urban-gro, Inc. Q3 FY2021 Earnings Call

Hello and welcome to the urban-gro 2021 Third Quarter Earnings Conference Call. As a brief reminder, all participants are currently in a listen-only mode. Following the presentation, there will be a question-and-answer session for those on the teleconference line. Please note that this conference call is being recorded and a replay will be made available on the company's website following the end of the call. At this time, I'd like to turn the conference call over to Dan Droller, Executive Vice President of Corporate Development and Investor Relations at urban-gro. Sir, please go ahead.

Good afternoon and thank you for joining us. Today's call will be led by Brad Nattrass, Chairman and Chief Executive Officer; and Dick Akright, Chief Financial Officer. Following our prepared remarks, we will open up the call to questions for those on the teleconference line. I'd like to remind our listeners that remarks made during this call will include discussion of non-GAAP metrics, including adjusted EBITDA and backlog. These items should not be utilized as a substitute for urban-gro's financial results prepared in accordance with GAAP. Reconciliations of our adjusted EBITDA to GAAP net income or loss is available in our press release and in our Form 10-Q filed with the SEC, and can be accessed from the Investor Relations section of our website. On this call, we may state management's intentions, beliefs, expectations, or future projections. These are forward-looking statements and involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the Safe Harbor provisions of the federal securities laws and are based on urban-gro's current expectations and actual results could differ materially. As a result, you should not place undue reliance on any forward-looking statements. Some of the factors that could cause actual results to differ materially from these contemplated by such forward-looking statements are discussed in the periodic reports urban-gro filed with the Securities and Exchange Commission. These documents are available in the Investors section of the company's website and on the Securities and Exchange Commission's website. We encourage you to review these documents carefully. Lastly, a copy of our earnings press release may be found on the Investor Relations section of our website at ir.urban-gro.com. In addition, a webcast replay for today's call will be available on the Events section of that same IR site. With that, I would now like to turn the call over to Brad, Chairman and CEO.

Thank you, Dan. Good afternoon, everyone, and welcome to our third quarter 2021 earnings call. As you can see from both of our releases this afternoon, the contract to design and build approximately 20 turnkey food-focused vertical farms in Europe, and our strong third quarter earnings, this is a great time to be invested in urban-gro. On today's call, we'll cover several topics. I'll begin by providing a brief overview of our business and an update on our progress through the end of Q3, including sharing more on the European contract and further discussing key areas of focus as we continue to build upon our strong momentum. Dick will review our third quarter results in more detail, and then we'll open up the call for questions. urban-gro is the only fully integrated architectural, engineering, and cultivation systems integration company in the indoor controlled environment agriculture, or CEA market. We're fundamentally a high-touch, service-oriented company comprised of nearly 80 employees, of which approximately two-thirds are what we refer to as experts—a variety of architects, engineers, cultivation designers, and horticulturists who have a strong history of growing multiple crop types. These experts are urban-gro's intellectual property, and it's the holistic integration of these skill sets and the expertise acquired from working on more than 450 controlled environment agricultural facilities that provides immense value to our clients and defines our competitive advantage. Further, as demonstrated by the newly announced European contract, our intellectual property also travels globally and very efficiently. Focusing on the third quarter financial highlights, we once again delivered record results. We achieved quarterly revenue of $18.3 million, which represents growth of 119% versus the prior year period. We generated positive adjusted EBITDA of approximately $1 million, and positive net income for the second quarter in a row. Furthermore, we finished the quarter with a backlog of $22.5 million, a cash position of over $40 million, and no debt. The continued expansion of our high-margin services offerings, both pre and post-operations startup, is key to developing a sound foundation that will support long-term growth. In the third quarter, with the successful acquisition of 2WR, the 23-person award-winning architect firm, we not only expanded our existing offerings to include architecture and project management services, but we began the exciting job of integrating our existing engineering and cultivation design services into as many of the approximately 70 open projects that they had at the time of acquisition. These open projects further represent a phenomenal cross-selling opportunity for our cultivation equipment solutions. We previously estimated this opportunity to be approximately $10 million over the first year post-acquisition, and we're well on our way to achieving this target. I've been incredibly pleased with how quickly we've integrated 2WR into our adjacent businesses, and I'm excited by our clients' warm reception to full turnkey design engagements that include all three in-house services on a single contract: architecture, engineering, and cultivation design. This acquisition continues to exceed my expectations, and I'm very encouraged by the team's continued progress. For operating facilities, we continue to focus on building out our managed services offering, branded gro-care. This is a highly advantageous recurring revenue model that utilizes our experts to provide operators with the expertise to assist them with training, onsite and remote troubleshooting, remote monitoring, and equipment maintenance programs. Furthermore, since the acquisition, we've bolstered the program by including architectural peer reviews and full facility site analysis reports as well. From both a growth and geographical perspective, we're continuing to execute on opportunities in both the cannabis and food-focused vertical farming markets, and are also making solid progress with our expansion into the EMEA region. Our ability to capture a greater share of these markets is based upon establishing a strong foundation on which to support our service platform and leverage it to new geographies. After primarily working in the legalized cannabis space since our inception, our acquired massive knowledge in controlling environments and working with one of the most valuable crops in the world has given us a great entry point into food. After engaging with clients on a variety of food-focused vertical farming service contracts in the North American market this year, we've taken a strong leap forward with the signing of the Urban Health Farms contract that we announced today. Based in the Netherlands, Urban Health Farms aims to revolutionize the way food is produced and distributed through indoor vertical farms, which is the cutting-edge intersection between agriculture and technology. They have plans under development to commission approximately 20 urban indoor vertical farms to provide local, sustainable food products to communities throughout Europe. Our exclusive engagement provides for urban-gro to deliver all of these complete turnkey facilities, providing architect-led design, procurement, construction management, cultivation equipment integration, commissioning, and the grow care recurring revenue service offering as well. This has been an opportunity that the team has been pursuing and we've been investing in for the better part of 2021, and we're absolutely ecstatic about announcing this long-term alliance today. Supporting this initiative, the recent appointment of Sonia Lo to our Board of Directors should signal a strong commitment to further building out a leading food-focused presence in the controlled environment agriculture market. Sonia, having previously served as the CEO of Sensei Ag and Crop One, brings extensive experience as a CEA industry leader to our company. She'll be invaluable as we expand our presence globally, both to new markets and to new crop types. And I couldn't be more enthused about what's in store for us. Further on the European front, cannabis opportunities are continuing to emerge as the market opens up. In 2021, we've been investing in market entry. We've been bolstering our leadership and sales team in Europe, most recently with the hiring of a Vice President of Horticulture who has a very strong background in the EMEA region. We've also begun exhibiting at industry tradeshows in different countries and speaking on panels, where applicable. I'm pleased with the team's progress. Year-to-date, we've entered into multiple contracts in the Netherlands, Portugal, and Macedonia and further have a strong pipeline to ensure that we continue to expand this reach under our fully-owned entity, urban-gro European Holdings. In the near term, we will be formalizing our European presence with the opening of a physical base of operations in the Netherlands. With the newly announced Urban Health Farms contract in place, we intend to accelerate our capital investment into the EMEA region so we can meet the robust demand and capitalize on this tremendous opportunity that lies ahead. As we move into the fourth quarter of 2021, we continue to launch and invest in innovative vehicles to drive lead generation. The launch of our urban-gro Financial Services division is one such example, and is focused on driving incremental cultivation equipment revenues and margin dollars for the company. Our initial strategic partner, XS Financial, provides the U.S. cannabis industry access to competitively priced and non-dilutive capital expenditure financing solutions. With this facility in place, we not only strengthen our purchasing power with leading horticulture equipment manufacturers but provide additional value to our clients as well. I believe XS Financial's competitively priced access to capital eliminates yet another barrier for operators. It broadens our reach within the cannabis market and further assists in minimizing supply chain delays. Before passing the call over to Dick for his financial review, I want to address the revisions to our full-year 2021 guidance, previously given on our second quarter earnings call. As a result of our year-to-date performance, we are raising our full-year 2021 revenue guidance to greater than $60 million. As a result of starting to accelerate our investment and developing our operational infrastructure in Europe during Q3, our increased marketing spend tied to building the urban-gro brand globally, and our proactive investments in companywide headcount to successfully meet anticipated demand, we are revising our full-year 2021 EBITDA guidance to exceed $2.5 million. In closing, to further drive future revenues and profits across all of our offerings, we continue to execute on our business development initiatives. Our pipeline remains robust, and we continue to actively examine service-focused acquisition opportunities that are profitable, accretive, and synergistic to our core offerings. All of the aforementioned moves that we're making continue to tie into our vision to be the leading provider of turnkey indoor high-performance cultivation facilities in the global controlled environment agriculture market. With that, I'll now turn the call over to Dick.

Thanks, Brad. I'm excited to talk about our financial results with you today. They demonstrate how we are executing against the strategy that we've articulated and clearly reflect that we're continuing to grow in a smart, meaningful, and profitable way. With that, we've built upon the strong momentum from the first half of 2021, which translated into another quarter of record financial results for our third quarter. Revenue was $18.3 million in the third quarter of 2021, compared to $8.3 million in the prior year period, representing an increase of $10 million or 119%. This increase was driven by a $9.1 million increase in equipment systems revenue and a $1 million increase in services revenue. The increase in equipment systems revenue relates to our historical base business and is evidence of the underlying quality and growth potential of that business. The increase in services revenue is primarily attributable to the acquisition of the 2WR entities at the end of July of this year, which will continue to enhance our reported services revenue numbers on a go-forward basis. Gross profit was $4.3 million or 23% of revenue in the third quarter of 2021, compared to $1.7 million or 20% of revenue in the prior year period. This represents an increase of $2.6 million and 300 basis points as a percent of revenue. The increase in gross profit dollars and margin percentage was driven by a dramatic increase in higher-margin equipment service revenues and an increase in higher-margin services revenues as compared to those experienced in the prior year period. Operating expenses were $4.2 million in the third quarter of 2021, compared to $1.9 million in the prior year period, representing an increase of $2.3 million. This increase in operating expenses was primarily driven by costs associated with an increase in headcount, including the increase in headcount that was associated with the acquisition of the 2WR entities. Net income was $100,000 in the third quarter of 2021, which compared to a net loss of $700,000 in the prior year period, representing an improvement of $800,000. Adjusted EBITDA was $1.0 million or 5.4% of revenue in the third quarter of 2021, compared to $300,000 or 3.8% of revenue in the prior year period, representing an increase of $700,000 and 160 basis points as a percent of revenue. For the nine-month period ended September 30, 2021, we reported total revenue of $43.2 million, which represented an increase of 160%, a $3.7 million reduction in net loss, and a $3 million increase in adjusted EBITDA to $2.1 million. As Brad mentioned in his remarks, we are investing for growth with an emphasis on building out our international capabilities in Europe and the Middle East. While maintaining positive adjusted EBITDA is an important goal, we believe it is imperative that we make calculated investments today to capitalize on the long-term opportunities that will drive continued growth for the future. Moving to reported backlog, our total backlog as of September 30, 2021, was $22.5 million. Equipment backlog, as of September 30, was $18.6 million, compared to $27.9 million as of June 30, a decrease of $9.3 million. Services backlog, which is initially being reported, as of September 30, was $3.9 million. While there are several variables that influenced the change in backlog, the two primary factors are signed orders and revenue recognized from signed orders during a stipulated period. Because our backlog generally relates to capital expenditure commitments made by our customers, the dollar amount of signed customer orders in individual periods can fluctuate materially. Revenue recognition is then dependent on delivery of these orders. While equipment backlog decreased from June 30 to September 30, 2021, since we began reporting backlog as of December 31, 2020, backlog has generally trended upward. We believe our backlog should continue to trend upward in the future. Now, turning to our balance sheet, our capital structure is in excellent condition, with cash, as of September 30, 2021, of $40.5 million with no debt, which provides us the necessary flexibility to fuel our growth strategy, including potential M&A targets. The primary uses of cash in the quarter related to $5.6 million associated with the acquisition of the 2WR entities and $3.4 million in further repurchases of our common stock. At this time, I want to comment on our disclosure around the fraud that we were victims of in October. While I can't get into the details as there is an ongoing investigation, we have initiated legal action against the bank to recover the entire $5.1 million. We've had the proper controls in place, and as with any incident like this, we have conducted a thorough review of our controls and remediations throughout our organization, and with the financial institutions that were spoofed. Although these are clearly unfortunate circumstances, it in no way slows our strategy or has caused us to deviate from our plan. In closing, we are incredibly pleased with our financial results and our continued momentum. With that, I'll turn the call back to the operator and open the call for Q&A.

Thank you. Ladies and gentlemen, the floor is now open for your questions or comments. Your first question is coming from Aaron Grey from Alliance Global Partners. Aaron, your line is live, please go ahead.

Hi, good evening, and congratulations on the quarter.

Thanks, Aaron, appreciate it.

No, absolutely. So, I want to kick off on the new announcement on the exclusive architectural designs for the Urban Health Farms. So, it's kind of looking at the European opportunity, right. Can you help to contextualize how big you think that would be in the next two to three years? So, obviously, there's a cannabis side, which a lot of potential markets could legalize over the next couple years. And then now looking over here, at other vertical controlled environment agriculture and indoor growing, just how do you think about the opportunity international versus what's historically been more of a U.S. story evolve in the next 12 to 24 months? Thank you.

Look, I'll start with—I've said it multiple times, I look at the European market for cannabis really like where the U.S. was about five years ago. And there's a strong demand right now for the expertise and skill sets in horticulture equipment systems that have been utilized in these North American facilities to make them so efficient. In the last, I guess, nine weeks now, I've had a team over four times. And we've exhibited at trade shows, we've spoken on panels, where applicable, and the demand is tremendous. It's a blue ocean. We actually started to see that a little bit before the start of the year. We've signed some commercial representation agreements at that time, which allowed us to penetrate earlier and start engaging with clients before we were allowed to travel successfully over again. As I just mentioned, we're working on multiple contracts in the Netherlands, in Portugal, and also Macedonia, all cannabis contracts, early-stage service contracts that will traditionally lead to more design and integration of equipment systems and conditioning. So, opening up urban-gro European Holdings was a good strong move for us to start investing out of the country, and we have a good strong six-month head start right now. What we learned a little over a year ago is that regardless of crop type, we're crop agnostic. The same architect firm, it’s the same engineering; it’s the same cultivation design, and really the same systems that were born in horticulture, like environmental controls and mechanical. The only real difference between a food-focused vertical farm and a cannabis facility is the logistics or the system to move the crop throughout the facility. And so, with Urban Health Farms, that's an opportunity we've been working diligently on for nine months. It's fluid situation. I knew I would be asked the question of what's it worth, what's the value to Urban-gro in the future, but at this time, I don't feel it's prudent for me to assign a value to up to 20 facilities. What I can share is these facilities are retrofit facilities. They're all unique. Urban Health Farms is currently vetting and analyzing industrial sites in multiple countries. Because we've learned to control an environment really in any indoor building format, that's why we were the right choice and selection for Urban Health Farms. Aaron, I'll continue to keep you updated, and the market informed on how rapidly the contract will turn into revenues. As I mentioned, we are actively investing into our European infrastructure. It's one of the reasons we also adjusted the EBITDA guidance. It's worthwhile on all fronts, and both food and cannabis.

Thanks for that color, that's really helpful. And then second question for me, just turning back to the U.S. Just want to get a better idea of new states coming online, particularly I think about some of the Northeast states where adult use sales should begin over the next couple of years, New York, New Jersey, Connecticut. In terms of you guys, for different construction, how do we think about the leads when adult use starts? I'm sure you guys are already getting inbound calls to help on projects. When that starts flowing through the revenue, just as we think about the buildup of these new states coming online and that flowing through urban-gro's P&L? Thank you.

Thanks, Aaron. First of all, we're seeing incredibly strong demand. The acquisition of the architect firm 2WR is by far exceeding my expectations; at the time of acquisition, they had 70 open projects. A nice positive aspect of an architect firm is we learned they're the first to touch the client. We're touching the client 12 to 16 months before that facility is operational. Out of 80 employees we have, as I mentioned, about 60 are architects, engineers, and horticulturists. We're holding the client's hand now throughout the entire life of the grow. By getting involved earlier, we're able to earn the trust of the client, deliver a solid customer experience, and be there for the entire process. As you'd have noticed, on our services side, we reported an increase by about 5X, and that was only with two months of 2WR services involved in Q3. As new states open, we launched a digital marketing plan earlier this year, allowing us to access new clients at tradeshows. Like the very successful MJBiz last month, we're able to meet them in the planning stage. When we're engaged in services, that translates over to equipment solutions more than 90% of the time. We're driving hard for full turnkey solutions as well.

All right, thanks for that helpful color on that, and I'll go ahead and jump back into the queue. Congrats again on the quarter.

Thank you, Aaron.

Thank you. Your next question is coming from Eric Des Lauriers from Craig-Hallum. Eric, your line is live, please go ahead.

All right, great, thank you, and congrats on the strong quarter and the Urban Health Farms partnership.

Thank you, Eric.

Sticking with that Urban Health Farms partnership, the press release notes your plan to commission 20 vertical farms. It sounds like that's an up-to number, and not necessarily contractually obligated. Could you maybe walk through the expected timing of those 20 farms or if there's a minimum number of facility build-outs as part of that partnership? Can you just help us understand what the range of expected outcomes could be here from a number of farms perspective and then the overall timing of what to expect with those partnerships? Thanks.

Yes, thanks, Eric. We started with the signing of the services agreement, and that's the agreement that we just announced. This agreement sets forth how the companies will interact with each other in the years ahead. Urban-gro has been chosen to do the complete design and build for up to 20 facilities. Each facility will have its own statement of work. As I mentioned, they are currently looking at sites and analyzing industrial sites in various countries. When they close on that site, we'll sign a statement of work, and then urban-gro will step in with the site development and all of our services, and then equipment solutions. We anticipate, depending on the size of the facility, which will vary because they are all retrofits and unique, the time to complete a facility should be anywhere from nine months up to 15 months, depending on size and any unforeseen delays or supply chain delays that are hitting certain parts of the world right now.

No, that's helpful. I appreciate that color. And then, I guess, just sort of at a higher level, how should we think about your capacity to service deals, whether it's a market like Europe or just in the U.S.? I'd imagine this Urban Health Farms partnership of that scale would keep your employees quite busy. But wondering if you can just help us understand the potential bottlenecks or your overall capacity to service more deals, either in Europe or just beyond. How should we think of your overall capacity to service deals and what the bottlenecks are in your business as you look to scale? Thanks.

Thanks, Eric. This also ties into part of my discussion on reducing the EBITDA guidance. We are aggressively hiring right now, architects and engineers for the U.S. market. Currently, I believe we have over 10 job postings out. We've started to build our team over in Europe because we do not want to take our experts over to Europe and leave a gap here in the U.S. market. So, we've chosen a select group of individuals who will move over to Europe and help train the team in the European marketplace. However, we've also got to rely on our M&A initiatives as well. We're not burning cash; we’re actively executing on our M&A plans with a strong pipeline, and we're looking at service-focused accretive synergistic companies that drive cross-selling opportunities similar to what we did with 2WR. We will look in Europe through a combination of hiring and acquisitions as well. We maintain that cash position of just over $40 million entering Q4, so we're well-capitalized to execute for sure.

Great, thanks. Appreciate the color.

Thank you.

And the next question is coming from Colin Ferrian from MJResearchCo. Colin, your line is live, please go ahead.

Hey, guys, congrats on the nice quarter.

Thank you, Colin, appreciate it.

Brad, could you provide any color, specifically on the North America demand side? I think we've seen, specifically, a couple of your peers seeing slowdowns this quarter in particular. It doesn't seem to be an issue for you guys. I'm curious if it's geographic diversity or if there is any other differentiation, like the XS deal; you could provide some color on?

For sure, Colin. We continue to see strong demand across the European markets and the North American marketplace. I've read references to perhaps a weak California, where supply chain issues are causing delays across the industry. But most of our clients don't operate in the California marketplace. We haven't had any material supply chain issues at all. Maybe some delays from vendors, but that's just requiring us to proactively work ahead on the planning with our clients. Our global growth model is decreasing our exposure to specific markets. I'd like to talk a little bit about backlog. We entered Q3 with a backlog of just under $28 million. That backlog has always been a great indicator of future revenue or market demand for urban-gro, but there are variables out of our control that affect timing, especially on a short three-month period. As you saw in the third quarter, our backlog dropped to $22.5 million. However, there was a larger contract that just pushed into Q4 and therefore didn’t make it into that number. In Q4 so far, we have signed close to $15 million in new contracts over just five weeks. That’s a strong indication of the current demand we’re experiencing here in North America.

That's helpful. The only other question then is I’m curious if, even in the demand over the past four weeks, how much of that is attributed to the partnership you guys have signed with XS and the financial services division startup? And then is there a possibility that that can pay additional dividends, either into Q4 or into 2022 as you look forward into the future?

I think for sure it will have an impact. XS providing non-dilutive, aggressive financing to our clients is a solution that's been requested for years now, and we don't have any business since we signed the contract and made the investment to report. We did work on a project and a larger MSO together before we signed the contract. But since we announced the partnership, we're introducing the solution to multiple clients that qualify. I think we've got a couple dozen calls in progress right now. I'm racing to get the solution out to the marketplace because it's so attractive. They have a great leadership team, very confident and experienced in our sector, not only our sector but in others as well. I think our clients will enjoy this working partnership.

Great, sounds like we have come to our tail ends. Thanks for the time, guys.

Thanks, Colin, greatly appreciate it.

Thank you. Our next question is coming from Scott. Scott, your line is live, please go ahead.

Hey, guys, congratulations on the quarter. Hope you're doing well.

Thanks, Scott.

I have two questions, first on the backlog. Can you differentiate on the services side, how does the $3.9 million reported in this quarter compare to previous figures? What's the margin differential with the services gross margin?

I’m going to ask Dick to answer this question, please.

Hey, Scott. Yes, with regard to the services backlog, this is the first time we've really started reporting it because a lot of that pertains to the acquisition of the 2WR entities and the pure architecture services that they provide, which is why we started providing it for this quarter. It hasn't been a meaningful number for us previously, and we've always focused on the equipment side from that reporting. I believe your second kind of part of your question related to the margins with regard to the services versus the equipment side. We certainly see higher margins with the services side. As we reported after the 2WR acquisition had closed, their historical financial statements over the last two years showed margins in the low 40% range from services. We're excited to show those services going forward in our financials. Certainly, we haven't seen any decrease from the revenue they’re experiencing or the number of jobs they’re having come in. That will certainly help boost our margins moving forward, and it likely leads to additional incremental equipment sales for us. As Brad indicated, we get into the clients earlier, and we tend to be very sticky from that standpoint, which leads to additional orders for equipment through us.

Great, thank you. My second question is with regard to the elevated level of spend. Can you provide a little color on how long you expect this higher level to last? Is this a permanent change or just a couple of quarters? Can you provide a timeline?

Sure, Scott. This is Brad again. Bottom line, we're reinvesting in the P&L, based on what I’ve seen since the last earnings call. The acquisition of 2WR is more successful than anticipated, which is great. However, it’s resulted in aggressive hiring. We don’t envision any slowdown in demand, and we’re not hiring just to keep up with existing demand. We’re hiring to meet future demand in the first half of next year. Second, the European contract, we've been working on for a while, has led us to accelerate our investment into urban-gro European Holdings. We’re in a rapid growth mode, strong focus on top line, but we are aware of the need to maintain positive adjusted EBITDA. We’re not burning cash, so we’re keeping our position strong. We will also look at acquiring versus hiring. You should see an increase in marketing spend in the European market as well. Our participation in tradeshows in the controlled environment agricultural industry is essential for meeting new clients. I can’t put a timeline on it, but I’d say probably at least into the first or second quarter of 2022.

Great, that's terrific. Keep up the good work, I appreciate it.

Thank you.

I appreciate it, Scott, thanks.

And your next question is coming from Quinn Stills of Palisades Investment Partners. Quinn, your line is live, please go ahead.

Great, thank you. I have a question, just more broadly speaking about macro wins. With the European economies opening up from COVID, the U.S. opening up from COVID, and the travel restrictions coming down, are you seeing that as a tailwind in terms of your activity, new business activity? Can you comment on any tailwinds you might be getting from things just opening up in general, vis-à-vis where they were a year ago? Thank you.

Thank you, Quinn. I'll start over in the European market. In the cannabis segment, there wasn't enough momentum pre-COVID to drive it through that year-and-a-half period. Unlike the U.S. marketplace, where cannabis was deemed an essential business very early on, and it picked up momentum across all segments, ancillary and the cultivation side. In Europe, it was only five months ago that we needed to get governmental approval to visit the Netherlands, for example. The last time we were there, we were tested every day at a trade show. I don't feel the tailwinds are there yet; they're only going to get stronger. However, hiring a vice president of horticulture, located in the Netherlands provides strong support in the EMEA region. That will allow us to grow aggressively regardless of how fast COVID slows down. It always helps when you have strong clients, and we have multiple clients on the food and cannabis sides. We're not building it and hoping the clients will come—we have the clients, and we’ll ensure a great customer experience with urban-gro.

Great, thank you.

Thank you.

That concludes today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.