Conference Call February 28, 2024 5:00 PM ET

Company Participants

Shannon Weaver – VP, Communications

Ben Kovler – Founder and CEO

Anthony Georgiadis – President

Matt Faulkner – CFO

Conference Call Participants

Matt Bottomley – Canaccord Genuity

Matt McGinley – Needham

Eric Des Lauriers – Craig-Hallum

Pablo Zuanic – Zuanic & Associates

Antoine Legault – Wedbush

Aaron Grey – Alliance Global Partners

Sonny Randhawa – Seaport

Scott Fortune – ROTH Capital

Ty Collin – Eight Capital

Mike Regan – Excelsior Equities

Andrew Semple – Echelon Capital Markets

Frederico Gomes – ATB Capital

Operator

Good day, and welcome to Green Thumb Industries’ Fourth Quarter and Full Year 2023 Earnings Conference Call and Webcast. All participants are in a listen-only mode. [Operator Instructions] On today’s call, management will provide prepared remarks and then we will open up the call for your question. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Shannon Weaver, VP of Communications. Please go ahead, ma’am.

Shannon Weaver

Thanks Betsy. Good afternoon and welcome to Green Thumb’s fourth quarter and full year 2023 earnings call. I’m here today with Founder and CEO, Ben Kovler; President, Anthony Georgiadis; and Chief Financial Officer, Matt Faulkner.

Today’s discussion and responses to questions may include forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements.

These risks and uncertainties are detailed in the earnings press release issued today, along with the reports filed with the United States Securities and Exchange Commission and Canadian Securities regulators, including our most recent annual report filed on Form 10-K. This report, along with today’s earnings release, can be found under the Investors section of our website.

Green Thumb assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. Throughout the discussion, Green Thumb will refer to non-GAAP financial measures, including EBITDA and adjusted EBITDA.

A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in our earnings press release and SEC and SEDAR filings. Please note all financial information is provided in U.S. dollars unless otherwise indicated.

Thanks everyone and now here’s Ben.

Ben Kovler

Thank you, Shannon. Good afternoon everyone. Thank you for joining our fourth quarter and 2023 year end conference call. I’ll lead off with an overview of our results and some quick observations on the industry. Anthony will discuss the progress we made in 2023, designed to carry momentum into 2024 and beyond. Then Matt will dive into the financials, and after that, we’ll open the call up to questions.

I’m pleased to report that our team delivered a strong finish to 2023. Even with price compression in some markets and inflationary impacts on consumer spending, we saw our year-over-year revenues increased 7.3% in Q4. This performance contributed to a record fourth quarter for revenues, cash flow from operations, and adjusted EBITDA.

On a GAAP net income basis, we reported $3 million or $0.01 per basic and diluted share for the fourth quarter. Importantly, for 2023, cash flow from operations was $225 million and at year end, we had $162 million in cash on our balance sheet, net of share buybacks, debt repurchases, and fully funded tax payments.

Green Thumb is in strong financial shape that largely reflects the capital allocation strategy focused on generating cash flows. Over the past few years, we have deployed considerable capital within our key markets in anticipation of expansion.

When New Jersey, Maryland, Connecticut, and New York launched adult-use sales, we had an expanded infrastructure in place to serve greater market demand. Adult-use sales are on the horizon for Virginia, Ohio, and Minnesota and potentially other states where we operate like Florida and Pennsylvania.

We are ahead of the curve when those markets open for adult-use retail sales. While our major CapEx cycle is behind us, we will continue to invest in scaling growth within our operating markets.

As part of our capital allocation strategy, in September, our Board authorized our first share repurchase program for up to $50 million. We believe that this share repurchase program is an appropriate tool for creating shareholder value without compromising our growth initiatives.

To-date, we have purchased approximately $40 million or 3.8 million shares. We paid a reasonable price and now every shareholder owns a slightly bigger piece of the pie. In addition, the Board approved an additional $50 million for the repurchase program, bringing the remaining authority to repurchase shares to approximately $60 million for a total of $100 million for the program.

Additionally, as it relates to the senior debt, we repurchased $25 million of that debt at a 5% discount during the fourth quarter, bringing our remaining principal balance to $225 million at the end of 2023.

We continue to focus on building a business to succeed regardless of federal change, while remaining hopeful for the potential reclassification of cannabis to Schedule III, a move that would eliminate the punitive impact of 2AE. This would be helpful for Green Thumb, especially since we paid over $100 million in cash taxes for 2023.

Separately, we also look forward to the day that U.S. cannabis companies can list on the U.S. Exchange, which would increase the company’s access to capital and the marketability of our stock.

Turning to consumer demand. We see positive indicators that consumer sentiment will continue to drive the long-term growth prospects of cannabis. Number one, acceptance of cannabis for health and well-being is evident, with 70% of U.S. adults believe in cannabis should be legal.

Number two, U.S. legal cannabis sales are estimated at approximately $30 billion for 2023 with more growth expected ahead. And number three, my favorite. Over the next five years, there are expected to be 18 million new cannabis consumers in the U.S., while there will be 2 million less alcohol consumers, and stat that drives us.

Now, more than ever, we remain hyper-focused on our patients and customers. We are growing our family of award-winning cannabis brands, RYTHM, Dogwalkers, incredibles, and Beboe to provide our customers with an even wider array of choices that suit their preferences and price points.

We are on a mission to continue building brands that will be part of the American experience for decades to come and we will continue to explore innovative ways to connect people to cannabis. Whether it’s the first of its kind Miracle in Mundelein, legal cannabis consumption music festival that I mentioned last quarter, the expansion of our RYTHM artist series, including the exciting momentum around Tinashe’s Green Tea Strain or new collaborations like the long with Magnolia Bakery and our incredibles brand.

Our strong brand recognition is opening doors to engage and excite our customers in new ways. And as our brands grow, the stars are aligning to create even more opportunities to increase brand awareness and attract new customers.

We believe this is just the beginning for RYTHM, Dogwalkers, incredibles, and Beboe. Our confidence in the future of cannabis has continued to grow since we founded Green Thumb 10 years ago. That said, outsized opportunity is only as good as an organization’s ability to optimize its potential.

We are continuously studying what separates success from failure, and it all comes down to long-term planning are with strong execution that delivers organic growth and cash flow.

For us, it’s about focusing on investing capital for the greatest risk-adjusted returns; our obsession on providing customers with the best, most authentic cannabis products and experiences; and our intensity around strategically executing our growth plan.

Every day is still day one, and we are always looking forward to ways to get better as we evolve and continue to win. The team accomplished a great deal in 2023, and that sets us up well for 2024 and beyond, as Anthony will discuss in a moment.

However, no achievement whether big or small happens without an amazing and committed team across all aspects of the business. We can build cultivation facilities, open stores and develop new products, but it’s the people who care about promoting well-being through the power of cannabis and who are dedicated to treating people well that matters most.

And this dedication extends beyond the doors of Green dumb out into our communities. On February 8th, we published our Second Annual Social Impact Report that shares many stories of our Growing for Good program and positive impact it’s having in the communities we serve.

The report highlights the causes we support to promote a more inclusive and equitable industry, the ways we advocate for social and resort of justice, and how we seek to be more environmentally aware.

Above all, our Social Impact Report celebrates our team’s dedication and achievements, and I could not be prouder of our 4,600 plus team members who make it happen every day in every way.

Now, I’ll turn the call over to Anthony to add his thoughts on 2023 and beyond. Anthony?

Anthony Georgiadis

Thanks Ben. As you just heard, despite substantial industry inflationary and consumer headwinds, the company posted robust fourth quarter results, capping off an incredibly successful year for our team.

Let’s look at some of the highlights. First, throughout the year, we invested $220 million in CapEx and opened 15 new stores across six states, ending the year with 91 stores. We also made major wholesale investments in New York, Minnesota, Virginia, New Jersey, and Florida, markets that we anticipate will grow considerably in the years to come.

Second, continued strong performance across our award-winning family of brands, RYTHM, Dogwalkers, incredibles, and Beboe. We are incredibly proud of our BDS market share gains, Illinois, Maryland, and Pennsylvania, along with our 12 High Times Cannabis Cup wins in Illinois and Massachusetts, including six gold cups.

Third, an incredibly successful adult-use launch in Maryland. Since July 1st, our team has established a leading market position in the state and has not looked back. And last, successful launch of the first open cannabis consumption music experience Miracle in Mundelein as well as the launch of our RYTHM Artist Series with Mitchell Tenpenny, Marcus King, State Champs, and Tinashe.

These results represent the culmination of a tremendous amount of hard work, discipline, and passion with which our team approaches the work we do for patients and consumers every day.

Two months into 2024 and some of last year’s themes continue to ring true. One, we remain skeptical on the timing of any fundamental Federal Reform, including rescheduling and capital market accessibility. As a reminder, we were left at the altar on Safe Banking around this time last year.

Two, we anticipate continued price erosion in many of our markets. The confluence of supply/demand imbalances, competition from unregulated and/or farm-bill-compliant product, and the current state of the consumer leads us to believe that industry pricing and margins will continue to be under pressure throughout the year.

While we prefer wind at our back versus in our face, this setup plays to our strengths as cash flow generation and balance sheet management have been core to our DNA since day one.

Despite regulatory challenges in industry pricing, we are cautiously optimistic on the state of adult-use discussions happening in Ohio, Minnesota, Virginia, Florida, and Pennsylvania. In the last 24 months, we’ve deployed significant capital into these markets and our well-timed investments should provide strong shareholder cash-on-cash returns.

For the year, we anticipate CapEx spend to be approximately 50% less than 2023. The bulk of the spend will be focused on 10 to 15 retail store build-outs and renovations in Florida, Nevada, Minnesota, Virginia, and Ohio, along with some wholesale investment in Connecticut and potentially others.

In terms of business strategy, within CPG, we plan to operationalize our recent facility expansions in New Jersey, Virginia, and Minnesota; continue to innovate and expand our brand and product portfolios; and last, improve our overall operational efficiency and product quality.

In retail, we plan to continue to build out our physical store presence, taking a hard look at those states that convert to adult-use market soon; invest further into our omnichannel strategy; and refine our curated product selection and consumer experience in each market with a stated goal of being best-in-class.

Our success in implementing the various strategies will be defined by our ability to accessibly focus on the consumer, continue to optimize our competitive market positions, deploy capital to projects that optimize shareholder returns, and continue investing in our team, who remain in the heartbeat of our organization and core to everything that we do.

With that, I’ll turn the call over to Matt to review our financial results.

Matt Faulkner

Thanks Anthony and hello everyone. We reported fourth quarter revenue of $278.2 million, a 7% increase over the fourth quarter of last year, while sequential revenue saw an increase of 1%. The year-over-year increase was primarily driven by the legalization of adult-use sales in Maryland and Connecticut.

While the effect of price compression continues to pressure the top line, continued unit growth as well as revenue generated from 15 new stores opened during the year, also contributed to an increase in revenue.

Overall, retail revenue increased 6% versus the fourth quarter of 2022 and 2% sequentially. Fourth quarter comparable sales increased 1.3% over the prior year on a base of 76 stores, while growing 1% sequentially on a base of 82 stores.

Consumer packaged goods net revenue increased 13% over the prior year quarter and 3% for the full year. Looking forward, we expect to see first quarter sequential revenue to be down mid-single-digits, much like we saw sequentially last year.

Gross profit for the fourth quarter was $142.7 million or 51% compared to $124 million or 48% of revenue for the fourth quarter last year. For the full year, gross profit was $526.5 million or 50% of revenue versus $504 million or 50% in 2022. The increase in gross profit was directly attributed to the revenue growth.

Turning to OpEx. Selling, general, and administrative expenses for the fourth quarter were $92.3 million or 33% of revenue compared to $80 million or 31% of revenue for the fourth quarter of 2022.

SG&A, excluding depreciation, amortization, one-time transaction costs, and stock-based comp, which we refer to as normalized operating costs, approximated $61 million this quarter compared to $59 million in Q3 and $53 million last year.

Normalized operating costs for the full year increased 4% to $233 million from $224 million last year. Increased total expenses primarily reflected costs associated with opening new stores and supporting adult-use launches. Continued cost management and discipline enabled us to carefully manage our cost base.

Fourth quarter net income was $3.2 million or $0.01 per basic and diluted share compared to a net loss of $51 million or $0.22 per basic and diluted share in the prior year period, which included a non-cash impairment charge.

Adjusted EBITDA, which excludes non-cash stock-based compensation and other non-operating costs was $90.8 million or 32.6% of revenue as compared to $81.2 million or 31.3% of revenue for the fourth quarter of 2022.

Adjusted EBITDA for the full year was $325.8 million or 30.9% of revenue, compared to $311.5 million or 30.6% of revenue last year.

On the liquidity front, we ended the year with a strong balance sheet, including cash of $162 million. Operating cash flows increased $66 million to $225 million from $159 million last year with $71 million generated during Q4 alone.

In closing, we’re pleased with our fourth quarter results, and we are in a strong financial position as we enter 2024. We look forward to speaking with you soon when we report first quarter 2024 results.

With that, we’ll open the call to your questions. Operator?

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions]

The first question today comes from Matt Bottomley with Canaccord Genuity. Please go ahead.

Matt Bottomley

Good morning everyone. Thanks for the question. I’m just wondering if we can get a little more granularity on the outsized performance in your adjusted EBITDA margins and operating margins, considering that SG&A was up a little bit and we did see maybe a 1% increase in revenue.

It looks like on a year-over-year basis, some of this might have to do with non-cash charges and SG&A on the back of M&A, but I’m just wondering to kind of triangulate the sort of outperformance we saw in adjusted EBITDA given a higher cost base on the SG&A?

Matt Faulkner

Well, we did — thanks for the question, Matt. So, we did see some improvement in margin in the quarter, thanks in part to improve scale and efficiency in CPG. But at the end of the day, we continue to manage costs and focus on our goal, adjusted EBITDA of 30% and less concerned about the components there.

Matt Bottomley

Great. Thanks guys.

Ben Kovler

Thanks Matt.

Operator

The next question comes from Matt McGinley with Needham. Please go ahead.

Matt McGinley

Thanks. Maybe I have a follow-up on that one. I mean there was something unique about the fourth quarter where you were able to generate the highest gross margin in two years. I mean was there something with regard to production efficiency or less pricing pressure or some sort of shift in geographic mix that enabled you to get that margin rate up so much?

You did have an increase in revenue and it did increase sequentially in year-over-year, but the dollar amount there just, it’s not — it’s incongruent with the amount of margin increase you got there.

And you did note that you could see some pressure going forward, but I guess what I’m trying to get at there is like, was there something different this quarter in terms of gross margin — that I’m not sure if that’s unique or if that’s just good management of the business that you could sustain that level on a go-forward basis?

Anthony Georgiadis

Yes, Matt, Anthony here. I’ll take that. So, look, we definitely had strong performance on the CPG side of the business, better operational utilization. We also took a hard look at discounting at the retail store level and maybe made some adjustments there that kind of flow in the bottom-line.

But I mean, look, at the end of the day, it’s — the other contributing factor was that some of the states that are big contributors of the overall business had a strong quarter. So, that was also a contributing factor.

But again, kind of looking back as we look ahead, our North Star is really kind of 30%. It was a strong quarter. We took some learnings from it already on to Q1, and we’re looking ahead at this point.

Matt McGinley

Okay. Thank you.

Operator

The next question comes from Eric Des Lauriers with Craig-Hallum. Please go ahead.

Eric Des Lauriers

Thanks for taking my questions and congrats again on — you had another strong quarter here. A bit of a qualitative question for me. So, given this outlook for continued elevated competition, obviously, your operational efficiency kind of gives you more room to absorb price compression. But wondering if you can comment on your assessment of your product quality just how that’s trended, whether that’s sort of over the past year or in individual situations?

And then maybe just sort of comment on how you’re seeing maybe market average quality sort of trending over the past year? Obviously, quality having a big impact on pricing here. I’m just wondering if you can kind of comment on your overall quality and how that’s performing in the market? Thanks.

Anthony Georgiadis

Yes, Eric, this is Anthony here. Great question. So, look, this is something we take a lot of pride in. We’re very focused on product quality. And starting at the beginning of the year, we really leaned into this effort, and we saw a lot of nice progression over the course of the year.

In my prepared remarks, I talked about the market share gains that we saw in Illinois, Pennsylvania, and Maryland. And we think product quality was a big contributor to that.

In addition, we talk about the cannabis cup wins where we’re up against every other operator out there and very strong performance. So, really, kudos to the team for just continuing to really strong work out there.

The flower quality is incredibly strong. We’re leading with the brands, obviously, with RYTHM being kind of the lead horse there, but product quality is front and center for us and will continue to be.

Eric Des Lauriers

Thank you.

Operator

The next question comes from Pablo Zuanic with Zuanic & Associates. Please go ahead.

Pablo Zuanic

Good afternoon everyone. Ben, I guess one question regarding rescheduling. Do you have an estimate of the cash savings for Green Thumb if you were to have rescheduling? And what would you do with that cash?

And related to that, we’ve seen other companies taking more I guess, proactive stance against 2AE, and they have either stopped paying their taxes or even started providing for a normal corporate tax rate as opposed to being a cannabis company. So, is that something you’re also looking at in terms of how you deal with 2AE at present? Thank you.

Matt Faulkner

Hey Pablo, this is Matt. I can take that question. So, with rescheduling, we think the savings there from a tax perspective, it should cut our tax burn in about half or so. When we look at what we would do with that cash we have options on what we could do it there.

So, — and when we get to that point, we would evaluate all of those, but you’re looking at things such as stock buyback, debt pay down, M&A, and CapEx. So, no definitive plans. We’re waiting to see what happens there before we can count on any real tax savings.

As far as others in the industry, we are definitely aware and familiar with their position. But at this time, we continue to follow and apply the tax code as we have in the past.

Pablo Zuanic

Thank you. And can I ask a follow-up just quickly regarding New York. I know you opened your Rochester store. If you can comment on how that’s going? And also, when do you start planning to supply the wholesale market in New York State? Thank you.

Anthony Georgiadis

Hey Pablo, Anthony here. Yes, look, we opened Rochester just recently, things are going well. We also entered the wholesale market in January and that’s really where we’re leaving it at this point. We have indoor capacity that we built out and we’re really leading that through RYTHM.

And we’ve got — so far, it’s — we’ve got warm reception from the market. We’re adding doors kind of by the week and so far so good. So, I think we have a lot more visibility probably on our next call, but we’re cautiously optimistic. We’ve got a pretty good start in New York and hope we can build from here.

Pablo Zuanic

Thank you.

Operator

The next question comes from Gerald Pascarelli with Wedbush Securities. Please go ahead.

Antoine Legault

Hi, this is Antoine on for Gerald. Thanks for taking the question. Can you maybe provide an outlook on your expectations for the cannabis category dynamics in general head into 2024? Do you expect performance to improve relative to 2023, considering most major operators meaningfully cut back on CapEx, which, in theory, should improve the supply/demand imbalance?

And lastly, just — there looks to be some top-down tailwinds on the horizon just related to the lower income consumer, including the cycling of removal of SNAP benefits and margin potential for lower interest rates to result in higher disposable income. So, any color on category health and your broad outlook would be great? Thank you.

Ben Kovler

Sure. I’ll take that. Hey it’s Ben. Thank you. The question was the consumer health? What was the first question?

Antoine Legault

The second back on CapEx and supply/demand imbalance.

Ben Kovler

Yes, I think that’s a good first question on what’s going to happen in the industry overall supply/demand. We certainly watch the CapEx numbers from cratering down to previously low numbers. We continue to spend 2023 is a big year for us, and we have a real number going into 2024. However, the EBITDA is very strong.

So, we can continue to play offense. We’re continuing to spend. It’s hard for me to comment on others, but I’d be curious what’s going on, how that growth gets there, how that balance sheet rectifies and other kinds of core questions.

From the terms of the state of the consumer, again, good question. What we see in terms of some of those pressures you mentioned, which are real, which are macro, you may hit the more staples, I guess, would be the term, we’re seeing a lot of growth in new markets open in some of like the step function up for — those sorts of things. But those are very real. But I would say, broadly, the cannabis consumer remains resilient.

People still like the product. We see it behave like other products in this space, and they’re not giving it up, particularly for us is an investment in the brands. I think you’re seeing it with RYTHM here at the very early stage. We talked about this on these calls over the years, but watch out for what happens with RYTHM and Incredibles, Dogwalkers, and Beboe over the next decade, and we’re pretty optimistic about that.

Antoine Legault

Thank you.

Ben Kovler

Thank you.

Operator

The next question comes from Aaron Grey with Alliance Global Partners. Please go ahead.

Aaron Grey

Hi, good evening and thanks for the question. Just wanted to talk a little bit about CPG and wholesale opportunities in third-party stores, particularly maybe states such as Illinois, New Jersey, and New York. We have new stores opening. Just any color you could provide on strategy in terms of getting on shelf, how that might differ in new stores ahead of them opening versus trying to get on shelf, of already open stores and you might not be there?

And then indicate you might be able to provide in terms of how you’re looking to approach that in these markets would be appreciated. Thank you.

Anthony Georgiadis

Sure, and I’ll take that one. Look, we’re very focused on building out our CPG presence within third-party doors, right? We’re leaning into our brands. In terms of market-to-market kind of strategy, the reality is all these are different games, given the different components of regulation, product that’s available, supply/demand and whatnot. So, it’s kind of — it’s not a one-size-fits-all approach.

But look, we just talked about product quality. That’s one area that we’re really leaning in because at the end of the day, we think we can win there. And so it’s really just establishing the ground game, building the sales team and having products that are demanded by consumers. And if you can do that, you can maintain product quality the rest largely takes care of itself.

So, that’s where we’re focused on. Product quality is kind of the tip of the spear there and then all the other kind of operational kind of execution type things associated with servicing third-party accounts in terms of delivery, fulfillment and everything else. We’re just incredibly focused on building that part of the business and doing it the right way.

Aaron Grey

Okay, great. Thanks for the color.

Operator

The next question comes from Sonny Randhawa with Seaport. Please go ahead.

Sonny Randhawa

Great. Thanks for the question. I just wanted to talk about the Florida investments you guys have made. How many locations, I guess, on the retail side, do you think that, that investment could support once it’s fully ramped? Just trying to think about 2024 modeling out additional locations in Florida. So, I kind of wanted to see what the constraints there were?

Anthony Georgiadis

Yes, sure. Sonny, I’ll provide — this is Anthony. I’ll provide some context on that. So, as everyone is probably aware of, given the verticality in Florida, you really have to build out wholesale first before retail. So, we did that with our first real phase in Ocala. We have 14 stores opened. Today — we’ve got another one opening in the next few days. And then we’ve got several more that we anticipate opening throughout the rest of 2024.

What we are doing is obviously watching the ballot initiative in Florida pretty closely because if things head in a positive direction, we’re probably going to have to reinvest into the wholesale capacity and then revisit kind of a retail plant. So, that’s really where we are at the moment. We’ll have a lot more kind of visibility on our next call is my guess. But in Florida, it’s built the wholesale first and then the retail second, that’s really how we did it.

Operator

The next question comes from Scott Fortune with ROTH Capital. Please go ahead.

Scott Fortune

Yes, good afternoon. Thanks for the question. I just want to dig in a little unpack the fourth quarter a little bit. You guys anticipate a low single-digit decline, and you called out United States kind of contributing a little more strength there. But just kind of understand was it West discounting price compression there and kind of calling out for the same thing in the first quarter?

But are you starting to see, in some states, some pricing stabilization here in your kind of key states, just kind of call out some of the better pricing opportunities that you see in some of your key states kind of going forward?

Anthony Georgiadis

Hey Scott, Anthony here. I’ll take that as well. So, let’s zoom out, obviously, a very strong quarter from a profitability standpoint for the business. We talked about the operating leverage at wholesale. We talked about kind of really looking at the retail gross margin line. Those were the two biggest drivers.

Now, look, we had a very strong December, particularly late December. And given the overall operating leverage of the business, with us the way we manage kind of the SG&A line, every incremental dollar of gross profit really just drops to the bottom-line.

So, in terms of pricing, we started to see a slowdown in a few markets. But it’s just — it’s too early to say that we’re out of the wood yet. The reality is we continue to see price erosion in most of the markets that we operate in.

So, we saw a slight slowdown in the fourth quarter, but too early to say if that slowdown is systemic and not going to continue, but it’s really — again, it just comes back to running the business and trying to optimize wholesale/retail by state and just running a good clean business with keeping fixed costs level.

Scott Fortune

Appreciate the color. Thanks.

Operator

The next question comes from Ty Collin with Eight Capital. Please go ahead.

Ty Collin

Hey guys, thanks for the question. As you’re thinking about your capital allocation options for the year ahead, especially with the pretty significant step down in CapEx, how are you guys winning share buybacks against debt repurchases at this moment?

And do you think that share repurchases are still a good use of capital considering the repricing we’ve seen in your stock over the last few months and compared to where you guys were buying in the second half of last year?

Ben Kovler

Sure, I can take that. It’s Ben. Great question. What I would say at the core is we remain opportunistic things are set up pretty well given where the balance sheet is. However, debt is due in April 2025. So, we want to be sure we cover that. I think in the last call — and maybe two or three calls have talked about the progression of CapEx. One, handle the debt too and think about the share repurchases and how to return capital or what else we could do.

Obviously, there’s always an overlay of M&A, and we’ve given thoughts on that before. So, that really remains what it is. We want to be sure we handle things all those things. We feel good about the CapEx. Obviously, some regulatory changes could come that make 2025, 2026, 2027, and beyond. Look a little different, and we obviously plan pretty far in advance. We’ve shown a tendency to do that.

We’re optimistic about the stock. I don’t think that’s a secret. It’s the first time in a while. We’ve been able to talk about that over the last few quarters, now that the Board has authorized buyback, and we want to be opportunistic on the price. It’s very volatile. So, we’ll see what happens, but we want to be able to be in there and see what happens. You never know. But obviously, the price we pay matters.

Operator

The next question comes from Mike Regan with Excelsior Equities. Please go ahead.

Mike Regan

Hey guys, great quarter and thanks for taking the questions. In terms of the sort of more recently the first time you’ve been mentioning M&A as a potential use of capital. Can you please give us a little more color on sort of what types of things you’d be looking to acquire a sort of new markets, still end markets, things like that? Thanks.

Ben Kovler

Sure. Hey it’s Ben. Didn’t mean to apply any different than the answer last time. We answered the phone. We talk to a lot of people. Things are always on the table. We’re down to be creative and think through stuff, but given where multiples are, given the cost of capital, given where balance sheets are, given the non-believability of most people’s quoted EBITDA, we intend to sit where we are and sort of take the calls.

We’re always interested in looking and seeing what’s out there and trying to be accretive for shareholders. You never know what’s going to happen in the future, so we want to be up to speed. But right now, we’re pretty focused inward.

Mike Regan

Got it. Great. And just a quick follow-up. Is there sort of any update on how the regulators are looking at the co-located RISE Express stores with the Circle K agreement, which could allow to really extend Florida pretty rapidly if they approve that?

Anthony Georgiadis

Sure, Mike, Anthony here. Unfortunately, no real tangible update there. We continue to work with state regulators to get the requisite permits. Look, we continue to believe that at some point in time, we’re going to open up a RISE dispensary adjacent to a Circle K.

Mike Regan

Great. Thanks.

Ben Kovler

Thanks Mike.

Operator

The next question comes from Andrew Semple with Echelon Capital Markets. Please go ahead.

Andrew Semple

Hi there. Congrats on the results. Just wanted to turn to the question of capital allocation. I think it would be helpful maybe if you could provide some sort of a sense of what you think an appropriate minimum cash balance would be for Green Thumb or maybe even like a minimum — or maximum leverage ratio that you’d be comfortable bringing the business to just to give us a longer term sense of what sort of spare capital you would think is available for capital investment, share buybacks or M&A. Any thoughts on that?

Ben Kovler

Sure, I can take it. This is more of an art than a science. We read Buffet’s letter over the weekend, and we like their cash balance. We’re certainly not that many decile places yet. But we like the sleep well, we like to have a lot of cash.

As the debt comes due, we want to be sure we’re in a position to figure it out and protect the balance sheet over. We don’t know what happens for the long-term for shareholders, but we’re — we feel really good about where we are.

So, I can’t really give you an exact number, but we like where things are. We have some room to play offense, and we continue to produce cash as a business despite 2AE and despite paying taxes, which I never thought would have to be something we’d actually have to call out.

But paying taxes, paying 2AE, paying the interest produces additional cash for us to figure out what to do, and we’re measuring those returns inside the business, M&A, debt, equity, and what we can do to best position the business for medium and long-term growth and not next quarter or next year even, but trying to really think outside the box and think long-term. So, that puts us in a pretty good position.

Andrew Semple

Thank you.

Operator

The next question comes from Frederico Gomes with ATB Capital. Please go ahead.

Frederico Gomes

Hi, thanks for taking my question. Just coming back to the margin side. I’m just curious, as you come off the large CapEx cycle this year, how far along are you in utilizing our capacity and achieving efficiencies in some of the facilities you have invested in this year? And do you see any sort of low-hanging fruit there to continue to optimize and improve your margins? Thank you.

Anthony Georgiadis

Frederic, Anthony here. I can provide some context on that. So, that question really — to answer that correctly, you have to look at it on a state-by-state basis. So, there are some states where we have excess capacity. I’ll tell you that those are states where we’re also having adult-use discussions today.

And so when we look ahead, as I mentioned, we — a lot of the CapEx building that we did over the last two years is really in advance of what we think is to come. So in some ways, we’re operating those facilities at a less than ideal kind of perfect scale, but we’ve got a lot of optionality that we can kind of grow into.

So, we don’t talk specifics on kind of capacity utilization and things like that, but we are well positioned to take advantage of some of the adult-use discussions that are taking place today such that we effectively in a number of the markets, we already have the capacity built. So, we feel very comfortable with where we sit there and our ability to continue to kind of grow into the facilities that we build out.

Frederico Gomes

Thank you.

Operator

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

Ben Kovler

All right. Thanks everybody for joining us. Look forward to our next update in the spring. Thanks everybody.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.