Unidentified Analyst : Thank you. And Forrest, how about a comment on your debt position right now?
Forrest Hoffmaster: Yes, strong balance sheet, debt-to-equity ratio is 1.4, debt-to-EBITDA is 1.7. Again, mention liquidity we’re strong on liquidity and working capital, generating operating cash from operations. We’re very aware of our interest and principle obligations in the out year, and our intention is to improve cash position, deploy it wisely to continue to meet those debt obligations.
Unidentified Analyst : Thank you. Just one more question here regarding refinancing possibilities for your debt. Will you be using positive cash flow generation to be paying off some of the debt to lower the large payments due in 2025?
Forrest Hoffmaster: Yes, that’s our plan. Right now as we all know, not necessarily the environment to go to the market and look for financing. So, our whole focus right now is generating free cash flow from operations and making sure we’re satisfying our obligations.
Unidentified Analyst : Okay. And one more question Forrest regarding guidance for the year, and why you did not provide guidance for 2023.
Forrest Hoffmaster: Yes, it’s a good question. I know we’re seeing mixed approaches to this. I think for us we’ve had a successful quarter, we’ve had a successful year, that’s where our focus is, is on growing the strength of the business managing what is in within our control, certainly hitting the performance side of things, but also creating long-term value. So that’s where our attention is right now, core business, generating free cash flow, successful execution of our M&A plan, and we’ll revisit whether or not we’re going to provide forward-looking guidance in second quarter earnings.
Unidentified Analyst : Thank you, Forrest. Let’s bring Justin back in the mix here. Justin, can you talk about your M&A activity and what are the plans in 2023 and going forward?
Justin Dye: Yes, thank you, Joe. Appreciate you asking me a question. These guys have all the answers and
Unidentified Analyst : They’re hogging your way.
Justin Dye: No. The team had a great year, great quarter, so congratulations to
Unidentified Analyst : Absolutely.
Justin Dye: Nirup, and Forrest, and Nancy and the whole team. But, I think, we’ve talked a lot about this with our investors and nothing has changed. We are going to continue to focus on core markets. We’re operating in Colorado, we continue to see a very fertile landscape here to continue to grow within the cities and the counties where we serve as customers today, as well as extending that coverage into new counties and new cities. And to remind you, there is still well over 650 recreational dispensaries in the state, and we occupy just a few. So we still see a tremendous opportunity of really good real estate out there that we can acquire. And frankly, there is some opportunities to develop some new locations, and we’re going to continue to work there.
And then New Mexico, we’re very, very pleased with New Mexico. And what we’re really proud of is the team down there is leveraging our size, and scale and our expertise around retailing and merchandising to drive our new stores and to become the retailer of choice with really great products and driving efficiencies to create products on the shelf that are valuable that have a really good value for our customers granting great service. So we’re opening stores and very quickly we’re winning, and we’re taking €“ the customers are coming to do business with us, and that’s important. So you’re going to continue to see us on the M&A actively, we need to fill in those states. We still see lots and lots to runway within those two states. And as we’ve discussed with all of you, our goal is to be number one in those states from a retail perspective with great retail , with great product brands that Nirup highlighted that we’re bringing in new products in the different product categories that solve a need for customers.
And we’re excited about that. So building product brands behind our retail powerhouse is a winning formula, and you’re going to continue to see us do that and continue to work with wholesale customers, getting to leverage that size and scale when making products accessible for those other retailers out there to offer them to their customers as well. So we’re going to keep working there. We’ll keep our eyes up on the landscape for other states, sort of in our region here as we continue to focus on being a regional operator. But we like having that determination, focus and focusing our capital there. We’re finding lots of really interesting opportunities on retail, wholesale and on the product side. From the acquisition standpoint, I can tell you we’re busier than we’ve ever been.
On the M&A front, we’re being very discerning in how we’re using our cash and capital. And there are some really great brands and up there. So we’re going to continue to look at that. So I think we’re very bullish about our opportunities in both of these states and looking at other states down the road as well. And once again, we won’t dip our toe in the water, we’ll look for a platform where we can be number one in the next state down the road. And we’re sticking to our strategy and executing the plan. And I think you’re seeing that in terms of the margin, the gross margin is up almost 7.5% from last year. And I think you’ll continue the efficiencies that we can wrench out and continue to drive volume. So, you are going to see more and more of those types of opportunities.
Unidentified Analyst : Thank you, Justin. And keeping on with the M&A activity, looking at the bigger picture, looking on the horizon, which is the question that we always get, where do you expect to be in the next three to five years? And is there a buyout in the works or could there be a buyout in the works?
Justin Dye: Well, I think since we’ve been in this €“ we invested in this business in June of 2019, and many of the executives and management team have been here, and we set out to really win and take care of customers in Colorado, and then that branched out into New Mexico. We have put ourselves in a position that we wanted to. So we’re generating free cash flow from operations, which allows us to put more cash on the balance sheet, allows us to have the ability to pay down debt if and when we want to be able to do that, it allows us to have a war chest to use some cash in acquisitions when and where we need to do that. And creates unbelievable flexibility for us. So, we have the opportunity to continue to do what we’re doing, which is grow within our states, perhaps get into another state or two down the road, or to acquire something much larger or wait for safe banking or capital markets provision, where we could perhaps even be listed in a couple of different exchanges, whether it be the NASDAQ or something along those lines that would allow us to have a larger population of retail shareholders and allow us to tap into that and be able to tap into the institutional investor base.
So we’ve got optionality, which is good for our shareholders. Certainly equity markets are challenged right now with cannabis, with a number of the cannabis investors running for the sidelines after safe banking didn’t pass in December. So we’re in great shape. We’re in great shape. We have, right now, we control our destiny and there’s a lot of companies that don’t. And I think that as we threw this will come out of this capital vacuum, so to speak, on the debt and the equity side. And we’re going to come out very, very strong. And I think these things happen quickly and I think we’ll see €“ we’ll be more appreciated in terms of share price. And the good thing is we’ve got lots of choices and what we’re doing is resonating with our customers and the big thing is with our customers, our retail customers, our medical patients, and our wholesale customers.
And as long as we’re winning with them and we’re generating free cash flow and we’re growing, we really have a lot of flexibility. So we’re setting very, very well, really proud of the team. Nirup has done a heck of a job leading operations, leading the business. We’re excited to have Forrest on board, Ken Diehl, that’s running New Mexico, Collin Lodge that’s running Colorado, the team’s running wholesale and on the M&A side, I think the team’s done a really good job. So I think we’re set up really well.
