In addition, we are in the process of optimizing our inventory through an ERP implementation across our cultivation and manufacturing facilities, which we expect will lead to one-time inventory valuation adjustments as we close out the year. These initiatives will enable us to further — to recognize further improvements across our business as we continue to deepen our presence in the markets we serve. I will now turn the call back to Nirup for closing remarks.
Nirup Krishnamurthy: Thanks, Forrest. Looking ahead to 2024, our strategy remains unchanged. Leverage our operating playbook and further integrate our acquired assets to drive customer acquisition and sales across our expanded footprint while generating cash. We will continue to evaluate opportunities that can enhance our geographic footprint and brand portfolio, and we have proven our ability to execute in competitive environments and we look forward to capitalizing on the opportunities ahead. That concludes our prepared remarks. I’d now like to pass it back to Sean who will open the call for Q&A. Sean?
A – Sean Mansouri: Thanks, Nirup, and Forrest, and thank you everyone for participating in the conference call. We’ll now begin the prepared Q&A session. As we gather the queue for live questions, we’ll address questions that came in via e-mail over the past couple of weeks. So, kicking off, you mentioned in response to license proliferation that you’re leaning into pricing and promotional efforts in New Mexico to drive traffic and sales. What specific initiatives are you implementing and how long do you anticipate this to drag on gross margin?
Nirup Krishnamurthy: Thanks, Sean. I’ll take that one and I’ll have our Chairman opine on that as well. As we discussed on the call, New Mexico sales increased 19% year-over-year in Q3, but the store count was up 76%. So obviously the pie is being shared by a more number of outlets. So we are essentially focusing on running a good operation, increasing our product assortment, improved merchandising within our stores and providing a variety of pricing options for all our customer segments. So I think that is — that’s something we have to do to make sure we compete with these new licenses, but the same time provide our brand promise, which is providing the best assortment, highest quality and exceptional service in our stores.
We’ll have to wait and see how long certainly it will take to drive our customers into our stores, but we believe that it is a temporary kind of impact on margins. And as we drive our — as we implement our operating playbook, we expect New Mexico to be a long-term prospect for us in our footprint. Hey Justin, do you want to kind of add anything to that?
Justin Dye: Yes. Let me add two comments. I think as you look at New Mexico, there are things that we control and then there are things that Schwazze influences. I would tell you we are disappointed with the regulatory environment as it is today. We believe that it is improving and it will continue to improve in terms of the regulations and enforcement. And what I mean by that is having out of state product in a number of these new stores, we have seen that with little to no enforcement and we’re starting to see the government starting to enforce that and that will improve and that will certainly help those operators who play by the rules and who follow that. We think that’s important for the customer so that they know they’ve got tested product.
So that’s good for everyone. So we’re optimistic it’s going to continue to improve and that will help — that will certainly help our business in terms of sales and margin as we do that. Now, there are things that we control as well, that we’re in process Nirup and the team have a very direct plan to work on offering the best products with a broader assortment than where we — than what we have today and working out with our people, as well as pricing and promotion, which they have a plan that we’re working through today. And from an investment perspective and from a Board perspective, we believe in New Mexico, we believe in the business, and we’re here for the long-term. And we’re going to continue to invest in the customer experience and treat it as such.
And we’re going to continue to work on that. So long-term focus, we’re going to keep working with the regulators on enforcement and taking some of the best practices from Colorado. And we’re going to continue to improve the in-store experience, which we have room to continue to work on, and obviously working on the synergies with Everest. So we’re optimistic, things are going to continue to grow and improve there.
Sean Mansouri: Thanks, Justin. Maybe flip to Colorado here, guys. What are you witnessing from a competitive standpoint in Colorado?
Nirup Krishnamurthy: Let me take that. Competitively, we’re not seeing any increase in cultivation licenses, for example. We are seeing the opposite. Cultivation license count in Colorado has come down on the recreational side approximately from 855 licenses down to 655 licenses. And so it’s quite a dramatic reduction and we expect that to continue. I think the word in the — word out in the Street is that more cultivations are going to shutter down over the next quarter or two, and that should help stabilize the market, so to speak. And we are watching that carefully and we’ll evaluate that as time goes along here. On the retail side, we had a couple of new jurisdictions open up licenses. Brownfield opened up with six licenses.
And so as these new jurisdictions like opened up, we need to figure out how to compete. We need to get licenses in there and that’s part of our game plan going ahead. And so, our competitors, as I mentioned in the last earnings call have invested in prices — in pricing at the store level in the first couple of quarters. But in the third quarter, we are seeing that coming back up. So the market is starting to stabilize, but we need to put our foot down and continue to implement our operating playbook and keep our customers happy.
Sean Mansouri: Thanks, Nirup. Given you’re in the early stages of integrating your new assets, what’s your perspective on future M&A? Will you work to continue optimizing the newly acquired assets before evaluating new targets?
Nirup Krishnamurthy: Yes. I mean, over the last year, we have acquired a significant number of assets across retail, manufacturing, cultivation, and we have opened offshore premise storage facilities to handle our inventory. As you have said in the past, we expect to realize full synergies of acquisitions within 12 months to 15 months. And our main priority right now is to optimize our new assets while driving synergies and driving customer experience to drive revenues and sales across the footprint. From an M&A standpoint, our — we will continue to look at opportunities that will enhance our strategy, which is to go deep in each of these states. But our primary focus now is to optimize the host of assets that we have purchased or acquired in the last year. And Justin, you want to give your perspective on that?
