Good day, and welcome to Cresco Labs' Q3 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then one on your touch-tone phone. To withdraw your question, please press the star key, then two. Please note, this event is being recorded. I'd now like to turn the call over to Megan Kulick, Senior Vice President of Investor Relations for Cresco Labs. Please go ahead. Thank you. Good morning, and welcome to Cresco Labs' Q3 2023 Earnings Conference Call. On today's call, we have Chief Executive Officer and Co-founder, Charlie Bachtell, Chief Financial Officer, Dennis Olis, and Chief Commercial Officer, Greg Butler, who will be available for the Q&A. Prior to this call, we issued our Q3 earnings press release, which has been filed in SEDAR and is available on our investor relations website. These preliminary results for the Q3 of 2023 are provided prior to completion of all internal and external reviews, and therefore, are subject to adjustment until the filing of the company's quarterly financial statement. We plan to file our corresponding financial statements and MD&A for the quarter ended September 30, 2023 on SEDAR and EDGAR later today. Certain statements made on today's call may contain forward-looking information within the meaning of the applicable Canadian securities legislation, as well as within the meaning of the Safe Harbor Provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements may include estimates, projections, goals, forecasts, or assumptions that are based on current expectations and are not representative of historical facts or information. Such forward-looking statements represent the company's beliefs regarding future events, plans, or objectives, which are inherently uncertain and subject to a number of risks and uncertainties that may cause the company's actual results or performance to differ materially from such forward-looking statements, including economic conditions and changes in applicable regulations. Additional information regarding the material factors and assumptions forming the basis of our forward-looking statements and risk factors can be found in our earnings press release and in Cresco Labs filings on SEDAR and with the Securities and Exchange Commission. Cresco Labs does not undertake any duty to publicly announce the results of any revisions to any of its forward-looking statements or to update or supplement any information provided on today's call. Please note that all financial information on today's call is presented in U.S. dollars, and all interim financial information is unaudited. In addition, during today's conference call, Cresco Labs will refer to certain non-GAAP financial measures such as adjusted EBITDA, adjusted gross profit, and adjusted gross margin, which do not have any standardized meaning prescribed by GAAP. Please refer to our earnings press release for the calculation of these measures and a reconciliation to the most directly comparable measures calculated and presented in accordance with GAAP. These non-GAAP financial measures should not be considered superior to, as a substitute for, or as alternative to, and should only be considered in conjunction with the GAAP financial measures presented in our financial statements. With that, I'll turn it over to Charlie. Good morning, everyone, and thank you for joining us on the call today. I'm pleased to share our Q3 results, which reflect our focus and execution against the things that will make Cresco Labs the strongest company possible, winning within our core markets and with our core stores, core brands, and core products. As mentioned at the start of the year, by making 2023 the Year of the Core, we would create strength and value via growth of the bottom line. The resulting margin and profitability gains enable us to succeed in the current industry dynamics, prepare us for the growth catalysts existing within our current state footprint, and allow us to capitalize on future opportunities as they continue to avail themselves. The results discussed today are the product of our incredible Cresco Labs team. I want to extend a very large thank you to the team for their thoughtful and disciplined execution of our Year of the Core. To better illustrate the impact of this year's strategic plan, I'll be comparing several of this quarter's financial metrics to our Q1 results. On roughly the same revenue base, our Q3 results reflect the value and leverage created by prioritizing our core. Kicking us off, in Q3, we generated $191 million of revenue. While off slightly from Q1, we saw retail growth and strong performance in our core markets offset the purposeful attrition from strategically divested and rationalized assets year to date. We generated adjusted gross profit of $96 million and adjusted gross margin of 51%, an almost 500 basis points increase from Q1. With adjusted SG&A expenses of $57 million in Q3, we've reduced this number $10 million from Q1 by unlocking efficiencies and leverage throughout the business. Adjusted EBITDA in Q3 came in at $49 million and 26% of revenue. This is $20 million and over 1,000 basis points higher than our adjusted EBITDA from Q1. And finally, our operating cash flow of $41 million in the quarter is up $37 million from Q1. Again, all of these metrics on roughly the same revenue base. To summarize, our disciplined Year of the Core strategic growth plan is resulting in outsized gains to our bottom line. We're leaner and more productive. By growing revenue from our core states to effectively balance strategic rationalizations, we've held revenue roughly flat while eliminating over $40 million in annualized operating costs. The resulting improved cash flow and operating leverage prepare us to effectively compete today, execute the upcoming growth catalysts existing within our underlying business, and be opportunistic as new market opportunities present themselves going forward. Again, credit to our incredible team as we continue to lead this emerging industry forward, while building the strongest and most valuable Cresco Labs possible. Now I'm gonna share an update on how we're executing on the three pillars of our three-year strategic plan, which again, includes ensuring we have the most strategic footprint, broadening our branded product leadership, and driving retail productivity across a larger base. So number one, we're ensuring that we have the most strategic geographic footprint. Throughout this year, we've taken the tough but necessary steps to impartially evaluate each of our states' long-term cash flow potential. Again, we're doubling down on our strongest core markets and implementing targeted strategies to optimize or rationalize any areas of margin dilution in our footprint. The core of our footprint is comprised of states where we have material share and generate significant cash flow, many with significant adult-use unlocks ahead, namely Ohio, Florida, and Pennsylvania. We continue to drive margin improvement in these states by investing in our processes, procedures, facilities, and technologies. These focused efforts have led around a 200 basis point improvement in gross margin from our core compared to Q1 of 2023, even with the ongoing price compression in many of these markets. Of course, margin improvements weren't limited to our core states. Over the last couple of quarters, we've scaled back and restructured our California operations, sold our subscale Maryland processing operation, and subsequent to the quarter's end, we divested our remaining Arizona assets for approximately $7 million in cash. We're seeing the benefits of the targeted actions we're taking, and we'll continue to refine and improve so that we're positioned to compete in today's challenging environment, while also planning for the future growth of our organization and industry. Number two, we held our leadership position in branded wholesale products. As with any consumer products category, long-term value is created with brands, and we continue to build our industry-leading brand portfolio. When it comes to brand building, we excel at introducing smart innovations, creating consistent quality products, and meeting the consumers where they are, demonstrated by the sustained strength of our house of brands. We continue to lean into our core brands and products by making smart, cost-effective investments that drive long-term share growth and profitability. For BDSA, we have the number one portfolio of both branded flower and branded concentrates in the industry, as well as the number four portfolio of branded vapes and branded edibles. Once again, in the markets of Illinois, Pennsylvania, and Massachusetts, we continue to hold the number one overall share position. I'd like to spotlight the work of our teams in Michigan and Florida, who drove meaningful share gains in two ultra-competitive markets, thanks to their persistent focus on improving quality to further bolster our portfolio's reputation in each state. Time and again, we've proven our ability to compete without first-mover advantage in highly competitive markets. Combining this with our many number one market share positions and brand-building expertise, perfectly positions us to be a long-term winner in this developing cannabis CPG category. And number three, we're building a highly productive retail portfolio in the most strategic states. Our retail platform continues to grow thanks to our efficient internal processes, proprietary technology, and unmatched customer experience, with 70 total stores generating almost $120 million in revenue this quarter. We've proven our ability to grow and defend retail market share, and our platform is only getting stronger as we continue driving margin improvements. We're particularly proud of our continued success in Illinois, where we were able to out-compete and essentially hold our total market share, even with 19 new competitive doors opening in the quarter, resulting in an index to fair share of nearly 1.9 times, up from 1.7 in Q2. We saw similar results in Ohio, where our fair share reached almost 2 x the average. In Pennsylvania, we've opened three new doors this year, growing our absolute retail share by 140 basis points since Q1, and maintaining our above average fair share. In Florida, we opened 12 new doors this year, bringing our total to 33 stores that continue to drive share gains in the state. We've established ourselves as a highly productive retailer with stores that consistently outperform fair share, with continuously improving cost structures. The investments we've made in technology and processes are driving down costs, and our targeted approach to marketing means every dollar spent is generating measurable ROI. Plus, our retail strategy is a competitive advantage that we can efficiently transfer and replicate. It will continue to pay dividends as regulations change, and we can respond quickly by adding new stores that follow a winning, well-tested blueprint. Our Q3 results are a direct reflection of the actions we've taken in the H1 of the year to invest wisely in our core through smart innovation, brand building, productive retail infrastructure, and to rationalize and exit margin-dilutive operations. The industry is evolving and consolidating, creating openings for companies with strong cash flow generation. A stronger, leaner Cresco Labs sets us up for continued growth from our core and to take advantage of the many capital-efficient opportunities for expansion that we see on the horizon. With that, I'll turn it over to Dennis to provide more details on our Q3 performance. Thank you, Charlie, and good morning, everyone. It's nice to see the hard work by the team executing our Year of the Core initiatives lead to directly to better margins, profitability, and cash flow. In the quarter, we generated $191 million in revenue. This was a modest decline from Q2 due to the expected lower wholesale revenue based on the actions we took to rationalize and optimize California and Maryland. Retail revenue grew by 2% as we opened two new stores and saw continued fair share improvement across the network. The actions that we took in the H1 of the year have led to a 370 basis points sequential increase in adjusted gross margin and a nearly 500 basis points improvement since Q1. Our Q3 Adjusted Gross Margin was 50.5%. We have said many times over the past couple of quarters that our long-term goal is to achieve and maintain approximately 50% gross margins. But as we've said in the past, we do expect to see fluctuations from quarter to quarter due to the timing of cost and revenue mix. Our cost savings initiatives go beyond COGS as well, targeting every area of the business. The team has made tremendous effort to drive additional profitability at every level of the company. Total adjusted SG&A declined to $57 million in Q3, a $10 million lower than Q1. That represents a $40 million annualized adjusted SG&A savings versus the Q1. As a result of this focus on margins, cost, and profitability, we generated $49 million of adjusted EBITDA, up approximately 21% sequentially and almost 70% since Q1. Our Q3 adjusted EBITDA margin was 26%, up over 1,000 basis points from Q1. With cash generation being our number one goal this year, we're thrilled with our progress so far. We closed the quarter with approximately $113 million of cash on hand. In the quarter, we generated $41 million in operating cash flow, a significant improvement from $21 million from Q1 and Q2 combined. This improvement in operating cash flow was a direct result of the improved margins in the quarter, combined with ongoing management of our working capital. Year to date, we've generated $62 million in operating cash flow. We spent $12 million in CapEx during Q3, bringing the total year to date to $51 million. Our CapEx investment has been focused on facility improvements and new store openings, both projects with short payback periods and high ROIs. Looking ahead to the Q4, we expect total revenue to be down mid-single digits sequentially. While we will see retail gains from new stores in Florida and Pennsylvania, they will be offset by our decision to exit Arizona in the quarter, as well as seasonal weakness in Q4 versus Q3. We expect margins to be in line or slightly lower in Q4, given the lower revenue base. Absolute SG&A expense should move lower as we continue to create efficiencies and manage our corporate overhead. We are taking the tough steps across the organization to drive increased profitability and cash flow that will enable us to reinvest back into the business, allocating capital efficiently to create a stronger Cresco Labs. While we're pleased with our results this quarter, we'll continue to drive efficiencies and cash generation initiatives to create shareholder value throughout the balance of the year and beyond. With that, I'll pass it back to Charlie. Last week's successful ballot measure made Ohio the 24th state to pass adult-use cannabis legislation. The implications of this event should not be marginalized. With Ohio, now over 50% of the U.S. population lives in a state where adult-use cannabis is legal. You had an off-year election in a swing state, produced voter turnout almost equal to 2022's midterm election, and passed a cannabis legalization effort with 57% of the vote. More than ever, cannabis continues to break down the partisan barriers as U.S. voters are saying they want to create a responsible and regulated cannabis industry. And while the timing of federal reform has been unpredictable, we've reached a tipping point where change is inevitable. Until that change comes, we're improving every aspect of our business to best position ourselves for both today's environment and for the future. The long-term cannabis growth story remains unchanged. Cannabis is estimated to be a $100 billion market, where only about 30% currently comes from state-regulated sales. As regulations change and consumers turn to the accessible, safety-focused, regulated legal market, Cresco Labs is doing what needs to be done to secure long-lasting industry leadership. Again, thank you to the Cresco team for your disciplined, focused, unmatched creative problem-solving skills, and relentless pursuit of industry leadership. In closing, we will continue leaning into our core by investing in our largest, highest-margin markets while optimizing those markets that negatively impact margin, driving operating efficiencies throughout our entire organization and doing more with less, investing in brand and retail innovation to provide the consumer with the best cannabis experience possible, and generating more free cash flow to strengthen our balance sheet. With that, I'll open the call for questions. Thank you. If you would like to ask a question, please dial star followed by one on your telephone keypad now. If you change your mind, please dial star followed by two. And finally, when preparing to ask a question, please ensure your phone is unmuted locally. Our first question today is from the line of Aaron Grey, Alliance Global Partners. Aaron, your line is open. Hi, good morning, and thank you for the questions, and nice job with the margin improvement in the quarter. The first question for me, I want to actually talk about sales. So you had guided for sales to be down high single digits in 2H versus 1H. Based on some back-of-the-envelope math, it now implies that it'll be down, you know, more in the mid-single-digit based on 3Q and how 4Q seems to be coming in for you guys based on the guide. So can you speak to maybe what fared better than you might have expected, in terms of the margins being down less? Maybe price and pressure not being as bad as you had expected, you guys holding on to your market share, better than you had anticipated, some markets like Illinois. So any commentary in terms of, sales now coming in 2H versus expectations when we last spoke in August would be helpful. Thanks. Good morning, Aaron. You know, there's a lot that goes into producing the Q3 that we had, and as I said in the prepared remarks, like, credit to the broad Cresco team for really committing to following through on the Year of the Core initiatives. And so, you know, the results that you see in Q3 are a product of us being incredibly competitive in our core markets and maintaining, and stabilizing, and growing and all of those things from a performance perspective. And at the same time, it's the realization of a really diligent approach to cost management, and also the optimization and rationalization of components of our business that have been headwinds from the margin perspective. So again, just I think an overall really well-executed quarter. Phenomenal job by the team. Okay, great. Thanks for that color there, Charlie. Second question for me, just on, you know, the cost savings, and it's a really nice job of lowering that, you know, $10 million since Q1 to 57. So could you just provide more color, maybe where you've been driving, you know, some of those, you know, efficiencies? And then it sounds like you still, you know, have some more going forward. I think you said you expect SG&A to be a bit lower in Q4. So, you know, how much more, you know, fat you think is there to cut off? You've done a lot of work for the first nine months of the year. Any commentary of what's been driving it and expectations for further efficiencies that you might be able to drive out of the business going forward? Thanks. Sure. I'll start, and then Dennis will add some additional color. And some of this is also the product of recognizing in 2022, preparing to close a really large transformative transaction. That, of course, would require a lot of resources and bandwidth in certain areas of the business. As we refocused for 2023 to be the Year of the Core, it presented itself with opportunities for us to get leaner and to create efficiencies in structural design and responsibilities, et cetera. And it also really has put us on a path to, you know, I guess, living this way. Right, when you make tough decisions and you make some strategic overhauls to structures and design, it also opens up your eyes to what else can be done. It's challenging, it's difficult, but again, the team's done a really great job of committing to this philosophy of the Year of the Core. Yeah, Aaron, I'll just add a couple of things to what Charlie noted. There was a small piece of the improvement that we've seen from Q1 to Q3 related to some of the activities we did in some of the states, divest of some of our businesses. But the bulk of the savings really came from taking a hard look at our corporate expenses, looking at every dollar we're spending, and really reevaluating if there's a more efficient way to do it. Some of the investments we've made in people and systems have enabled us to reap those benefits from a cost perspective. As we look to Q4, there's still some things that we're actively looking at. I think the decline you'll see from Q3 to Q4 will be less than what you saw from Q2 to Q3. But we're going to continue to examine every dollar we spend and look for every opportunity to run the business more efficiently at corporate and in the field. Okay, great. Thanks very much for the call, and I'll jump back into the queue. Thanks, Aaron. Our next question today is from the line of Frederico Gomes of ATB Capital Markets. Frederico, your line is open. Hi, good morning. Congrats on the quarter. Thank you for taking my questions. My first question is just on your capital allocation plans. You know, given the strong cash generation this quarter, you know, how do you look at the options, you know, between the leveraging or investing for further growth? And I know that you mentioned that you're going to be opportunistic in terms of new market opportunities. So if you could expand on what are you looking for in new markets or in a potential target, and how the M&A pipeline looking like? Thank you. Sure. This is Charlie. I'll start. Again, great operational cash flow production in the quarter. It's a trend, right, that we wanna continue. So as we continue leaning into this area and creating more with less, you're gonna see us allocate capital to the things that continue to move us in this direction, that help increase efficiencies, that help us reduce costs and improve margins as we move forward, that make us more competitive, especially in our core markets. As it relates to, you know, growth opportunities that already exist in our footprint, there will be some investment as you see Ohio recently passing an adult-use law and, you know, Pennsylvania and Florida to be expected in the coming year-ish. So, we have opportunities to make investments in the footprint that are going to have great ROI. And as we look at opportunities in other areas of the industry, markets, et cetera, we have a very disciplined eye at this point in how we want to move into those markets. We've had opportunities to move into them before, for various reasons. The position that we find ourselves in right now is a very strong position. We can see how these markets unfold. We're seeing trends already develop in states like New Jersey and Maryland that will make us a more effective and more efficient acquirer, should we choose to move into those states, than the opportunity would have presented itself over the last 18 to 24 months. Thank you for the color. And then my second question, just looking at your portfolio of branded products, you know, your good, better, best approach, and just thinking about the broader competitive environment, are you seeing any need to discount, you know, certain segments more than the others? And just any general color you could provide on discounting and the overall, I guess, surrounding market dynamics that you're seeing out there. Thank you. Greg will start us off on this one. Sure. Look, I think we're very pleased with how our brands performed this quarter. As we talked about before, we still lead a market position, either in the market position or within top five across all categories. I think from a branded products perspective, our view is, we want to continue to grow and defend our share positions. We'll do that through innovation. We think there's some near-end innovations that we can continue to do, bring, whether it's flavors or new formats, into markets. But from a general kind of business perspective, our view is we've got brands that we know consumers love. We're seeing that as they vote for our brands with their sales. To what Dennis mentioned before, it's just about driving efficiency on the back end of those brands to really help drive margin so that we can flex with price as we have to, but really just focus on delighting our customers and driving better margins off our brands. Perfect. Thank you. Congrats on the great margin expansion this quarter. I'll hop back in the queue. Thank you. Thank you. Our next question today is from the line of Ty Collin of Eight Capital. Ty, your line is now open. Hey, good morning, guys. Thanks for the questions. Charlie, maybe for my first one, then, you're obviously very dialed into everything going on in D.C., so I'm just wondering if you could update us on your thoughts around rescheduling at this point, how you're handicapping the likelihood of that going through, and what timeframe you think is realistic? Yeah, sure. You know, always, always have to caveat the things that involve government decisions and actions, but nothing has changed as it relates to the rescheduling. Once the HHS announcement or recommendation came out, nothing, nothing that we've heard or seen has changed the expectations on how that process is going to move forward and what the end result of it is going to be. From a timing perspective, again, there's flexibility in timing, but you know, all indications and what we're hearing and seeing from other reports on it is by the end of the year is sort of the expectation, or around the end of the year, is the expectation on a DEA announcement. There is process that has to happen before it becomes effective. That's just the recommendation from DEA, but feeling optimistic about the rescheduling. As I mentioned, I think on our last quarter, there's a difference between legislation and administrative action. And administrative action, like a rescheduling, is somewhat more insulated from the complexities and risks associated with legislation, so feel good about it. Great. Great. Appreciate your, your thoughts around that. And for my follow-up, just wondering if you could provide a little more detail around the operating cash flow generation this quarter as we're waiting for the full financials to hit, assuming there was some movement in working capital or tax payables in there. So just wondering if you could comment on that. And specifically, curious if there was any change to your policy around paying the 280E taxes, which a number of your peers have announced this quarter. Thanks. Dennis will handle that one. Thanks, Ty. I'll start with the second part of that question first. There was no change to our policy on how we're handling 280E from a tax perspective. We will be making... We did make tax payments in Q4, so it didn't really affect our Q3 results to pay off the balance, the majority of the 2022 federal taxes. But we continue to pay our taxes as they're due, according to the current IRS law. So, no change to our policy on that. As far as the operating cash flow in the quarter, it was about a $42 million improvement in working capital, in the quarter. A lot of that comes from, you know, one of the things I'm really proud of, and we've talked about it in the past, we continue to see our inventory levels drop. You know, this time last year, we were sitting with an inventory balance of about $155 million or so. We've worked that down. This quarter, we ended with about $115 million of inventory on hand. So we're really pleased with that, the aging of that inventory and so forth. So that puts us in a good position, and we're proactively managing our AP and AR. So feel good about where we're at with operating cash flow, we will have a little bit of an impact in Q4, as we did make the tax payment that I noted earlier. But again, feel that we're on the right track. All the actions we've taken from a cost standpoint, both from an SG&A and as well as from a cost of goods sold, is we're gonna continue to see the benefits of that through our cash generation and operating cash flow, for the foreseeable future. That's really helpful. Thanks, Dennis. Congrats on the quarter, guys. Thanks, Ty. Our next question today is from the line of Luke Hannan of Canaccord. Luke, your line is now open. Thanks. Good morning, everyone. I appreciate the commentary so far on your thoughts on capital allocation. Dennis, maybe this one's for you. I think you talked about you're seeing some shorter payback periods on the projects that you're choosing to invest in now, whether that's automation within your production facilities or in the new stores that you're rolling out. Can you give us a sense of where those payback periods are now, and maybe how that's evolved over the course of the last year or two, or since you've initially rolled out new store builds in your core markets, how that's evolved over time? Yeah, thanks for the question, Luke. So if you look back at some of our investments we've made, you know, going back a year or two, a lot of those were investments we were making in some of our cultivation facilities, building them out. We made quite a bit of investments earlier, late last year and early this year in building out our New York facility in Ellenville. So those are gonna be larger investments, but also have a longer payback period. What you're seeing more recently is we're making investments in our facilities, whether it's with lighting or automation, to improve our productivity and efficiencies in our cultivation and manufacturing facilities. So those have a relatively short payback period once you install new lighting, for example, in a cultivation site. Also, we've seen quite a bit of growth in our stores, retail stores, whether it's in Florida. We've added a number of stores in Pennsylvania. And again, those stores have relatively short payback periods in the, you know, 12 months or less, time frame. So again, it's where we're making those investments that have shortened the. One, it's reduced the size of the investment, but two, it's also reduced the payback period and the ROI. Got it. Thanks for that. And then my follow-up here is just, I don't know if you can share this, but can you give us a sense of overall what we should be expecting as far as those one-time cash costs going forward? I think it was about $8 million this quarter. Should we expect that to lower in magnitude going forward? And how soon should we be able to see the operating cash flow that converges closer to the true underlying cash flow generation potential of the business, and we have those one-time cash costs sort of roll off? Yeah, what you saw in this quarter was, there was a couple million dollars of severance payments related to some of the reduction in force that we've had in the first couple of quarters that severance is kind of rolled out. That will continue a little bit into Q4. And again, as we continue to manage our cost structure effectively, you may see that will continue for a couple of quarters, yet, as we defer that cost over a number of quarters. Some of the legal costs that we incurred and deal costs that we incurred in Q2 and Q3 really relate to the Columbia Care transaction, so those costs will go away. So, you know, bottom line is, I would expect those costs to decrease over time. But again, as we continue to look at cleaning up our cost structure and running this business as effectively as we can, you will see some fluctuations from quarter to quarter on the amount of one-time charges we have, but overall, I would expect them to decrease over time. Okay, appreciate it. Thank you. Thanks, Luke. As a reminder, for any further questions, please dial star one now. Our next question today is from the line of Scott Fortune of Roth MKM. Scott, your line is now open. Yeah, good morning, and thanks for the questions. Congrats to continue to execute on the margin improvement and leaning in. But that said, can you provide a little bit of color on the CapEx and your kind of intentions looking out? I know you mentioned Florida, Pennsylvania, and Ohio as potential builds a little bit, but can you kind of focus on kind of the store growth? I know you opened 13 the H1, and we saw two new stores come on Q3 in Florida, but just kind of more of a little bit of a expectation for the store growth and production facilities as far as CapEx is concerned. Just kind of following on, what is kind of a level for CapEx maintenance kind of moving forward as we look into 2024 here? Yeah, thanks, Scott. This is Dennis. I'll start that one. So again, from a store standpoint, we did open 2 more stores in this quarter. We expect to open. We have one more store in PA that will open, I think, in early 2024. From a CapEx perspective, in Q4, we will see a very small, you know, mid-single digit CapEx expense in the quarter. We've been talking about managing that over the course of the year. You've seen that come down again, the H1 being driven by the expansion in New York. As we look at the next year, we haven't given any specific guidance, but we do expect our total CapEx expenditures to come down from our current year. This year will end in the, you know, the mid-$50 million range. As we look forward into next year, we do expect that to come down, and again, focusing on short-term ROI paybacks, to improve our efficiencies and operations, and additional store openings, the one store in PA and additional stores in Florida as well. Got it. Thanks. And just kind of focusing on Florida, obviously, you've opened up a number of stores there. I think you have a total of 33 now. How do you look Florida in the Q4 you see a lot of promotional, a lot of discounting. Is that a big part of the potential kind of Q4 numbers here on the top line, ending? How is Florida as far as kind of the margins or the profitability for that state versus kind of some of the other, as you like to call them, core states in the side, and the opportunity to expand or improve in Florida? Just kind of focus on Florida going forward here. Yeah, Scott, I'll start that, and then I'll pass it over to Greg. From a margin perspective, we don't give margins at a state-by-state level, but the margins in Florida are good. The fact that you've got a vertically integrated operation in Florida allows you to capture some of the margin that you would otherwise, you know, pass along to some independents or third parties. So from a margin profile, we're pleased with what we've seen in Florida, and I think we will continue to see some growth opportunities. Greg, you want to add on? Yeah, the only thing I'd add to this is, you're absolutely correct. Pricing in Florida from Q2 to Q3 has been tough, just different weekends, different price promotions. We don't expect that to change drastically, at least we're not planning it to change drastically as we look to Q4. What I would say for the team out there, they have done just a phenomenal job of bringing more product to line, getting more out of our facility in Florida, which has helped us ensure that we've got the best assortment across our stores. And we feel good that in Q4, we're going to continue to see the benefits of that work as we go into the quarter and then also into next year as well. If you remind, like, we have a pretty small share today, and we only see opportunities for us to continue to grow as we round out our assortment, and just get more out of the facility. So we're really pleased with our Florida results and excited for what next quarter brings. Thank you. I appreciate the detail. Thank you, Scott. Our final question today is from the line of Matt McGinley of Needham. Matt, your line is now open. Thank you. I think you said that retail sales were up about 2% quarter-over-quarter, which would imply that wholesale was down around 12% or around $10 million sequentially. How much of that sequential decline in wholesale is from the divested assets or from states that you're now less focused on, like California, compared to decline in your wholesale program in core states like Illinois, Pennsylvania, or Massachusetts? And then into the outlook for a mid-single-digit decline of revenue in the Q4, does that assume a decline like you saw this quarter in wholesale, or are you seeing a little bit more stabilization there? Thanks, Matt. This is Charlie. I'll start, and I think Greg and Dennis will have some to contribute. But yeah, I think you're right. Like, if you look at California, was responsible for a portion of that, the divested assets from earlier in the year, of course, but all part of the plan. And then I would also add increased verticalization also as a component of transition from wholesale sales to recognizing some of that same sales across our own footprint or our own retail shelf. Greg, additional color? The only thing I'd add to that is what we're seeing both in our stores and I think across the market, is unit volume and trip volume continues to grow. Which is really encouraging just from the consumer side of this, which is showing that consumers are both entering stores and buying bigger sized products in stores as well. Obviously, the revenue declines associated across the industry for most of our core markets are due to price compression. We don't see that changing too much in Q4 or the H1 of next year, which is why, as Dennis mentioned, like, our focus is how do we drive unit costs down so that we can get hold margins through that period. From an overall business perspective, a couple of big trends that we're watching. One is just MSO allocation of own shelves. That obviously was an impact to us for Q3, as many retailers were prioritizing their own brands on their own shelves. And then the second thing, particularly in Q4, that we're watching, is with independents, pricing actions. You know, some of the independent stores that are open, I think, as we look at the market, might start to struggle. You might see that cause some price as they're liquidating their unit sales, which could put some compression on the wholesale market, as we get into Q4 and we're watching for Q1. But overall, from a just total retail and our wholesale brand perspective, unit volume's up, trips are growing. It's a price compression reality we're all facing right now, and, you know, through innovation and cost programs, we hope to drive increased margins as we continue to get into 2024. The last thing I would add to that, Matt, too, is if you look at the divestiture of Maryland, that's 100% wholesale, right? It's all we had in that market. And then also in California, the rationalization in California, we're only on the wholesale side in California. So it sounds like most of that decline was driven by core markets and not California and Maryland, though, correct? No, it's about 50/50. The half decline in wholesale was attributed to, California and, and Maryland. The other was core business. Okay. And then on the gross margin side, I think you said that about 200 basis points of that improvement you saw was from, I think, Ohio, Florida, and Pennsylvania. What drove, I guess, what was the underlying driver of that? Was that just less discounting in those states, or is that just the overall production efficiency gains that you were talking about, and now you have a, you know, cleaner inventory position? And I guess how much of a margin benefit did you have from that decline in revenue from California and Maryland? So absolutely, California and Maryland, which were states that we made those strategic decisions to change our model on, our footprint, those decisions were made because of the fact that they were dilutive to the overall margin of business. So that definitely contributed to the improvement that you saw from Q2 to Q3. The other thing you have to remember is, a lot of the actions that we took across our business in Q1 and Q2, as they relate to manufacturing, you know, we capitalize those costs and we then expense them as a product ships. So there's always a delay from when you take an action and when you actually see it flow through the P&L. What you saw in Q3 was a culmination of some of the activities that we had done to reduce our cost, actions that we took in the H1 of the year that are starting to pay dividends in the H2 of the year. Okay. Thank you. Thanks, Matt. Thank you, and this will bring us to the end of the Cresco Labs Q3 2023 Earnings Conference Call. Thank you to everyone for joining us today. You may now disconnect your lines.