AYRWFAYRWFOTC
Loading
Operator: Good morning, everyone, and welcome to the Ayr Wellness Fourth Quarter and Full-year 2024 Earnings Call. Joining us today are Ayr's Interim CEO, Steve Cohen the company's President, George DeNardo; and CFO, Brad Asher. Before we begin, we would like to remind that management during this presentation may contain forward-looking statements based on management's expectations. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as and must not be relied on by you as a guarantee, assurance, prediction, or definitive statement of fact or probability. Many of these risks and uncertainties are discussed in our most recent public filings, including our most recently filed Annual Information Form and Management's Discussion and Analysis. Numerous risks and uncertainties could cause the actual events and results to differ materially from the estimates, beliefs, and assumptions expressed or implied in these forward-looking statements and might not be expressed today. Numerous factors that will determine Ayr's future results are beyond the ability of Ayr's control or predict. In light of the uncertainties inherent in any forward-looking statements, you are cautioned against relying on these statements. While Ayr may elect to update forward-looking statements at some point in the future, Ayr specifically disclaims any obligation to do so, except as required by law. During this presentation, we may reference non-GAAP financial measures such as adjusted EBITDA, and adjusted gross profit. For a reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the Investor Relations section of our website earlier this morning. With that, I will now like to turn the floor to Ayr's Interim-CEO, Steven Cohen. Sir, you may begin.
Steven Cohen: Good morning, and thank you for joining Ayr's fourth quarter and full-year 2024 earnings call. I'd like to start today's call by thanking the entire team at Ayr. Since I became Interim CEO, I've worked closely across the business and I'm impressed with the talent, resilience and determination of our team. Cannabis is a tough business, but our team is up to the challenge. Fiscal year 2024 in the fourth quarter in particular drove home what we all know. Challenges and volatility define this industry, including state and federal policy disappointments, macroeconomic factors that have further pressured the consumer wallet, rising labor costs and challenging supply dynamics across a fractured state landscape. With that said, the team at Ayr has faced these challenges with tenacity and dedication. On the other hand, it's clear that demand for cannabis continues to rise throughout the country, and our transaction volumes reflect that. The core thesis of cannabis as a consumer product remains stronger than ever. With that in mind, we have made crucial steps towards building a more resilient business, with a focus on thriving in our current operating environment. We have taken major steps towards improving our leadership structure. We've elevated George DeNardo to President and George is and will continue to take an increasing role in managing all day-to-day aspects of this business and effectively becoming my partner as Interim CEO, until I am replaced with somebody who will be the future of this business along with George, Julie Winter and Jamie Mendola, our Chief Revenue Officers. We are aligning other members of our executive team to make our organization more sound and operationally focused, while all the time recognizing that core of George, Julie and Jamie is the group that will drive this business forward and it is the team to which, I believe we are all committed to supporting on the operational side of this business. While we still have a few key positions to fill, including CEO, I'm proud to say that, our leadership team is motivated and better positioned to tackle the opportunity in front of us. Beyond the leadership team, we have taken key steps to further streamline our business, eliminate headcount redundancies and start the process of rationalizing our state portfolio to be in the markets that make the most sense for our business. With these changes underway, we remain focused on controlling what we can control, executing with discipline and positioning Ayr for sustainable growth and profitability. Although I will address it at the end of the call, I also want to note that, it is with some degree of sadness that, this will be the last call that I will do with our CFO, Brad Asher. And I just want to before I give final remarks about Brad, give him my personal thanks for his commitment, dedication, and support to this business. I'll now turn the call over to Ayr’s President, George DeNardo to talk through high-level Q4 results and operational updates.
George DeNardo: Thanks, Steve. I'm honored and excited to take on the role of President of Ayr and I appreciate the confidence placed in me to help to drive the company forward. Our top priority is positioning Ayr for sustainable growth and enhanced profitability within our existing footprint while ensuring long-term balance sheet stability. To achieve this, one of my immediate objectives is to create greater synergy and collaboration between our revenue-generating and supply chain functions, ensuring we maximize efficiency and optimize our operations. Turning to the quarter. In Q4, revenue was in line with our guidance and essentially flat compared to Q3. However, continued price compression and inventory challenges in Florida stemming from the transition to the new state-mandated seed-to-sale tracking system impacted our top-line and margin performance. Outside of Florida, revenue was supported by strong wholesale sales, retail share gains in Pennsylvania and a full quarter of adult-use sales in Ohio. Notably, our brands and store concepts continue to resonate with consumers in Ohio resulting in market share gains despite the market becoming increasingly competitive with new dispensaries opening. Below the top-line margin performance was challenged by several factors wholesale price compression which was further compounded by a higher percentage of bulk product sales particularly in Massachusetts and Nevada, where we sold down aged inventory. Florida seed-to-sale transition added excess operating costs and limited our inventory in our highest margin state, and cultivation challenges in Pennsylvania that stem from facility upgrades during the quarter. However, these upgrades have already begun to drive improved production yields in our Q1 harvest. As we move through 2025, we anticipate continued competitive pressures across our markets particularly in Nevada, Massachusetts, and New Jersey, as new retail stores come online. In Florida, pricing pressures remains an ongoing challenge and we expect to navigate similar headwinds in our Wholesale segment across other markets. We are proactively positioning Ayr to offset these pressures through operational efficiency, cost discipline and a sharpened focus on our core markets. Our vision for 2025 focuses on two primary tracks, both of which build on top of the foundation that we put in place throughout 2024. Those tracks include one, investment in our core brands and two, the streamlining of our operations to achieve cost efficiencies and enable quicker and better decision-making. On the investment in our brands, we made strong progress last year in rationalizing our brand portfolio and relaunching each brand with higher quality biomass input, new modernized hardware, and new formulations to deliver the desired effects that our customers are looking for. As these elements have come together to deliver a much better quality experience, the response from our customers has been telling. Our CPG wholesale revenue in 2024 was up 20% year-over-year with our core brands of Kynd, Haze and Later Days up 126% over prior year and now we build on that. Across our footprint, we are rolling out comprehensive brand toolkits that incorporate physical presence at retail, bud tender engagement, digital e-commerce penetration and digital content creation and putting that in the hands of a revamped wholesale team now further incentivized to prioritize the sale of finished goods. With regards to streamlining our operations, we made progress in 2024 identifying inefficiencies and are now acting to clean them up. As we continue to streamline our operations and strengthen our financial position, we're taking a close look at our footprint to ensure we're focused on markets with the greatest potential for growth and profitability, while maximizing our ability to make faster and more precise decisions. That means investing in the markets that we believe in, and where we have a pathway to succeed and to move on from the ones that don't make sense from where we are as a business. To that end, we have signed a Letter of Intent to sell our assets in Illinois, a market where we do not have the necessary scale to compete over the long-term and where we lack vertical integration and our CPG brands to complement our four retail stores. We're taking a hard look at other markets to make sure we are prioritizing those core markets that will deliver for our business. Within our core markets, we are making a concerted effort to consolidate our facilities, which we began last year with the closure of our Ponderosa manufacturing facility in Nevada and the sub-lease of our original medical cultivation and manufacturing facility in Massachusetts. We will be further streamlining our Nevada operations with the closure of our secondary cultivation site later this month and consolidating cultivation in a single turnkey facility with cultivation costs without impacting top-line. From a company-wide standpoint, we are laser-focused on rightsizing our SG&A. We have already made substantial costs related to regional consolidation and corporate overhead and we anticipate providing further updates on our SG&A reduction efforts throughout the year. We remain confident that sustained growth and enhanced profitability are achievable within our existing footprint, but we recognize that execution will be critical. As we advance initiatives across our core markets, we do so with a keen focus on balance sheet discipline and ensuring the long-term health and success of the company. Now to hit a few key updates across our markets. Despite the setback of Amendment 3 in November and the challenging conditions faced in Q4, we believe Florida presents significant opportunities for organic growth as a medical market. Considering the ongoing price compression, executing on our strategic cultivation expansion is now more important than ever. With that in mind, a key initiative for this year is the launch of our new indoor cultivation facility in Ocala, which is expected to come online in Q2 and begin contributing to results at the end of Q3. This facility is one of our most important catalysts of the year, as our lack of high-quality indoor flower has been a persistent drag on performance in the state and has not allowed our aforementioned brand portfolio to thrive in the way we like to see. As a reminder, our Florida retail stores represent approximately 70% of our total retail network. Once fully operational, Ocala will more than double our current flower production capacity enhancing product assortment in premium flower and concentrates, which represent historically underperforming product segments for Ayr and significant growth and margin opportunity, even under the current medical only framework. This facility will complement our existing Gainesville facility directly addressing our current deficit in premium flower production, which is a highly sought after category by customers. Beyond Florida, we are focused on scaling our business in Ohio, where adult use sales in Q4 contributed to meaningful increases in both retail and wholesale revenues. While the state's adult use launch has been somewhat tempered by regulatory restrictions including limitations on marketing and advertising, as well as certain product types like pre-rolls, we expect a further ramp in sales as additional form factors are approved. In February, we opened our fourth adult use store and remain on track for further expansion with our fifth location opening later this month, and an additional two stores by year end. As new retail locations open across Ohio, we will continue to assess the market opportunity and scale production at our 58,000 square foot pharma cultivation facility and Akron production facility as appropriate to both support our own stores and drive greater wholesale penetration. In Pennsylvania, we continue to closely track legislative progress and we will be ready to scale should adult use legalization advance. In the meantime, we are focused on driving operational efficiencies across cultivation and production rebounding from Q4's production decline and bed and fitting from the installation of new equipment. As mentioned in Q4, we took a margin hit on Massachusetts wholesale contributions through an initiative to sell through aged and excess inventory. With our improved inventory levels, we have shifted our focus towards selling more finished goods supported by our brand portfolio and an updated wholesale commission system. We are confident that this sales strategy will drive more consistent and profitable results beginning in the current quarter. Even setting aside the inventory reduction during Q4, Ayr's core brands Kynd, Haze and Later Days continue to gain market share in Massachusetts wholesale due in large part through deeper penetration and sell through with existing doors for our narrow brand portfolio. While we have not seen a rebound in pricing levels as some large operators have exited the market, pricing appears to have stabilized. We continue to believe that, our Massachusetts CPG business will maintain its strong position in the market over the long-term. Last fall, we announced the receipt of a conditional license for exclusive rights to operate vertically-integrated operations in Virginia, a significant long-term opportunity. We are excited to establish operations in Virginia's medical market, while remaining well-positioned for any potential movement on adult use legalization. Before I wrap, I want to reaffirm our commitment to executing with discipline and sharpening our focus on the core markets where we operate Florida, Nevada, New Jersey, Pennsylvania, Ohio and Massachusetts. We recognize that the near-term environment remains dynamic and challenging, but we are leaning into our strength with a clear strategy to drive sustainable growth and enhance profitability over the long-term. I'll now turn the call to our Chief Financial Officer, Brad Asher to walk us through financial results.
Brad Asher: Thanks, George, and good morning, everyone. Q4 sales of $114 million were flat compared to the prior quarter and just under 1% lower than the prior year, aligning with our top-line guidance to be flat quarter-over-quarter. Price compression continued in Q4 with BDSA flower pricing decreasing sequentially across all our markets ranging from down 5% to 12% with Florida at the top of that range. Our overall retail transactions increased by 1% in Q4, marking the fourth consecutive quarter of transaction growth. Overall retail sales declined 1% quarter-over-quarter, driven by a 2% decline in average basket size. With our first full quarter of Ohio adult use under our belt, our Ohio retail sales increased 41% quarter-over-quarter, resulting in an increase in BDSA market share and our highest premium to date, when compared to our implied market share. Our Pennsylvania retail also increased by 8% quarter-over-quarter leading to an increase in BDSA market share attributed to both operational improvements and seasonal factors tied to store locations. These gains were offset by a sequential decline in Florida, due to further price compression, seasonal greenhouse impacts and inventory challenges as George mentioned earlier. We expect our new indoor Ocala facility to stabilize inventory, increase our overall biomass capacity and enhance our ability to compete in Florida with premium indoor flower. Sales in our remaining markets were largely flat quarter-over-quarter with price compression impacting profitability across all markets. Our newer locations in Illinois and Connecticut continue to ramp slowly in a competitive environment. However, we remain focused on acquiring new customers. Retail internalization for the quarter was 65% consistent with the prior quarter, and 47% excluding Florida, the highest level of the year. On the Wholesale front, a 4% sequential increase largely offset the retail decline. However, despite higher sales, wholesale margins were lower in Q4, primarily due to inventory reduction efforts, which included clearing out aged inventory and resulting in an overall higher percentage of bulk sales compared to finished goods. While wholesale typically has more ebbs-and-flows than our retail business, it's worth noting that New Jersey wholesale appears to have stabilized from the decline in Q3 and Ohio appears to have stabilized at the prior quarter pace as well. Although Ohio wholesale is still up over 2x, when compared to Q1 of '24 and we are hopeful that as the market continues to expand and the next wave of retail locations begin to open, there will be a significant opportunity to return to Wholesale growth. Q4 gross profit of $35.8 million represented a 17% decrease from prior quarter, and 27% decrease from prior year. Q4 adjusted gross margin, a non-GAAP measure was 48.7%, down approximately 400 basis points quarter-over-quarter impacted by the following: lower contribution from Florida, our highest margin state, price compression across both retail and wholesale channels higher bulk sales in wholesale and inventory depletion efforts. Q4 loss from continuing operations was $133.9 million driven primarily by $116 million of non-cash impairment charges, which included a $94 million goodwill impairment related to broader industry headwinds including the Florida vote outcome and a $24 million impairment associated with operational streamlining efforts such as classifying Illinois as assets held for sale and impairments on leases and PPE and smaller facilities such as our legacy Indoor Grow in Massachusetts where capacity has since been absorbed by our larger facility. Q4 adjusted EBITDA, a non-GAAP measure was $19 million falling below prior trends and expectations due to the macro pressures and gross margin challenges discussed earlier. Moving to the balance sheet, we ended Q4 with a cash balance of $35.5 million. The sequential decrease in cash was primarily driven by the timing of semi-annual interest payments and $3 million of scheduled principal amortization payments. This was partially offset by a $6.5 million benefit from inventory depletion and $3 million from a Massachusetts retail sale leaseback transaction. And now quickly reviewing full-year results. Full-year sales of $463.6 million were in line with the prior year. Retail sales declined 4% year-over-year due to same-store sales pressure. This was fully offset by a 28% increase in our Wholesale business with substantial gains in New Jersey and Ohio. Full-year gross profit of $177 million represented a 13% decline year-over-year. Full-year adjusted gross margin, a non-GAAP measure, was 51.6% compared to 55% in the prior year, driven by price compression across markets and a revenue shift from Retail to wholesale. Full-year adjusted EBITDA, a non-GAAP measure was $100 million also below prior trends due to macro pressures and the gross margin headwinds. Full-year cash flow from continuing operations was $9.6 million marking another year of positive cash flow and compared to $24.4 million in the prior year. Full-year CapEx stayed within budget at $17.7 million with 2025 CapEx expected to be approximately $10 million. Subsequent to year-end, we received $4 million in proceeds from the sale of ERC tax credits. Looking ahead, we expect revenues to be down mid-single-digits for the first quarter of 2025 with a modest increase of the company's adjusted EBITDA margin. Despite ongoing macro and industry headwinds pressuring margins, we continue to maintain positive cash flow from operations. The foundation we built at Ayr is strong from our retail and cultivation footprint to our systems, structure, and talented workforce. We remain well-positioned and Ayr will continue executing its strategy. With that, I'll turn the call back to Steven Cohen for closing remarks.
Steven Cohen: Thanks, Brad. As many of you know, we recently announced Brad's departure from Ayr to pursue a new opportunity. Having been a senior leader with the company since the beginning of Ayr, Brad has been a trusted and integral part of the development of this company, and we all thank him for his time at Ayr and wish him the best in all future endeavors. We will commence a search for a new CFO in due time, and I will recognize that Brad will be with us for a few more weeks and I look forward to enjoying the last of Brad with Ayr over that time. While this represented a tough quarter for Ayr, we are laying much of the groundwork and making the key changes needed to ensure the long-term viability of the company, which we believe is uniquely positioned to succeed in this industry. Thank you again to our entire team at Ayr for their continued dedication and effort, and thank you to everyone for joining today's call. Operator, we will now open the call up for questions.
Operator: [Operator Instructions] And our first question today comes from Matt Bottomley from Canaccord Genuity. Please go ahead with your question.
Matt Bottomley: Yes. Good morning, everyone, and good luck, Brad, on the next chapter and thanks for all your insights over the years. I guess I just wanted to start with Florida specifically. So you guys had a lot of commentary over focusing more on core markets, obviously on branded initiatives, but the Florida market I think on a revenue basis is still well over half of your revenues or at least around there. And just given all of the investment into that state, where I think the general consensus was November would have a better outcome. Given that, you've sort of reset your margin profile for EBITDA into next quarter to around maybe 20%, how is the Florida dynamic in your view going to further potentially impact that, given that I'm assuming there'll be more competition, just given more investment in that market? And I'm just curious on how you think the next 12 months are going to play out there in terms of supply-demand dynamics?
Steven Cohen: Let me start. This is Steve and then I'll turn it over to Brad and George. Look, the reality in Florida is, I think the industry, not just us, the industry made an assumption that it turned out was wrong with respect to the passage of adult use but Ayr is still committed to Florida. The fact that we are going to come online with Ocala that we are very much focused on being able to produce a quality product in the state, is for us an opportunity. Now the problem is, and we've acknowledged this, and I think I mentioned it on the last call three months ago that the dynamics of expectation when it came to adult use caused not just us, but everybody to call it, I'll call it a hiccup with respect to what was available with supply, where the focus was and I think it's going to take us looking forward, a bit of time to regain our footing. But with that said, our expectation is that Florida will remain a mainstay of our overall business and that it represents over the long haul a real opportunity. George, you're going to add?
George DeNardo: No. I mean, we're excited for this year for the Ocala facility coming on with indoor quality flower. It's been a lagging product form that we've had really over since Ayr's conception. I think it's something that will help us with the price compression that we're facing in the market, due to the higher competition and it will allow us to generate additional foot traffic within our stores. We've always been a strong participant in the oil category and I see Ocala also providing us a higher quality product when it comes to concentrates, as well as oil product forms, that will generate additional foot traffic and also level set some of the price compression that we're facing.
Matt Bottomley: Got it. Okay. Thanks. And next question, I just wanted to pivot more to maybe the strategy, when it comes to, excuse me, the strategy when it comes to capital deployment on things that we'll call them non-core, but the things that aren't Florida. So obviously, you call that Illinois, but there's a lot of positives that you mentioned in your prepared remarks in the Pennsylvania and certainly Ohio, and even in Massachusetts branded changes. But some of these markets, I assume are still going to be a drag on your overall cash profile. So when you look at kind of a greater picture of your balance sheet and looking to get to all in free cash flow probably in the relatively near-term, how do you, I guess, balance continuing to invest in some of these markets versus just making a decision as soon as possible to cut bait, I guess, where it's not serving you into the long term?
Steven Cohen: Yes. I mean, as we mentioned, we're focusing on our core markets, which is Florida, Nevada, New Jersey, Pennsylvania, Ohio and Massachusetts. And the capital that we're looking for, that we're expecting is our continued growth in the Ohio market, which has although muted to expectations, with the rollover to adult use, given some of the restrictions with marketing and advertising as well as product forms with the pre-rolls, we're going to continue. We've just opened our fourth store. We have our fifth store opening up later this month, and we continue to evaluate our capacity utilization within our pharma growth facility. Besides the investments, we're also looking at -- really looking at our balance sheet and ways to optimize our operations in certain markets such as Nevada and Massachusetts with consolidation of facilities to optimize our labor force as well as still providing the top quality products in all product formats. So we are really focusing on not only our capital layout, but also how we can optimize our existing footprints within our core markets.
Operator: Our next question comes from Frederico Gomes from ATB Capital Markets. Please go ahead with your question.
Frederico Gomes: Hi. Good morning. Thanks for taking my questions. A question on the CapEx guidance of $10 million into 2025. Does that include any investment in Virginia?
Steven Cohen: So right now, I mean, we're excited about Virginia. We got our conditional license and we're working with the regulators on the best way to really enter the market and provide sustainable growth not only within our HSA but other HSAs.
Frederico Gomes: Got it. So I guess any investment in Virginia would be incremental to that $10 million CapEx?
George DeNardo: It would be incremental. We're still working with the regulators on the best way to enter the market. So it would be incremental.
Steven Cohen: Let me jump in here, it's Steve because you're asking an important question from our perspective, which is how do we deploy capital? And I think that we, like a lot of other MSOs, have transitioned from a world in which there was a perception that bigger was better at any cost. And in the past few years, that has proven not to be a strategy that is going to have a long-term benefit for anyone. So Virginia is a great example. It presents an opportunity, but rather than rushing in and deploying anything and everything without thought, what we're doing is recognizing that our partner in most of these new markets is actually the state. And so, rather than saying how big and how quickly, we're talking to the state about how to build a rational business that will help the state, it will help us. So what you're seeing and what George is spearheading with the rest of the team are a series of conversations with the regulators to get us to the right place at the right size in the right time to serve their needs, but also not to simply jump in without thought of how to build out the business.
Frederico Gomes: Perfect. Thank you. Second question is, you mentioned you're looking at the footprint and potentially rationalizing that and Illinois with NOI already. So how should we think about potential proceeds from eventual divestitures in the context of market conditions right now, cash, shares, consideration, seller notes, et cetera? Also given the lack of capital available overall and record low valuations here. So how should we think about that, not only Illinois, but potential future divestitures that you're looking at?
Steven Cohen: It's an ongoing process, obviously. What we're trying to do, and we enjoy a remarkably good relationship with all of our lenders across the board, which is a unique aspect of this business. I mean, especially with our senior secured lenders, they very much operate, as if they were our partners. So the question always becomes from the standpoint of rationalizing the business, where do you want to be over the long haul, where is it worth deploying capital and what you can get out of -- what is worth exiting because it doesn't -- and again, it's not just a notion of where are the best markets, but what is a rational scheme for us both in terms of the nature of the businesses, in terms of the geographic footprint, in terms of our ability to manage. And one of the things that I think happened at inception, not just with us, but with many MSOs is every opportunity was deemed a good opportunity and with an organization that we very much are at the top trying to streamline is the wrong word, I would say we are trying to create an effective leadership team. Part of the problem becomes, it is much more difficult to operate in markets that are dissimilar than markets that are similar. It is much more difficult to operate in markets that are geographically diverse rather than geographically contiguous. And that, isn't always obvious, but is very much now getting baked into the plans. So what we're looking at is, where are there great opportunities for us, Ohio, I believe Pennsylvania, Florida, but also what makes sense through that lens.
Operator: Our next question comes from Bill Kirk from Roth Capital Partners. Please go ahead with your question.
Unidentified Analyst: Good morning. This is Nick on for Bill. Thank you for taking the questions. First one for me, just on the Wholesale business. You mentioned the strength there. Just wondering how you see that opportunity playing out with the amount of dispensaries added kind of across the board the last 18 months here. And just your sense of your current penetration versus what you think you can reach by the end of the 2025 year would be helpful. Thank you.
Steven Cohen: Thanks for the question. I mean, and we talked a lot about it, our brand consolidation, to our three main brands Kynd, Haze and Later Days. For -- and I think we said it earlier in the call, we had a 20% growth year over year in the wholesale penetration. And it's really refocusing on building the brands not only within our four walls, but really finding industry partners that have adopted the brands and are working with us on digital assets, budtender training, giving them sales kits. So we're training the bud tenders to actually drive our brand, and what it stands for, and what it delivers to the end consumer. So it's really an evaluation of how we continue to evolve our wholesale team and really our mindset on how to position our brands through both the product quality as well as pricing. We really focus on not only our four walls because that's a great growth of our internalization of our brands, but really with the proliferation of additional doors opening. We have to make sure that, our brand stands out amongst the other brands and that's what we're really doing. We're working with all of our partners to make sure that we can continue that growth from the 20% year-over-year. And remember, most of this really was an evolution throughout 2024. We're hitting 2025 where we've established these brands and now that's where we're leaning into our teams and our partners on driving that additional growth.
Unidentified Analyst: Great. I appreciate that color. Second one for me, if you could just expand on Florida and the cost side there, just how do you see the margin structure improving from a cost standpoint, as you bring this additional color square footage online? Assuming this brings a significant degree of scale to the state and helps offset some of that pressure, but just your sense on how this helps drive cost in the state would be helpful.
Brad Asher: Yes. This is Brad speaking. I would say we're looking at Ocala as more of a top-line driver for us in terms of attracting new patients, patients that we've struggled to attract in the past with premium flower. From a margin standpoint, I think when you look at the premium pricing of that flower, but also the cost of an indoor facility and the continuous pricing pressure we're seeing in the state, you're probably looking at a pretty similar story in terms of margins, but it's more of a top-line driver for us.
Operator: And our next question comes from Aaron Grey from Alliance Global Partners. Please go ahead with your question. And I believe Mr. Gray actually has us on mute. Mr. Gray, are you on the line?
Steven Cohen: I'll take that one.
Operator: All right, everyone. As I believe he has stepped away. We will be ending today's question-and-answer session. And I'd like to turn the floor back over to Steven Cohen for any closing remarks.
Steven Cohen: Thank you very much, and thank all of those who participated, listened, asked questions. I'm just going to reiterate two things. First, I want to again express not just mine, but everybody's heartfelt thanks to Brad Asher for his extraordinary dedication, and tenacity over the last very many years. We will miss him. We wish him the best. Life is about change, and as much as we wish Brad would stay with us, we appreciate the fact that there are opportunities out there and have no doubt that he will be an extraordinary success and I just want to again just emphasize our deep sense of gratitude to Brad. So thank you, Brad. Second of all, I want to note which should be obvious, which is this is not and it never has been an easy industry. There are challenges we face, known and unknown, and we're going to continue to face those challenges. What we have at Ayr though is a dedicated team and we have a group of people who understand that this is not as Rob Vinesco would say for the faint of heart, this is a business that requires a long-term, not just plan, but a long term commitment and a long term attitude. I'm often reminded of the theme of the Jimmy Valvano, NCAA championship team survive and advance and we very much are committed to surviving and advancing. We will survive and advance. And I believe that, ultimately this is an extraordinary industry and Ayr has a very important role to play in it. So thank you everyone.
Operator: And ladies and gentlemen, with that, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.