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00:35 Thank you and good evening everyone. And welcome to AWHs third quarter twenty twenty one investor call.

The presentation that accompanies this call can be found on our website, www.awholdings.com/investors. 00:50 Before we proceed, I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC and SEDAR filings, including our registration statement on Form S-1 and our 10-Q, which we expect to file in the next week.

We will not review those risk factors and other cautionary statements on this call. However, we encourage you to read them carefully.

01:12 Various remarks that we make on this call concerning expectations, predictions, plans and prospects constitute forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results.

Any forward-looking statements reflect management's current view only and we undertake no obligation to revise or update such statements or to make additional forward-looking statements in the future. 01:40 During the course of today's call, we will be referring to non-GAAP measures, as defined and reconciled in our earnings materials in the appendix.

These non-GAAP measures, as defined by AWHs may not be comparable to measures with similar titles used by other companies. 01:55 On today's call we have Abner Kurtin, Chairman, Founder and CEO; and Daniel Neville, our CFO.

02:01 With that, I'll turn it over to Abner.

02:05 Thanks Rebecca. Good evening to everyone joining our third quarter twenty twenty one earnings call.

Before we begin, I wanted to take a moment to honor the people who served this country on this Veterans Day, a day that celebrates the sacrifices they have made. I want to thank all of our investors and partners for their continued support.

We remain committed to providing you with strong governance and enhanced transparency as evidenced by the GAAP financials we plan to file tomorrow. 02:34 We continue to drive towards our goal of becoming a leading MSO in the Eastern half of the United States and a top five player in each of the states in which we operate.

The team is laser-focused on executing on our expansion roadmap within in select limited license Markets. We didn't win our assets in a lottery, we strategically acquired each one in some of the most compelling cannabis markets and locations across the United States.

03:01 We have proven our ability to execute and have built deep networks within every one of our geographies. Our approach to allocating capital into high return opportunities is our top priority.

I'm proud of the progress this team has made and appreciate the contributions of each of our fifteen hundred dedicated employees whose efforts have enabled us to create a premier MSO and assemble a quality portfolio of assets. 03:26 This industry is still in the early innings.

But it is growing rapidly with analysts projecting the market to reach a one hundred billion dollars in sales over the next decade. I've never been more bullish on the industry given the rapid and strong state-by-state progress, it has made over the past few years.

The fundamentals of the industry are strong and I'm confident there will come a day when the majority of US institutional investors are involved in the sector. This may not be an overnight switch, but we do anticipate participation to steadily build over time.

03:59 Let's move on to slide four, to review some of the highlights of the past ninety days. We are pleased to deliver another strong quarter.

Coming in ahead of analysts’ estimates with thirteen percent sequential revenue growth, one hundred and twenty eight percent year-over-year revenue growth and an adjusted EBITDA margins of twenty four point nine percent for the quarter. On the cultivation front, we added twenty seven thousand square feet of canopy this quarter and approximately thirty percent increase, bringing our total canopy to one hundred and eighteen thousand square feet across the portfolio.

04:32 We are happy to report that on November fourth, we acquired ten acres of land adjacent to our Franklin New Jersey cultivation facility. We now intend to expand the New Jersey cultivation to one hundred and fifty thousand feet of total canopy by year-end twenty twenty three.

This would make our cultivation facility one of the largest sites in New Jersey and will provide substantial incremental canopy relative to the fifty five thousand square feet that we were originally planning. The New Jersey market is promising and we are thrilled to devote more capital to high return opportunity and deliver considerable upside to twenty twenty three and twenty twenty four.

05:10 During Q3, we also expanded our vertical footprint in Ohio. We signed a definitive agreement to acquire another dispensary in the Greater Columbus area, bringing our total dispensary count to nineteen across the country.

Ohio has a strong medical program. And we are hopeful about its prospects to legalize adult use in twenty twenty three.

Now is the opportune time to scale our footprint in the state, while continuing to provide medical patients with the high quality product they expect from us. 05:42 We ended the quarter with a strong cash position, north of two hundred million dollars.

All of our CapEx projects are fully financed, and we have the ability to access additional capital to pursue incremental M&A if required. We have no near-term debt maturities and are looking forward to deploying the capital that we have in the high return growth opportunities.

06:02 We are pleased with the performance in the quarter and we still anticipate fiscal year twenty twenty one net revenue to more than double twenty twenty. However, we now expect to meet the low end of our previously provided net revenue guidance range.

We expect negative revenue growth from Q3 to Q4 caused by lower consumer spending, which has impacted many retail segments and challenges scaling the wholesale business. 06:25 Ramping wholesale has been prolonged as we complete construction projects and refine our operations.

We continue to build out our distribution networks and work to improve our product quality and selection. While we still foresee the next step function of growth will come next year as we begin to monetize the canopy expansions completed this and bring online additional stores and flip the switch on adult use sales in New Jersey.

06:49 We do, however, expect a slower growth rate than originally anticipated in the first half of the year as we face regulatory delays in New Jersey adult use implementation, challenges to scale our wholesale business and licensing and compliance hurdles delaying certain canopy expansions. Ascend has demonstrated tremendous better than expected growth all year.

We have always said that growth will not be a straight line, but rather a stair-step, it is not surprising or concerning to us that we will take a pause of the short -- over the short term before we take the next giant step forward. 07:23 Despite a slower-than-expected start to the year, we are still targeting to double adjusted EBITDA full year twenty two over twenty one, an impressive feat for any industry.

We remain confident that our existing asset base combined with a substantial capacity, we are planning to add in New Jersey has the power to generate over one billion dollars of sales and three fifty million dollars of adjusted EBITDA in the mid-term. 07:48 Let's move to slide five to review our current footprint.

Our model is to execute and deliver. We have done this well so far notwithstanding the challenges and hurdles that come with operating in this industry.

We are proud that despite our rapid expansion we have maintained our commitment to highly desirable retail locations, many of which can be considered flagship stores. 08:13 Our Newton MA dispensary will open its stores next week.

The store will have twelve POS systems and ample parking spaces. The store neighbors, whole foods and Trader Joe's has easy access to the Mass Pike and is less than ten miles from Downtown Boston.

We plan to open our third Massachusetts store in New Bedford Mass and our third New Jersey store in Fort Lee, New Jersey, in the first half of twenty twenty two. We are particularly eager to open the New Jersey of the Fort Lee store.

08:40 The Fort Lee store borders New York City and we'll have an expansive footprint with twenty nine points of sale and close to one hundred parking slots. We are eager to have this border store up and ready to capture the overflow from New York, in the interim period while New Jersey allows recreational sales but New York does not.

We also anticipating to open two more stores in Michigan in twenty twenty two in East Lansing and Grand Rapids. All of the dispensaries in this pipeline are fully licensed and fully financed, including the four New York's dispensaries, which are subject to a close of the transaction.

09:15 The New York transaction is subject to approval by the state and needs to be completed by the end of the year for the structure to remain as it is. We are working with the State of New York to gain approval and are having constructive conversations with all stakeholders to complete this process.

We are facing a time crunch, because we only began leading the approval process in September. From February to September of this year, the current owner of this license required us to work through them to obtain approval and they did not take meaningful actions to get this transaction completed.

09:50 Since we got directly involved, we have made substantial progress and believe we are on track to close by year end. Ascend is ready to participate in this inclusive industry and brings strong fair paying jobs to the systems of New York.

We appointed T. Andrew Brown as President of our New York operations to lead the charge and get the transaction over the finish line.

10:13 Andrews commitment as a public servant focus on Equity, Access and affordability along with his existing strong relationships with stakeholders across New York will help establish a presence as we enter the market. We are excited for this license to finally fulfill it's long overdue promises of job creation and inclusion that were made in the past many times by the license holder.

10:38 We move to slide six to review the detailed breakdown of our canopy expansions. Since we last reported, we have added fourteen hundred square feet of canopy in New Jersey and thirteen thousand square feet of canopy and Michigan, bringing us to a total of one hundred and eighteen thousand square feet across the portfolio.

11:04 Based on the latest projections, we anticipate approximately one seventy five thousand feet of canopy to be completed by year-end twenty twenty one. This includes the addition of fifty eight thousand feet greenhouse in Barrie, Illinois, which will be turned over to operations team by year-end.

11:27 COVID related delays and regulatory hurdles have pushed back the timing of certain canopy expansions. This doesn't impact the medium-term earnings capability of these assets, but it does impact timing to a small extent.

As I mentioned earlier, we acquired the land, adjacent to our New Jersey facility, which will allow us to expand up to one fifty thousand square feet of canopy by end year twenty twenty three. This expansion significantly increases our core earnings capabilities.

11:58 While construction remains underway across much of our portfolio, we continue to hone our cultivation skills and implement standard operating procedures across the board. We are recruiting key talent to fill out critical operations and strategy positions.

12:14 Let's move on to slide seven to discuss the delivery program we are launching in Mass. In the coming weeks, we plan to launch a delivery program in Mass.

This program pilot will be out of the Newton dispensary which will open next week, but we'll look to expand into other markets both within and outside Mass in short order. We will be delivering adult-use products to consumers within a twenty five mile radius of our Newton store seven days a week.

This radius covers densely populated towns and cities, including Boston, providing us access to three point six million potential customers. There are only seven dispensaries license to service Boston proper and this allows us to tap into that market even further.

12:55 The pandemic combined with consumer demand for convenience drove delivery trends through the roof. Over the last two years, whether it's food, alcohol or convenience products consumer want everything up their doorstep and they don't want to wait, cannabis is no exception.

13:10 California has pioneered cannabis delivery programs, according to our Hollywood based cannabis brand sixty percent of users of delivery as their preferred method of obtaining cannabis going forward post pandemic. We look forward to bring customers products to enjoy straight to the comfort of their home and we expect the program to be well received.

Cannabis business that provide a pick up their delivery options during the peak of the pandemic made twenty percent more in sales on average than those that did not. 13:40 There is not much cannabis delivery competition yet in Massachusetts particularly West of Boston.

And we feel uniquely positioned to succeed. As a vertically integrated operator, we have control over the product and can access both inventory and consumers directly.

13:54 Now let's move on to slide eight to discuss the incredible opportunity set we have in New Jersey. Twenty twenty two will be the year of New Jersey.

The opportunity in this densely populated limited license market provides immense possibilities. We estimate this market size to be over two billion dollars today, including our sales.

14:15 We are thrilled with our assets in New Jersey and believe we are well positioned to capitalize on the opportunity. Today we have twenty eight poits of sale systems and nine thousand square feet between our Montclair and Rochelle Park stores.

By the end of the month we will begin breaking ground for the expansion of our Montclair store, more than doubling our square footage and our number of point of sale systems at that location. 14:39 The Fort Lee store alone will have twenty nine points of sale systems.

This is almost one point five times the number of POS systems that we have in our highest-selling dispensary in Collinsville, Illinois, which generates over one million dollars of sales per week. Similar to how Collinsville is a border store to Missouri, Fort Lee is also considered to be a border store and this is only minutes from the George Washington Bridge.

15:01 We do not anticipate adult-use sales to start in New York in the near term and are optimistic that the store will have comparable success to Collinsville. Both Rochelle Park and Montclair have pass adult-use ordinances allowing for at least one recreational dispensary.

The Fort Lee area has opted in but not yet established adult-use ordinance. We now anticipate adult-use sales in New Jersey to commence in the spring.

15:30 Before I conclude, I want to take a minute to reflect on the tremendous journey of hyper growth that Ascend has enjoyed over the past three years and will continue to benefit over the upcoming years. Twenty one full year sales will be nearly twenty eight times our full year sales in twenty nineteen.

In the month of October alone, we harvested forty five hundred pounds of flower across four cultivation facilities, a twenty five times increase over the same month two years ago. 16:00 We now produce flower pre-rolls gummies and vape form factors, which has allowed us to meaningfully expand our SKU offering.

Our employee base has meaningfully grown from three employees at inception to fifteen hundred today. We remain committed to delivering continued success in the coming quarters.

16:17 And with that, I will now turn over the call to Dan Neville, CFO to review the financial results starting with slide ten.

16:26 Thanks, Abner. Good evening, everyone.

As Abner mentioned, we are pleased with the company's performance during the quarter. In Q3, we delivered solid sequential revenue and EBITDA dollar growth, achieving nice leverage on our SG&A expense.

16:43 Total system revenue was one hundred and five million dollars representing a seven point seven eight percent increase quarter over quarter and one hundred and thirty one percent year over year. Net revenue, which excludes the intercompany sales of wholesale products to our own dispensaries increased thirteen point two percent quarter over quarter to ninety four point four million dollars.

Sequential revenue growth was driven by a full quarter of sales from the three stores we opened in Q2, improved traffic at our Boston flagship, expanded hours in our Chicago land stores and a robust increase in third party wholesale sales. 17:25 Adjusted gross profit dollars increased four point one million dollars to forty three point seven million dollars or ten point three percent sequentially, driven by wholesale production and yield efficiencies, partially offset by lower realized wholesale price.

While retail gross profit and wholesale gross profit, both increased sequentially, adjusted gross profit margin in total decreased one hundred and twenty two basis points quarter over quarter to forty six point three percent. This was primarily driven by lower intercompany sales as a percentage of wholesale sales in the quarter, combined with lower realized pricing as we ramp in Mass and Michigan.

18:07 Our adjusted EBITDA for Q3 was twenty three point five million dollars, which represents an increase of three point two million dollars or sixteen percent sequentially. Our margin for Q3 was twenty four point nine percent, which represents a fifty eight basis point increase sequentially.

18:27 Despite gross margin headwinds, we levered our SG&A by over three hundred bps sequentially, which expanded EBITDA margins. We continue to look to leverage the corporate infrastructure we build to grow revenue at a faster pace than SG&A expenses.

18:43 As a reminder, approximately six point four million dollars of rent expense related to sale leasebacks are considered operating expenses. Since we provide GAAP financials not IFRS, these are accounted for above the line, the majority of which are represented in COGS.

19:01 Let's move on to discuss some of the other key operating metrics from the quarter on slide eleven. We have nineteen open and operating dispensary.

This includes our Carroll, Ohio dispensary, and the dispensary we signed a definitive agreement to acquire in Coshocton in Ohio. Total retail revenue increased to approximately sixty four million, representing an increase of nine percent quarter over quarter.

The growth was driven by increases in transactions at existing stores and the full quarter benefit of the three stores opened in the prior quarter. 19:38 Annualized revenue per dispensary came in at a very robust fifteen million dollars, which was up seven percent sequentially.

We continue to see lower basket sizes as the recreational and medical mix among our portfolio shifts and as consumers return to normal spending patterns making less bulk purchases. 20:00 Gross wholesale revenue increased to forty two million dollars across our five cultivation sites, representing an increase of five percent quarter over quarter.

Net wholesale revenue after intercompany sales increased to approximately thirty one million dollars, representing an increase of twenty two percent quarter over quarter. Which was driven by an increased number of wholesale unit sold.

20:24 Our in-house brand Ozone continues to garner impressive attention which is supporting both wholesale and retail sales. According to BDSA data, in Illinois Ozone pre roles are the number one seller in sales year to date and the Ozone brand overall is number two in sales year to date.

Ozone has sold in ninety nine percent of all dispensaries in Illinois. We're proud of the growth the brand has seen in just a few short years.

20:56 Let's move on to slide twelve to discuss our recent debt financing. In August twenty twenty one, we entered into a credit agreement with a group of lenders to provide a term loan of two ten million dollars.

This senior secured loan bears a nine point five percent interest rate and matures in August twenty twenty five. This was a great outcome for the company as it significantly lowered our cost of debt capital from approximately fifteen percent to nine point five percent and allowed us to simplify our capital structure by taking out legacy debt.

21:32 We were very pleased with the participation in that facility that was two times oversubscribed and led us to group of quality institutional investors. We are thankful to our lenders who are enthusiastic about the fundamentals and growth profile of the company.

21:51 Upon closing, we immediately repaid approximately seventy six million dollars of legacy debt. We expect to refinance twenty five million dollars of additional debt by the end of the year, and we'll use the remainder of the facility to fund approximately sixty million dollars of remaining investment required for the New York assets, the Ohio OCC transaction and incremental M&A.

22:17 The facility has a sixty five million dollars expansion option which were also able to leverage to fuel additional growth and provide dry powder for future M&A. The debt markets are very strong for the industry right now with over seven fifty million dollars raised by U.S.

MSOs over the last two and a half months with more coming down the pipe. We work hard not to be somewhat discouraged by the price action in the equity markets, the broad based and enthusiastic reception we had in the debt markets gives us hope that more and more institutional investors will participate in cannabis equities over time.

We believe the debt market are a year ahead of the equity markets in terms of interest and participation. 23:03 Let's move on to slide thirteen to discuss the balance sheet and cash flows.

On the top of the slide, you'll see our standard waterfall, which bridges from Q2 cash to cash at quarter end. During the quarter, we increased cash by approximately one hundred million dollars.

We used approximately ten million dollars from operations, six million dollars of which was cash costs related to the extinguishment of debt and other one-time items during in the quarter. We anticipate being operating cash flow positive after this quarter, excluding the payment of taxes, which will continue to be lumpy.

23:41 We invested fifteen million dollars in net CapEx during the quarter. The majority of this CapEx was used to support our cultivation expansion.

During the quarter, we also benefited from twenty five million dollars of tenant improvement reimbursements. Year to date, we've invested approximately seventy one million dollars on net CapEx.

We still anticipate CapEx net of tenent improvement reimbursements to remain just below one hundred million dollars this year. 24:11 On the financing front, we obtained one hundred and twenty five million dollars of proceeds from the debt financing net of fees.

We ended the quarter with two zero five million dollars of cash and equivalents, two sixty four million dollars in total debt and net debt of fifty one million dollars. 24:30 Let's move on to slide fourteen to discuss our current full year twenty twenty one expectaions.

As Abner mentioned, we now anticipate net revenue for the full year twenty twenty one to be up one hundred and thirty percent year over year, closer to the low end of our previously provided range. We've delivered an impressive growth year to date, however, we anticipate a decline in quarterly net revenue from Q3 to Q4.

25:00 The decline in quarterly sales growth is driven by softness in retail cannabis trends as a result of the expiration of COVID related government stimulus, a return to normal behavior as consumers around the nation return to work, school and traditional entertainment outlets, as well as challenges in scaling the wholesale business. 25:22 We remain enthusiastic about the assets we have today and the markets in which we operate.

As Abner mentioned, we believe in the ability for this asset set to deliver one billion dollars in sales and three fifty million dollars of adjusted EBITDA. But we now anticipate delays in achieving this due to challenges in scaling the wholesale business in new markets, timing delays on local permitting in New Jersey, Mass and Illinois and a pushback in the start in New Jersey adult Use.

25:55 We are committed to executing on our near term goals to expand our canopy footprint, delivering a wide variety of consistent and quality products to our wholesale customers on a weekly basis and providing our retail customers with the best in-store experience and products at our marquee locations. 26:14 We're excited for twenty twenty two, the year where we anticipate the New Jersey market to flourish, and we look forward to reporting that continued success.

We anticipate adjusted EBITDA margin reaching north of thirty percent by year-end twenty twenty two as we achieve additional operating leverage as we bring new assets online. 26:37 Taking a step back, AWH generated twelve million dollars of revenue in twenty nineteen, one hundred and forty four million dollars in twenty twenty and is on pace to deliver one hundred and thirty percent growth this year.

Despite the slight slowdown we’ve seen recently, this is hyper growth at an extreme level and we're incredibly proud of what we've accomplished today. We also remain very excited about the company's midterm earnings potential, notwithstanding some short term hurdles.

27:08 We will continue to be disciplined in our capital allocation approach, focused on limited licensed markets and dedicated to executing on our goals. I would like to personally thank all of the talented Ascenders across the organization who remain committed to delivering on our mission to be a premier MSO.

27:28 With that, I'll turn it over to the operator for questions.

28:06 Thank you, and good evening. I wonder if you could speak to or provide any additional color on sort of the range of potential outcomes for the time pressures you are under in New York.

Appreciating that a lot of this hasn't been within your control, how are you handicapping the probability to be able to get this done by the end of the year? And if in a worst case scenario, you can't what the remedies if any or how we should think about handicapping the risks around New York looking beyond -- looking into twenty twenty two, twenty twenty three?

28:39 Thanks for the question. We hadn’t preparing any questions on New York, so this was surprising to us.

Just kidding. As an investor for a long time myself, I would love to put a probability on it.

Unfortunately, this is a situation controlled by government factors that makes it very, very hard to predict. What I can tell you quite clearly is we are having a number of very constructive conversations and discussions with all the people necessary to get this approved and over the finish line by year end.

29:17 And if it wasn't for this extreme time pressure, I wouldn't have any concerns whatsoever. The history of the situation is without speaking poorly on another operator, the current license holder has not endured themselves to the state of New York and New York would like to see an operator committed to inclusion and fair paying jobs and commitments of the program own that license.

29:51 That said, we have to get a permission through an approval process by the end of the year. We think we have a very good chance to do that.

But given the short timeframe, we can't fully guarantee it by a political process and it is out of our control. And to a large extent in tested.

This is a new cannabis regime in New York, the governor has done an amazing job. They moved incredibly quickly, they put flower on the menus very quickly, they've set up the CCP board quickly, they've got the OCM up very quickly, they've done everything right.

But they haven't transferred the license yet. And so this would be the first approval that they've given.

So because of that, we don't fully know the process that they will choose to take, but we are working constructively with every member of stakeholder that would be involved in that process to get it over the finish line. 30:54 In the event that it doesn't complete by December thirty one, we do not have an ability to unilaterally extend the transaction.

We would like to work with the seller to do that constructively. But at the same time, we understand in our opinion that the seller kind of failed on some obligations for a while during this process.

And while this isn't the place to discuss litigation, I mean clearly, we would feel that we would have certain rights under the agreement, but our extreme focus is to get this deal close by year end, and we think we're in a good position to do that.

31:33 That's great color. Thank you Abner.

And maybe just one more quick one for me. Could you help us better understand the challenges in scaling of the wholesale business, particularly in the context of sort of the traction of some of your brands and how well you've been ranking in terms of some of those brands.

Is it market specific issue in terms of scaling the wholesale business, so is it fairly broad based? Any additional color there would also be valuable.

32:01 Yeah. I mean -- So I've listen to what some of the other players have said in the industry, etcetera.

I mean, I can only comment on the states that we're in. But there's two fundamental macro trends.

The first is, the consumer is not spending more money today on cannabis. We had great tailwind behind from of the government money and where consumer was going to spend money.

They still log the product, they're still spending tons, but they're not spending additional amounts from where they were on pre COVID days. 32:33 And secondly, in a lot of our states and particularly Illinois for variety of government reasons, they haven't adding new stores.

So we don't have additional demand coming into the market and we do have additional supply coming into the market from some of our competitors. So it's a more competitive environment.

I don't think that's a problem. I think that in the medium term the market is fairly supplied to under supplied in most of our markets.

I think the ability for winning brands to put good products on the shelf is a long term growth opportunity. But in the short term, with no additional stores and with no additional consumers spending, you're in a flatter environment.

33:11 From a micro level, we have had the standard challenges of anyone trying to scale the business. I mean, we went from zero to fifty five thousand square feet of canopy, making us the third or second or fourth -- third or fourth largest player in Illinois in a year.

Now we're jumping up to one hundred and thirteen thousand square feet. I could tell you we could do that simply and easily, but this is a challenging business.

What we're doing is certainly is challenging as what anyone in this business has attempted to do. And their short term hiccups as we do that, some of -- the first big one is construction, has anyone could tell you in any industry the supply chain getting people to show up, getting materials to show up has been hard.

We faced increasing regulatory headwinds or delays in getting approvals, while we love our partners from the state of Illinois, we've had a hard time completing the inspection process for the greenhouse. People have a variety of other things that they have to spend their time on and that had of delay.

34:14 I think one of our competitors announced similar delay in Illinois. So that's part of it.

Once we get these operations up and running, we face the challenge of everyone of delivering high quality consistent products at scale. And I think we've done a very good job at that, but there are always certain times when as we scale up the operations we need to continue to refine and improve our product quality and consistency and that's what we're working to do.

So, what we're trying to do is very ambitious. I think we have the right plan to do it.

We've been successful at it, but we just got to work through these various headwinds to get it done.

34:54 Thank you, Abner. Good luck, and I'll get back in queue.

Appreciate the color.

35:05 Hey, guys.Good afternoon, good evening. So, I guess my first one is just, when we try to unpack Q4 sequential decline, I know that there's a retail element, there is a wholesale element.

Could you give us a sense of the split in terms of what's impacting -- driving that negative growth in Q4.

35:36 Well, I'll turn it over to Dan to give -- of how we think about the breakdown. But I will say that the Q4 decline is in some way a reflection of our success in Q2 and Q3.

In Q2 and Q3 we substantially did better than I think internal and external estimates and a lot of that was pulling through growth. I think on the retail side that kind of was pulled through customer spending.

And then on the wholesale side where we able to -- we were able to sell more products more successfully through the chain and I think we're kind of feeling a little bit of the chain being backed up here that needs to work through some of that process. 36:20 So I think if we have done -- I don't have the -- But if we've got eight percent growth in Q2 and eight percent in Q3, it will be lot smoother and happier, but we end up in the same place.

We wanted to be between three thirty plus million dollars and we're going to get to the right place. Obviously, everyone would love to see it in more of a straight line.

Dan, you want to comment on the breakdown a little bit.

36:46 Yes, in terms of the breakdown, Bobby it's going to be about two thirds driven by the wholesale side of the business and about a third of it driven by the retail side of things. We do have Newton opening up next week, which will provide a little bit bump to the Q3 numbers, but it's just -- it's kind of split across Illinois, Massachusetts, Michigan, just a little bit of incremental weakness around the edges and a little less strength in terms of buying patterns from some of our regular customers with the slowdown that some of our competitors are seeing across the industry.

So nothing dramatic, no huge problems in one place or another, but hat's the breakdown.

37:38 Okay. Very helpful.

And just one more quick one since another people want to get their questions done. When we exclude New Jersey, the delay in New Jersey in terms of timing there from what's happened in twenty twenty two.

Are there any kind of permitting and cultivation related delays that could linger into twenty twenty two in terms of maybe causing a different outcome versus your internal plan.

38:13 Look, I would say when we look at the bulk of the -- we talked about in the past, but bulk of the canopy expansions that we're looking at in twenty two are designed to the Apple Canopy expansion which should come online in January. The greenhouse, which also should come in line next month or the month after.

When I say come online, I mean planting. 38:42 The other big canopy expansion is probably New Jersey.

New Jersey could get delayed a few months sometime into twenty two. Same thing with some of the stores, but you these are kind of month -- multi month or month or two type of delays.

This won't impact I think the full year a much, it may kind of impact a month or two. New Jersey adult use will be a fixed way.

39:13 The January to April in our models has a big swing and should it get the delayed further, that's kind of a big swing. I think anyone in the industry kind of with New Jersey focus is facing that and we'll wait and see it.

Governor Murphy and the team are working hard to get it going. Obviously, every states gone through this conversion process, they're trying to get the industry open to adult use, they're trying to protect the medical customers, they're working on new applications, and hopefully, it all come together very shortly.

39:54 Yeah, I just add. It's kind of the same thing we experienced in Massachusetts and Illinois with those canopy expansions getting pushed out a little bit on the margin.

At Illinois, we expect it to be up and planted in October. That's looking more like December.

Apple, we expected to be planted at the end of the year, that's looking like January at this point, maybe towards the end of January which obviously isn't a big deal for the productivity of those assets, they are in the grand scheme of things, but when you're taking one hundred thousand square feet of canopy between those two sites and pushing that a couple of months in twenty twenty two, that certainly does move the needle a little bit.

40:45 Great. Thank you.

40:55 Hi. Good afternoon.

Thanks for taking my questions. First just around Illinois.

Abner you mentioned the licensing delays there. I know it's very tough to handicap anything involving the legal process.

But how are you thinking about the timelines for those additional licenses to be issued and to translate into wholesale demand for you?

41:19 Yes. Look, this is been -- obviously, Governor announced this back at the time of legalization in the summer in nineteen.

So, I think everyone, probably including himself is frustrated by the timing of these additional licenses. Recently, a lot of the lawsuits around the license have been consolidated.

We hope that begins a process that will allow some kind of solution that releases the licenses. And number of other states have released licenses with lawsuits pending.

That would be the quickest way to get through this. 41:54 The State of illinois has chosen not to do that, but certainly releasing some licenses ahead of that would help.

We would expect licenses to come on in line in twenty two. One of the good things is that, a number of – now there has been some announced winners, even though the license hasn't been issued.

We are starting to see people make plans, getting real estate, potentially even getting construction started. So, we think that the time from license issued to the time of license opening will be shorter than it wasn't because now they're moving forward.

42:29 We of course only have eight licensed -- eight stores in the state, we are looking to purchase or partner with two other stores and get to our ten cap. So we will have the ability to increase our store count by twenty five percent, as well as vigorously improve our wholesale business.

42:48 We're working really hard to try to partner with some of the new license holders to provide things that they need to get open and successful and to be good partners with us to sell Ozone products through their stores.

43:04 Great. That's helpful color.

And then similar question around New Jersey. Obviously in the last August we saw I think around seventy percent of municipalities and obviously a lot of that is expected to be temporary given the deadline they faced and the fact they didn't have the rules yet to digest from a standpoint of planning out your own wholesale business in that state, how are you thinking about how quickly those municipalities may opt back in obviously as an input as to how fast we addressable wholesale market can grow?

43:39 Well, to be honest, we haven't focused a lot on wholesale in New Jersey, because we don't have enough product. We're focused on getting enough canopy online to fill our own stores and it really is in Phase two that comes online, which will be in twenty three where we'll really be looking at meaningful wholesale.

So we really feel by the time our canopy comes online that the wholesale market will start to open up. But we're more worried about the opposite problem of not having enough product on the shelves to fulfill demand of customers in Fort Lee, Rochelle Park and Montclair.

44:19 Excellent. That's great color.

Thank you.

44:30 Hi, good evening and thanks for taking my questions. I just wanted to follow-up with respect to the ongoing process in New York.

Can you confirm whether there's been any capital that has been advanced to the license holder there from Ascend for working capital or otherwise?

44:48 Yes, I just don't think we're -- I mean the contract is confidential. I don't think we're in a position to comment on the specifics of that contract.

But either way, I don't think it's meaningful to the process for either of us.

45:07 Okay. Understood.

Then switching gears here with respect to M&A, very defined plan for Ascend, particularly through the end of twenty two in terms of whether we are going to scale up. I'm wondering if there's any additional states of interest on the radar or any movements in certain markets where Ascend is keen to enter into or increase exposure to?

Thanks.

45:31 Yes, look, I think it's hard to know, I mean, this industry kind of -- you think there's going to be a part of M&A and then all falls away. It is an odd industry both in terms of when deals happen how they happen.

But we are seeing definitely a pickup in activity. It tends to be from individual operators, individual licenses and individual states.

I think individual SSOs or operators or people with a license or having – are realizing it's just a tough road to get the scale in an industry that's consolidating, in an industry that gets -- needs more capital. 46:06 We see a lot of companies, maybe they have a grow, maybe they have a couple other dispensaries or two, but they realize they need another five million, ten million dollars, fifteen million dollars to get up to the next level and this group of individual investors maybe isn’t prepared go to that next step or else they feel that they need certain expertise and scale and there are unable to do that.

And I think that's driving a lot of the smaller deals. 46:31 The bigger deals we're seeing smaller MSOs both privately and publicly, I think trying to figure out what is their place in the industry and coming to the conclusion that being part of the somebody with the same size or bigger is the right way to go.

And I think that seems to be happening more now than it did, let's say, three or six months ago. And I have a feeling you're going to see some more deals announced as a result.

From our perspective, we continue to be focused on the same states. We love the Northeast, we were jealous of the deal did and their ability to get to Connecticut.

That's a great market. 47:09 We look at other markets up there, whether it be Rhode Island or the Mid Atlantic Maryland, the Delaware.

Certainly Pennsylvania is the largest market in the East mid Atlantic we're not in. So we're active in all those states.

47:24 Missouri on the other side of us in Illinois particularly in the St Louis areas is attractive to us. Ohio was an area that we're trying to fulfill the footprint.

So, we're disappointed we haven't announced any sizable deals since the IPO, but at the same time, we're working hard, our pipeline is very attractive and we think we'll be able to do good deals and add value to Ascend over the short to medium term.

47:51 Okay, understood. Thank you very much for that.

48:01 Good afternoon. Thanks for taking the questions.

Number of them have been asked already, but I think one I sort of curious on is what your expectations are going into twenty two as far as your wholesale and retail mix, and what the associated impact on gross margins might be you commented about Q3 and this slight different adjusted gross margin might be. You commented about Q3 and a slight dip in that adjusted gross margin and how do you look at that going forward?

Should we see that increasing in twenty twenty two? And what are your expectations for sort of the percent split between those two channels.

48:37 Dan you want to take a shot of that one?

48:44 Yes. So in twenty twenty two we'll be approximately sixty percent retail, forty percent in wholesale.

And then as we get the benefit of the full years of canopy expansion, the New Jersey expansion and getting up to two hundred and seventy five thousand square feet of canopy by the end of the year, that'll move it to something closer to the fifty fifty split between the wholesale and retail business, which is our ultimate target.

49:22 And when you at that fifty fifty split, would your gross margins trend a little bit higher or when you get the more wholesale in there, does that sort of keep your gross margin profile sort of consistent with what we saw in Q3?

49:37 Yes. As we mix over -- from wholesale over to retail, the wholesale gross margin profile is higher than the retail side of things, so as that mix changes our gross margins will trend up with that.

49:52 Okay, great. Thanks very much.

50:05 Thank you. On the softening retail trend that mentioned in Illinois, Massachusetts and Michigan, did that happen in every state at once or is that a great individually by state into the fourth quarter and where the decline fairly similar across the states obviously, you have much bigger exposure to Illinois on at this point.

If that's slowed down, it would matter a lot more than Michigan would, but I'm just kind of curious with the level of magnitude of deceleration was across these different states.

50:35 That's a hard one, because I think -- we're not -- I'm not sure totally big enough to see the whole macro trend, but I definitely think that once you saw the last of the free money kind of coming offline, we know we started to see a slow trend. Interestingly, it's definitely coming off in basket size, not transactions.

So we're seeing customers -- more customers come more often spending less money leading to a slight decline in overall retail spend. 51:12 I definitely think we saw it a little bit more in Illinois because we were coming off pretty high levels than we did in Michigan and Mass.

The other problem in Mass was, it's still a new store that's still growing in a post COVID Boston, so we're still seeing some growth in that retail side, but definitely being a wholesaler in Mass, we're seeing the trend of all retailers saying that the vault are full. They are selling through and they need to buy more products.

But the vault are fuller than they've been and they're not reaching out trying to grab every bit a product that they can and therefore, that's just kind of backed up a little bit of supply chain.

51:59 Great. Thank you.

52:08 Hi there. Congrats on the strong Q3 results?

I just wanted to ask, you believe the amount of cultivation canopy coming online within the third quarter increased by about twenty five thousand to thirty thousand square feet sequentially. Could you speak to how much of that incremental facilities base actually contributed to revenue growth within the third quarter and how much might still be undergoing first harvest that should come online within the fourth quarter.

52:40 Dan, you want to walk through the canopy specifics?

52:44 Yeah. I'm sorry, was that question directed towards Franklin or Atlanta, New Jersey or Michigan?

52:52 More on the New Jersey side, how much of that came online within the third quarter.

53:00 Yeah, the first harvest for that is going to be December, so none of the -- none of the canopy expansion that occurred in New Jersey impact our flow due to revenue this quarter. So, First Harvest in December starts to head -- starts to hit revenue in late January, February timeframe, but as Abner mentioned, a lot of that is going to go towards our own stores or a waiting in preparation for the conversion of the market in New Jersey.

So that's going to be a Q1 event, but there could be some intercompany impact to that as well.

53:46 Great. Thanks for the additional color.

53:56 Well, look, just thank everybody for taking the time. We're excited to bring another strong quarter and continue this growth trend.

And we hope everyone has a safe and happy Thanksgiving. Thank you.