Q3 2020 Green Thumb Industries Inc Earnings Call
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Good afternoon, and welcome to Greenfield.
Third quarter 2020 earnings conference call.
This time, all participants are listen only mode a quick.
I shouldn't answer session will follow the conclusion the formal remarks during the question and answer session.
I'll ask for a limit of one question and one follow up question had a person agile.
As a reminder, a live audio what.
Got that we call it available on the Investor Relations section of Green, one website and will be archived for replay I.
I'd like to remind everyone that today's call is being recorded.
I'll now turn the call over to Jennifer Dean Chief Strategy Officer. Please go ahead.
Thanks, Rob good afternoon, and welcome to Green.
Third quarter 2020 earnings call I'm here today, with founder and Chief Executive Officer, Dan Cobler, and Chief Financial Officer, Anthony George on it.
Today's discussion and responses to questions may include forward looking statements, which are subject to various risks and uncertainties that could cause our actual results.
To differ materially from these statements. These risks and uncertainties are detailed in the Companys reports filed with the United States Securities and Exchange Commission and Canadian Securities regulators, including our quarterly report on form 10-Q, which we expect will be filed tomorrow. This report along with today's earnings press release can be.
Found under the investors section of our website.
Green thumb assumes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise. After the date of this call throughout.
Throughout the discussion Greenbelt, we will refer to non-GAAP financial measures, including EBITDA and adjusted operating EBITDA.
A reconciliation.
Deletion of non-GAAP financials.
To the most directly comparable GAAP measures is included in our earnings press release and FCC inherent filings. Please note all financial information is provided in us dollars unless otherwise indicated thanks, everyone and now here's Ben.
Yes.
Good luck.
And thank you for joining our third quarter earnings call.
And a special thank you to all of those who served on this special day.
Against the backdrop of this unprecedented year I would like to begin by thanking our entire team for their efforts to make our mission.
Promoting wellbeing throughout Canada.
Viable and credible reality.
I mean, all the uncertainty Greenbaum mission strategy and execution of our enter open scale playbook remain our north star as this combination delivered strong topline growth and.
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For the first time terms, we have been public bottom line profitability.
Following a clean sweep of candidates legislation measures across five states. The greenway is big and real.
In fact, it's like a tidal wave as consumers demand.
Ill end cannabis for wellbeing.
People want a natural alternative to dangerous opioids.
Chemical pharmaceuticals.
And painful hangovers.
People are alarmed by the social economic and health disparities brought on by the war on drugs.
The ingredients are in place as the political and capital requirements warm up to this tremendous new industry well being through candidate is the next great American growth story.
While the US Canada stocks are posting strong revenue growth the S&P is posting consecutive.
Quarterly revenue decline.
It's important to note the kevins industry is becoming a significant contributor to both federal and state economies through job creation and tax revenue.
And in response to the capital markets are continuing to open up with a greater inflow of quality.
The institutional participants.
Prudent capital allocation has always been the bedrock of our story, which we think positions us well to be a leader in the capital markets.
Cannabis is set up to be one of the best use of stories of our time and we welcome the comparison to the great growth stories out there today.
Like cloud computing online gaming and hard seltzer.
The animal spirits are not going to sweep through candidates.
We use candidates industry is rapidly evolving into an estimated $100 billion consumer package goods category with project.
Adjusted annual growth rates of 20% for the next decade.
That makes Canada is larger than the us wine and spirits industry use confections and use beauty and personal care to give you a sense.
Five years in the legal cannabis in our home state of Illinois.
And only 10.
One month into adult use here industry wide, Canada sales for the state are approaching $1.5 billion on an annual run rate basis.
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Illinois, you don't use grew double digits for the month of October and over 330% year over year.
Thats impressed.
Pressel growth, but amazingly nowhere near the top.
We began shipping from our second production facility in Illinois in the third quarter and in October we opened the first adult new store in Naperville is Chicago suburb that is the third largest city in Illinois.
We have eight open store.
Stores across the state with the potential for 10.
We believe what is happening in Illinois will happen across the country.
It is a matter of when not if.
You may divided country, we are United on this issue.
In the Greenway Americans voted in support of Canada, Mississippi opens up for medical use and South Dakota, Montana, Arizona, and New Jersey join you don't use 21 and over roster.
New Jersey is great news for Green Zone, and we began the timely.
Production and distribution of our brand portfolio there in the third quarter.
Furthermore, this 9 million persons state in this densely populated east coast region raises the stakes for Nabors to follow the adoption of Adobe is in fact after the New Jersey, both Governor Cuomo called on New York.
Utilize that don't use in 2021.
We have one of the 10 licenses in New York.
In Connecticut Governor Lemont is also a way to what's happening around him in New Jersey, and Massachusetts as he expressed interest in adding adult views on top of a successful medical program in 2021.
That's it.
Lender, we have one of the four licenses in Connecticut.
And in Pennsylvania, Governor Tom Wolfe is urging legislators to legalize adult views to provide a new revenue stream to aid its economic recovery and restore social justice.
Pennsylvania has over 11 million people, just like Illinois, and his legal cannabis.
This industry is big and growing.
And has not yet opened for adult use.
We started shipping our new capacity in Pennsylvania, this quarter, allowing us to distribute more of our rhythm products to more stores and more consumers.
In October we opened rise.
Monroeville in a suburb of Pittsburgh. This is the 13th drive store in the state and our 49 store across the country.
Next week, we'll open our Fiftyth store in Kendall, Florida.
Same store sales across our entire retail fleet exceeded 65% on a base of 20.
Hi stores for the quarter.
This is it is worth noting that the three essence stores. We acquired in June of 2019 were added to the base for the first time in the third quarter of this year.
On a sequential basis comp sales were up 18% on a base of 42 stores and closed user remember that compares to 8% on a basis.
40 stores last quarter.
While we work to optimize our brick and mortar presence. We continue to think forward about the future of Canada's retail in this evolving digital age.
Whether physical or virtual.
We are committed to delivering superior experiences for our consumers.
Okay.
Our brands are now being distributed across 11 states coast to coast.
These are states, including California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts now.
In Nevada, Pennsylvania.
And new to the list in the third quarter.
Strong Hcone is we have a lot of faith in.
Hi, Bill.
And of course, New Jersey.
Collectively this is roughly 130 million Americans or 40% of the population of this country.
As we as we have always contended distributing.
Brands at scale is the key to strong organic growth and we love our brands.
Rhythm incredible.
All walkers vivo Dr. Solomon It is really about the connections they are forming with the consumers.
This quarter Incredibles launch.
Launched Hughes, Barry a gummy aimed to help the millions of people struggling to find that good night sleep.
We're very pleased with the positive feedback so far as Americans across the country reach for the stores.
This is growth and opportunity there is growth in.
Particularly across our our platform.
Our team continued to show resilience and adaptability.
With thoughtful positioning and through these unique times, we delivered a very strong quarter with $157 million of revenue, a 31% increase quarter over quarter and a one.
131% increase versus 2019.
Adjusted EBITDA improved by 50% quarter over quarter to $53 million.
These quarterly results were largely driven by the production expansions that came online during the quarter in New Jersey.
One, Ohio, Illinois, and Pennsylvania as.
As well as the bounce back in Nevada, and Massachusetts.
Our growing scale drove operating leverage and nearly three X revenue and Eightx adjusted EBITDA year to date compared to last year.
These results are the outcome of continue on.
Investments in constant evolution of our people and processes over the years.
We know there is more to do but we feel good about what's ahead for Greenplum. We have two highly complementary businesses that presents a tremendous opportunity for outsized growth overtime.
Right here in the United States.
And then when we compare our industry's growth with other sectors of the S&P 500, we feel pretty good.
Our thesis is proving out and we have a great team to keep the momentum going.
With that I will turn the call over to the best CFO in the business to review our financial results for the third quarter.
Anthony.
Thanks, Dan and good afternoon, everyone.
Before I begin I'd like to thank all those concerned without their sacrifices we would not be here today.
The DGF churn in the third quarter Greenspan posted record quarterly revenue EBITDA for the first time in company history positive.
Thanks per share.
Performance it truly speaks to the breadth and depth of our team as well as our daily commitment to excellence.
The backdrop of this financial performance, we cannot ignore the macro trend that is unfolding before our eyes.
The tidal wave of demand the benefit increasing two or three years, which fully on display during last week's election.
Burma key takeaway as a management team sales.
Build a bigger boat.
The Green tsunami is on our doorstep and the walls of probation or directly in the path.
In the third quarter, the company generated a robust $157 million of revenue.
Our topline growth of 31% was primarily driven by.
Earlier than expected contribution from our recently completed cultivation expansion in Illinois, and Pennsylvania as well as the rebounding in Nevada in Massachusetts to pre crisis levels.
Gross revenue for our consumer package goods business, CPG grew by $18 million or 33% quarter over quarter.
On a net basis, which accounts for intercompany revenue, our growth approximated $13 million or 41%.
In retail revenue increased 24 million or 28% driven by new store openings and same store sales growth that exceeded 65%.
On a gross basis, our revenue split for the quarter was approximately 60% retail 40% CPG.
On a net basis, 71% retail 29% CPG.
These numbers are similar to Q2, just slightly more tilted towards CPG.
As a reminder.
Minder, the difference between gross and net of intercompany revenue.
Approximately $30 million in Q3 and $24 million in Q2.
During the quarter, we completed our wholesale facility expansions in Illinois, Pennsylvania and Ohio.
All three facilities contributed to our Q3 financial results.
And are well underway to being positive profitability centers for the company.
Hats off again to our team for their execution as our Illinois, and Pennsylvania expansions ended up contributing more to our business in the third quarter than we initially anticipated.
As such they are incremental contribution in Q4 will be somewhat tempered.
Turning to profitability the company generated gross margins in excess of 55%.
200 basis points greater than last quarter.
While our intrinsic goal of keeping this very important metric above 50% remains we.
We are witnessing the true potential of our platform when combined with solid execution in highly attractive.
Limited license markets.
Below the gross margin line breast DNA of $50 million was essentially flat to Q2.
Excluding DNA and stock based comp our normalized operating costs totaled $34 million for 2 million greater than last quarter.
That helps with the same quarter, we increased cash operating cost.
That must by $2 million, we increased revenue by 37 months.
Other expenses for the quarter approximated $2 million, which reflected a favorable valuation adjustment to our strategic investment portfolio as well as interest in Warren expenses associated with our senior debt.
Net of these expenses the company's.
Curated $39 million in pre tax income in over $9 million net income, providing our shareholders with its first positive EPS force.
Four cents a share.
The company also experienced significant improvement to adjusted operating EBITDA, which totaled $53 million just under 34% of.
Revenue.
Year to date the company has generated 114 million in adjusted operating EBITDA.
Four times greater than our full year 2019 figure.
Another monster achievement for the team.
Turning to our balance sheet, we ended the quarter with 78 million in cash.
This is $4 million.
Last quarter with the company made substantial payments Tonkel, Sam and also kept its foot on the gas on the Capex front.
Subsequent to quarter end, we executed an agreement with innovative industrial properties that will provide an additional $25 million in funding to build out our Ohio cultivation license.
On a public.
Load over 70% of our shares are currently freely traded representing 150 million shares and over $3 billion in value.
We continue to believe that liquidity breeds confidence.
In summary, we are incredibly proud of our Q3 and year to date financial results looking ahead, it's impossible to ignore the.
Our opportunity ahead of us and I'll leave you with an interesting data point.
Colorado with a population of just under 6 million 80 million annual tourist is now averaging over $200 million of Canada spend per month.
It's an annual run rate in excess of $2.4 billion.
With Colorado can hit these sorts of numbers.
In the years to realization worked.
What's going to happen in Illinois, New Jersey, New York, Pennsylvania, and others over the next several years.
We agree with them certainly have our thoughts.
While the world around us continues to evolve men.
Many thanks.
Yes for us largely stay the same.
As we look ahead to 2021 I'd expect that to continue to do the following.
Leave with the consumer.
Stay focused on markets, where we had been working create edge sales.
Sales and invest in our team.
Play hard in play to win.
Last.
Continue to wave that green thumb flag widen high.
Until next time for everyone of the safe holiday season with the level one.
We see you all in the new year.
Back to them.
Thank you Anthony as always your remarks are both informative and colorful.
A rare.
Accommodation in CFO commentary.
I believe the key takeaway from our third quarter is that our continued execution and prudent capital allocation strategy has led to steady profitable growth.
We have strong revenue improved profitability on nearly every Matt.
Down the income statement and balance sheet that leads to a good night sleep.
Ill, that's very exciting for us we remain focused on being a leader in this brand new industry here in the United States.
That means several things.
We must stay focused on leveraging.
That strength and executing our strategic plan, while being innovative and adaptable.
We must stay dedicated to our core values by promoting social equity diversity and inclusion to.
Community engagement and environmental stewardship.
We.
We must continue to do what we say we're going to do.
We must never lose sight that that first and foremost this is a people business.
And then people first means listening.
And taking care of our key customers and communities.
We are very proud of our.
Our commitment to those who we serve.
First day profit from all new store openings go directly to community organizations, such as the last prisoner project.
Lows additions in Illinois for 12, food rescue in Pennsylvania, and next week to the Florida rights Restoration coalition.
With today.
Today being veterans day is also a timely reminder, to thank those who protect our democracy, our freedoms and the right to choose candidates.
In November our brand dog walkers and operation 16, 20 team up to help bring awareness education and support to.
Turning to choose candidates as an alternative to pharmaceuticals.
And finally, our main job collectively is to promote well being through the power of Canada and in doing so create opportunity and long term sustainable value for all of our stakeholders.
I want to thank our team.
Came our customers partners and you our shareholders for their continued contributions and support a green thumb.
And everyone. Please state data well during this holiday season.
Thank you everybody and with that I'll turn the call over the operator and we welcome your questions.
Thank you in order to ask a question you will need to press.
Does that are wanting your telephone to withdraw your question you May press the pound key adds.
As a reminder, teams limit yourself to one question and one follow up and your first question comes from the line of the company from Omega family Office. Your line is open.
I hesitate to ask a question I think I had the honor of.
Asking the first question on your call as a public company. The very next thing I see My picture, New York posted underneath my picture they refer to as a cannabis king knowing very little if any way first let me congratulate you on outstanding results.
I kind of making a loose analogy there was a turning the century that were.
So very very large number of automobile companies producing oil appeals and of course the industry consolidated there are large number of companies in this space do you see an opportunity to consolidate the space given a superior job you've done and having a great CFO that you referenced.
On the team.
We will.
First question.
If I could squeeze in a second.
What is your attitude towards listing on the New York stock exchange.
Thank you we really appreciate the time words and.
You know what we're focused on the execution over here Youre right turn of the century, whether its automobiles or prohibition and weve used the phrase provision.
2.0, and I believe that history Doesnt repeat it rhymes through to really look to history for those lessons new totally right.
Those monsters consolidation opportunities you've seen probably the industry finished.
You asked the first label consolidation that happened at capital markets that property at a calm down.
Maybe I'll come back but there.
As massive opportunity given how big the sector Theres no. There's no 50 or $80 billion space, which is where we're going to be where the biggest companies only do $234 billion in sales.
You are exactly right of where it goes over time. The question is how quickly when for us with the CFO with the lens and shareholder capital and.
Really shareholder returns with every dollar we spend is when does that make sense.
Like always everything's on the table as it makes sense for shareholders and its accretive and it depends on lots of factors.
We have a huge opportunity within the portfolio.
But thats not the sales this tuck in acquisitions that are accretive.
And especially as this industry.
Evolves, we can see the feel pretty well and we're excited about what's out there and we're excited about the current portfolio.
As to the second question on New York Stock Exchange I think just backing up a second.
Greenspan is registered with the SEC Securities Exchange Commission.
This puts us in a unique spot that includes.
Our GAAP financials, you'll see the 10-Q in morning.
We file a case than Q 10-K's gap.
Standard stuff that we have registration with the SEC is currently not enough clarity in the federal government per listing on the New York stock exchange, but I can tell you we positioned ourselves.
Like has been our history, even since before we went public.
First mover in the capital markets and out and I would describe it as we're knocking on the door, we're getting ourselves ready. It obviously doesnt make any real sense that the only access on the New York stock exchange as the Canadian operators, who don't have exposure to us consumers and here is where the masters.
Business is but we understand that regulatory structure with.
It's a moat around our business and makes us extremely bullish about what's ahead.
So you've seen us put out things like an S. One which is a registered offering.
With US Security Exchange Commission is really just gives us optionality another tool the tool box as we use over history things like debt sale leaseback, all with the lens of what's.
Most accretive for shareholders.
He has done an excellent job congratulations im very pleased thank you. Thanks.
Your next question comes from the line of maybe any other from Cowen Your line is open.
Hi, good evening everyone.
So in terms of the.
The revenue growth sequentially.
And I was expecting and I was wondering if you could unpack that dimensionalize, the relative contributions from Illinois and Pennsylvania.
Coming online a lot faster than expected relative Q, Massachusetts in Nevada.
Reopening in Aberdeen.
Hello. Thanks.
Yes, great question increases, we're putting on a lot of cylinders last quarter and as Anthony mentioned.
Some of the other tempered outlook versus a 30% or whatever the last quarter was.
Where did that come from to your question lots of factors, you're exactly right production turn on in Illinois, Pennsylvania.
Then drove a lot.
Hi on New Jersey, as well in the market turned on.
Then two things going, Massachusetts in Nevada as I described one is the recovery and to growth within that market.
So sort of all things being equal there would have been growth out of Massachusetts, and Nevada had an up in the debt, but with the dip which is really an eight.
Any more than half of May with that's what we're comping in the third quarter.
Is there some factor there.
But really I would say the vast majority probably.
We almost 75% as a result of organic growth in the portfolio versus lapping a coated situation, but thats because we do is execute and turned on these things we talked about last quarter happened to be the third.
Broader could have in fourth quarter.
With that with that with the step up.
That's great Super helpful. Thank you and for my follow up then I really appreciate the commentary around New York very attractive potential limited license adult marketplace and it does seem like the Cuomo administration.
Okay.
Good times.
[laughter].
Well I think yes I.
I am curious, though if you have any thoughts around what a potential licensing framework could look like in particular, given the sizeable Colby driven budget. Thanks.
Facing.
Thanks.
There are several.
Ingredients for the successful rollout from medical the adult use and we welcome a conversation with regulators industry participants those were not yet industry participants to certainly got to be a place for new folks to come in this is a massive business. The pie is very big there's plenty winter finding ways to win even said in many different ways. However.
However.
Total relying on the operators that can stand it up and deliver that supply whether tax revenue jobs capital to get this thing going in very big.
And we're here we're constructive.
I think we're talking a lot of people are brainstorming.
And so we are excited about whats ahead broadly.
Across the sales.
Your next question comes from a line of Matt Mcginley from Needham Your line is open.
Thanks to the increase in retail revenue growth was quite impressive, but it is especially impressive given most that with productivity increases was that broad based across the entire portfolio. As you have the cash such as states where we're.
Well most of that and I guess importantly has that productivity held into the fourth quarter.
Sure. Thanks for the question Anthony here.
Obviously, we historically haven't haven't kind of broken down kind of state by state performance that.
Holistically, we will we see strength across the platform.
Yes.
Certain markets, obviously more than others, but yes.
We have a business here given the limited license markets that we operate in so bullish on all of them literally so we're in a situation where.
We continue to see nice.
Nice organic growth same store sales within each of the markets that we.
Operator.
Turkey for it it's a little early to speak to speak to speak to that but you.
It's been a strong year and obviously with Covance, we had no idea what to expect when when it hit in the first quarter and we've been pleasantly surprised by the.
By the pickup that we've seen across the entire platform.
Since the first quarter.
And then as far as gross margin I would think that the retail market. The retail gross margin wouldn't be that volatile to the gross margin upside in this quarter came from production leverage at the CPG business grows at a faster rate than which operation in the fourth quarter is there anything with the.
Nextera, it's product mix or geographic standpoint that would.
Prevent you from expressing continued upside of those gross margin rates or.
How should we think about that in terms of what happened in the quarter in terms of the leverage that you saw in gross margin and how would that look into the fourth quarter I.
I guess, we shouldn't be anything we should be thinking about that couldn't keep up and.
Going up even more.
Sure the fan out.
I'll take that one.
Normally talk quarter to quarter on how to think about it the overtime you're exactly right. The retail gross margin does not have a lot of upside from what the retail businesses.
That is probably downside risks will melt the.
The other thing that works against gross.
Margins, obviously price.
Lets input costs are rising so certainly the risk models.
If you look at our business in the modeling it out the real levers that will drive it one is which pieces are driving the biggest piece of that production.
Where are we making the most product.
And.
And then what's the profitability at the places that have the largest product so product mix and state waiting and really we see both kind of slow and steady with the constant awareness around price.
Kind of how I would think about it.
We continue to optimize you continue to think about capital.
Capital investments that can drive down those marginal cost per unit.
Sets up pretty nicely for that sort of exercise.
And if you tell me what prices going I can tell you where gross margin is going but we don't know is a lot of action was in markets.
And we don't try to further pricing.
Okay Circus.
Customers, we certainly cancer patients who are using the product for wellbeing.
Your next question comes from the line of Eric delaying from Craig Hallum. Your line is open.
Thank you for taking my questions and congrats on a really impressive quarter here.
First question is.
Yes.
I have a follow up on one of the previous questions regarding uplift in several reforms.
Especially with the degree wave announced prospect of a Democratic President certainly a lot of talk about federal form and especially uplisting to major exchanges.
You guys mentioned that you are ahead of your peers in terms of registering with the FCC and gap.
Reported.
First is there anything else that you guys need to do to be able to up list or is it just a matter of federal reform at this point and then second given your discussions with the exchanges.
In your opinion would save banking.
Potentially give the exchanges enough cover to allow for an uplift.
Yes. Thanks. Thanks.
Sure This is Ben.
Your question is a great question without a great answer.
Again as I, obviously cant speak for anybody else.
The truth is the situation right now does not have a lot of clarity.
See ourselves on the doorstep.
As we see registration I mean, we.
The U.S. Security Exchange Commission with a registered offering to sell your security I think that's very unique.
And then a differentiated from where things were a year or two ago right. We went public two and a half years ago plus or minus.
The capital markets have been evolving.
When we see things like banking reform and and changes to this.
So with that screams to me is a reduction in the change in cost to capital. Thank you change the cost of capital reduction.
And that's really good for shareholders.
So this thing is one thing but.
You think about things and I think it's important as I mentioned, new sources of capital not just equity.
I wouldn't make shareholders notice as we will make.
Several years without an overhang here business is profitable so what's really interesting about banking change the cost of capital and thinking about our debt.
And with that cost the debt might be for the risk profile of the business is now profitable at 12%.
I think the listing happened one day and it's hard for me to say, if it's 20.1 2022 or.
Sugar and frankly for us that's not.
Focus the focus is execute the business thinking about the cost of capital of the allocated to this massive business and how to be accretive for shareholders in order to bigger monsters.
Enterprise into an industry, that's bigger than us wine.
Or bigger than the newest beauty and personal care those are big big number.
Number isn't the big industries that have been around for generations.
And we believe our relationship with the consumer effectively has been around for generations, we know it.
And thats the opportunity to execute into and we are a participant in what's happening or watching what's happening, obviously, you're paying tens of millions or hundreds of millions of dollars in taxes.
Not.
Going unnoticed.
So it's just a matter of time setting ourselves up for.
And credibility or whether it's high quality us institutional capital into the business or paying taxes.
Having profitability.
The industry now is a single operators really are the us Canada industry to make it.
It's still obviously that that should be less but.
Because you know we are.
This is USA in America first in a bigger way, there's no reason to transfer the wells to another country for the cannabis bid so native here.
So we just focus on the day to day execution of the business to deliver the product to the consumer.
Tumors that want it and we.
We believe changes coming we know changes happen, but I again.
No symbols, the timing and safe.
And what's going to happen in the release Bill.
Senate does is just too many variables and too many paths for us to speculate on and will focus on what we can control.
That makes sense and I appreciate the color there certainly seems obvious to me for for you guys to be published in here, but anyway last question for me I like industrial and on Illinois, given the very impressive growth we've seen there so.
In the press release, you guys mentioned that you completed the initial phase of construction at the old will be.
Facility.
I know you guys generally don't give much state by state.
Information here, but could you provide any color on how big that initial buildout is or perhaps give us a sense of order of magnitude how much further you can expand before reaching your square footage cap and then.
Any comments on timing was partially Alberta.
Yeah, Great question, Thanks, Eric and feel free to talk to the first part your question feel free to talk to anybody about that belief that we should be lifted because more education that occurs in the industry with all kinds of participants the better and you've done a great job. So thank you.
We don't we don't give a lot of details about what's going on in Illinois. So.
So.
So the more we got more coming and we have plenty of room to go bigger.
We are focused head down on what we do within the building to optimize the product in order to make it for the consumers so that.
I'm not worried about the Rex cap.
We know about the unlimited medical now we have to.
Two sites.
The business at 100 million now right on last month, we see going bigger very simple to see how big Illinois could be whether you go crazy and use Anthony's numbers, a 200 million a month in Colorado the numbers get very very big very very quickly.
So even like the $3 billion number for Illinois, and we see those dollars being invested.
The Illinois being very accretive for shareholders in terms of the one dollar on the balance sheet that becomes many dollars of EBITDA or some dollars EBITDA doesn't become a multiple in the equity value.
Enterprise value.
So we're focused on that and there's plenty of room to grow the welcome you and anybody else from poor.
Your next question comes from a line of Pablo Zuanic from Cantor Fitzgerald. Your line is open.
Good afternoon, everyone.
Could you just talk about what you're seeing in terms of your expectation. So close on direct sales will start in on average just taking about two years from a ballot approval in other states of course again noise exceptional six months on just brief.
We introduced Pennsylvania.
We the Democratic Governor there and Republican Legislature, there's talk that a compromise would be to implement Rick how the state owned liquor stores sell rate kind of risk how do you think about that thanks.
Thanks to our great question and I appreciate all the work you're doing well.
In terms of Opex. The PPA wanted and then Anthony maybe hit New Jersey.
Cutting to the Chase, we don't think Thats very likely.
We think the regulatory per state owned enterprise, where leave that to our friends up North we think the regulatory structures that are in place can protect the integrity of the industry or wireless service.
Three tier or other sorts of things, it's about inventory impacts.
Right, making sure nothing leaving out the back door and there's a tight inventory tracking system see the sales you know and everybody knows DTA is within the hearing other states that whether it's with Biothrax how that works.
And track the inventory.
We don't see a lot of upside.
That.
And so thats not only with us, but we think it's a lot about how the sausage is made here as people become educated in the structures that might work and might not work.
And there's a lot of discussion.
A lot of progress to be made.
So obviously bullish on PPA, we continue to invest in the market we continue to open stores.
Third the consumer.
Tumor and the Pennsylvania market in the two inpatient now massive opioid problem.
And it's really a pleasure to operate in that state and I'll, let Anthony talk about Undeterred.
Sure.
So probably a question.
Look it's really hard to say how quickly the roll on New Jersey watching take place, Illinois.
Took took about six months plus or minus in that was very very fast.
I will tell you it feels like there is it just a touch momentum in last night and Carbonite there on a bed reading kind of latest summary of one of the bills that seems to be getting internal mentioned within the state.
And look I think they see the writing on the wall they want to be a first mover in the northeast.
And and we see an opportunity to take advantage of.
You know of that at that time.
You know an average I guess, we've seen different markets take as long as two years, some shorter and then depending on.
The thing that they'll enjoy talking about yet is how are the local municipality is going to play.
<unk> role in that and once they set up the regime, how quickly can operators actually get to market right you see the situation in Massachusetts, where clearly the number of retail stores that have opened up in the last few years the lot with Lotte.
Lower than anyone would have initially anticipated heading in.
But hard to say I can tell you there is a lot of momentum in sales.
And I wouldn't be shocked if at some point next year the program good luck.
The teams are follow up thats good okay. Thanks.
Revenue for temporary growth in the fourth quarter, but but just remind us that new capacity that came in was that like in early July or late September because you would still have a big benefit of new capacity.
The fourth quarter.
Utilization in the fourth quarter right can you give some color on that thanks.
Yes.
Most of the quarter was there because the orders on the last quarter to say Hey, we got all these things coming that's been all that pre capital investment.
Yeah, obviously, the only turned down in the last week, there will be inorganic growth.
The store.
Your next question comes from the line of Michael Lavery from Piper Sandler Your line is open.
[music].
Thank you good evening.
Michael you question, you've talked about how important brand equity is and obviously as the category evolves, but that'll probably keep growing in importance can you give a sense.
So what if any metrics you look at in terms of of tracking that is.
Sort of a any loyalty measures or or price gaps and price premium pricing power you know what.
What is it that you look at in terms of understanding how you're building equity with consumers and and how sticky that might be going forward.
Thanks for your question, something we really focus on that and the insights and certainly having a portfolio across the country.
The 50 open stores, our consumers and medical but.
You don't really like to talk about those sorts of specific metrics that brand traction brand loyalty.
No sell in sell through.
And we're studying what consumers are saying how the ceiling.
Talking to people collecting data.
Isn't isn't there is extreme power in the data that our business is building and collapsing.
Okay.
The consumer business.
Often through businesses that are in late stage or maturity or wherever we rely on data for decision, making the same degree.
At here.
A lot of traction that you know at the end of the day, we want to be making more consumers want more if they want more dog Walker they want more rhythm premium flower.
Lumpy.
Michael.
I feel better without a solid sales and we can feel it.
And we're pleased with where we are but it's not a done deal sizes is kind of no finish line situation as we build and cultivate that relationship with this consumer.
As they evolve and get educated experienced this product.
Anyway.
What was the truly happening here is a new experience across the American consumer.
Right.
We present, both for the product is not most anymore, who land where.
And I think that we needed welcome to the spotlight of it and the data for everybody to see as it matures.
And then.
Okay. Thanks.
Okay, and just a follow up on the same store sales growth you called.
Got a couple of drivers there is obviously very very strong little.
Little bit of a clarification, but included in this when you talked about the comparable sales growth.
Primarily being driven by increased transit.
Surgeons is that the number of transactions similar to the to the foot traffic you'd call out in the sequential gains or that increased volume of stuff.
Size of transactions, where it where they're getting bigger or is it possibly both and just.
Curious about that what what you point deal with some of the key drivers is is it.
Gains from illicit trade is it share from competitors a bit of both what how do you think about where you're sourcing there.
Yes, great question pretty based it's the former Anue facility.
Further more transaction.
What's going to drive it to the ticket size or number of tickets.
I think as much at all.
And.
I actually see more ticket.
Which is more people.
In evolution of the ticket size and certainly the pantry loading in March and we've seen that spike in seen it come down maybe hadn't hit the pre corporate levels.
Sales will be different but not that their marching back there slowly.
In versus the air traffic control.
The.
The.
So.
Your next question comes from the line of Graham Kramer from <unk> Capital. Your line is open.
Yes, hi, good afternoon, and thank you for taking my questions I wanted to follow up on the call.
Comments made earlier in the call about building a bigger boat and I understand there's been an intense focus on green come on allocating capital to opportunities with the highest return on and also really running the company.
Like you didn't have to raise another dollar there are some questions earlier on the call with respect to Illinois, So that appears to be.
Really really talk the western on capital priorities, but as you look at everything going on in the existing portfolio and then what's going to happen in New Jersey, and what might happen in places like New York and Pennsylvania wanted to get more color in terms of maybe go down out West how you make the capital decision from there on out outside of what's happening in India.
Illinois in the short term here. Thank you.
Yeah, the decision on capital allocation and what's that based on where the market is.
First mover market opportunity whats the licenses are where we can put this is really a return on invested capital gain that we've been talking about for a long time.
Everything's on the table or constantly playing the game on where we can get the highest returns than most protected way there.
As a massive green wave going on here. So we don't want to have our head down too much we ought to be watching whats happening everywhere. So you know we're studying we're learning.
But the basic principles of capital there. So if we can put 50 million and.
Into something.
What that is equal in terms of.
Just like EBITDA, and what year at what rate and free cash flow when and how and what does it look like against the competitive set or the inevitable. You know we don't know we don't know.
And so worried all the time about disruption or something.
Sales and so we're focused on building our brands and our relationships with consumers, which I think were doing when the beginnings of the that's the value overtime to the portfolio.
Thats really what drives the capital decision and as accretive opportunities and great things not just in Illinois, Pennsylvania, New Jersey, Ohio.
And other markets.
The country, none of this would turn on the retail thing cut off or something.
It's really more tickets more consumers coming in the one thing I would say about that it's been unique as people buy more unlike consumer staple like for the paper that last year twice as long as we buy twice as much people buy twice as much candidates or they have more cash.
Profit they consume more.
That's not a bad thing for the business.
We don't think that that's into the consumer but there is a fact that drives velocity into the stores and so we're studying that to your question on what's driving that opportunity with tickets over transaction price for used units, but we're watching all of those in order to serve the customer.
And on the best way possible.
Thanks.
Okay and then just just a follow up question here regarding the continued scale then Tom with respect to the normalized operating costs, which had a very minimal change quarter over quarter. As you look into into next year on having even more states or the sales getting even bigger.
As that are we at a point here, where the business is sufficiently scaled up from operating expenses by things or will there be a need to add on more of that housing.
I think as we continue to grow and more market continues to get our market. Thank you.
Sure Anthony here, yes.
My comment about building a bigger boat coordinated.
Yes.
The team.
In addition to the infrastructure.
And.
I don't think we are still kind of building out.
Both the retail and wholesale pieces of our business and the business grows the complexity grows.
Any opportunity growth, so I think what you'll see from us.
We will continue to invest in people, obviously the right people.
We focus on cautiously decent business operators.
Just trying to run a good business. So I got you know at the same time, we kind of kind of underwriting decisions from the ground up basis without kind of saying to ourselves hey, the targeted tax.
That is so it's not like we're sitting here, saying, okay. The you know the yesterday in Q2 of 2021, you know should approximate you know X y or Z you can't do that the business is it moving too fast.
And there's a lot of verbal changing around us. The one thing that we are going to continue to do investment teams.
Now I'd to build the June so that we can execute on the opportunity ahead of us that we know is just massive.
So I would expect to see that that gross number increasing on a relative basis.
Quarter after quarter.
And a lot of that has to do with.
Caught one certain facilities turn on.
Or how quickly we can find additional team members that broken ground in order to help help.
Help grow the Savage, though to go down.
Your next question comes from the line of Aaron Grey from Alliance Global Your line is open.
Hi, good evening, thanks for the questions.
I'll add my congrats on the quarter.
Just want to add onto a question addressed earlier in terms of obviously the capital and what states that will be enough trythree allocated to our one state in particular in Florida, just given you just recently opened up.
Another short I want to first launch of opening and about a year. So just wondering just given.
The regulation the same.
There being no wholesale market are there any plans for any type of cultivation expansion the state.
Or any additional store openings, just kind of specifically focused on Florida. Thank you.
Sure Great question anything here look we are moving to annual report a magnet for the market may not sound like it but but we are.
Our.
Look I think if you rely on you know call. It nine to 12 months ago, we had some very difficult decisions to make and it all came down to return on invested capital.
We effectively we looked at our portfolio.
He had to we had earmarked dollars or perhaps could have been earmarked for Florida even out.
Payment services. These are results of the business.
I think as we look ahead to Florida, we continue to do the work we continue to access it is something we talk about on a regular basis.
But again here, we are now that new Jersey past.
You know call. It last week that adds another layer of complexity and so as we sit here in.
Our shoes in trying to allocate capital the cash to shareholders.
We're constantly reassessing the chips on the table and looking at them.
Well, we're bullish on the Florida market, we've seen the growth we see some of the third performance Assembly operations down there have and it's impressive.
And I think for US what we'll do is the discontinued.
As such it will.
Week after week month after month, and if it makes sense and we'll go ahead and pull the trigger but right now I.
It would be premature to communicate anything as it relates to income one.
Okay, all right great. Thanks.
Second question from me then.
Obviously trade is something that's still hundreds you on the other operators out.
Just as we think about you guys getting more and more profitable and the impacts on free cash flow specifically between retail and wholesale can you talk about the impacts that treaty might might have on the differences between the two and how having more sales flow through at the retail or wholesale could impact the free cash flow you guys gave versus that which are detailed on the on the tax.
Thank you.
Sure. So look obviously as it plays a role and within the business and.
We've been able to.
Obviously now that now that we're cash flow positive and paying big big tax payments outperformed and the nice part is we have a business that.
Yes that generate healthy after tax free cash flow.
In terms of the impact on the business.
Look obviously, the retail is a bit more punitive.
Yes, and so on.
Just sit here and say that that doesn't play a major role in how we kind of run the business. It's something we're watching something that he understands that.
We do see growth of X y or Z within the retail versus wholesale side of the business the impact that will have.
You know from a cash basis, but bullets here, we are setting and it's not like a situation, where we don't have the dollars.
On a pre tax basis to pay the tax.
So we can keep our foot on the gas is still generate help.
Healthy after tax cash flow returns to the shareholders and we'll continue to do that.
Your next question comes from a line of Andrew Carbonneau from GMP. Your line is open.
Hi, Thanks for taking my questions and congrats on the.
Credible quarter guys.
I wanted to just talk a little bit about new Jersey as the war.
Within the enabling legislation that Thats currently going through state Congress, if it gets passed.
As it's written I.
I believe there is there is a certification process where operators need to.
[music].
Certify that they can meet existing medical patient demand to the state before serving rec customers.
Do you have any color on on what that is.
Sales and so.
Moving.
We're at the point, where wrecked sales start to New Jersey do you think.
That could impact.
Pricing in Massachusetts at all.
Or demand.
Yes.
So good question.
I think the details of the certification.
We are still a bit Canada's indigenous.
You know what be the supply demand imbalance will exist for a period of time how long.
No one really knows there's just too many variables to kind of mature put your finger on.
[music].
I didn't fully understand your question about the impact in Massachusetts in New Jersey. So maybe if you could just kind of.
A little bit more light there.
Thanks.
When when new Jersey wrecked comes online.
Perhaps there might be some customers that shop in Massachusetts, I would prefer to shop in New Jersey.
Or.
As there could be any any impact at all.
Sure.
To the Massachusetts Rec market as a result of New Jersey were coming online.
Hey, this is Ben.
Further than just boil real simplistically.
At this moment in time.
You know this is water in the debt.
I wont be that way forever.
Right now yes.
Pricing as a result of new Jersey coming on line.
The amount of risk factor pricing broadly as I mentioned is a constant.
Risk factors, something we're thinking about how to do it but all the supply in New Jersey and then some.
If needed.
Heavy on the and then some.
Because anthony's bigger boat is needed.
Because there's a huge amount of demand on the east coast.
Can definitely recognize that with the underserved market in New Jersey.
Maybe switching gears and talking a little.
What about the health of the consumer.
You know and have you seen any kind of trends.
Like a shift in and more purchasing of value products.
You talked about the number of tickets increasing.
What about.
Returning customers how how.
Sales of.
Their purchasing patterns.
Changed or perhaps not changed over the past several months and particularly in Illinois or any other state that you would like to call out.
Are there still purchasing restrictions in place and when do you think.
That come to the end.
When we think what can I just missed that last part of your question sorry, Andrew.
Any purchasing restriction that could be in place, particularly in Illinois, or any other state that you'd like to call out.
Well I mean.
Purchasing restrictions.
What I would call. It really you know sort of opportunities for retailers to sort of serve more consumers in a place where there's really not enough water to go around.
So you know what's happening in the consumer basket has been pretty steady.
On like what happened last year sales vacate.
The m. repeat what consumers really should see quick away from vapor vaporizers, and innovate and and then I understood quickly after as I think the media and everybody did a good job educating folks that it was true.
Untested unregistered pen.
That we're making.
Can be within not legally consumer react the bat, we thought maybe consumers would go away from.
Mobile given colder than in the respiratory element and as we said before that did not happen.
And I think what's really happening the bottom line to the core of your question is more people.
Our continuing candidates.
That translates the category growth across the board.
And the nuances, while very interesting important.
An incredibly.
Detailed a lot happening core concept is massive new adoption by consumers and management.
Or consumption by those consuming.
So.
The respond pretty heavy.
And we're excited about that opportunity.
Your next question comes from the line of Matt Bottomley from Canaccord Genuity. Your line is open.
Good evening, everyone. Thank for taking the questions. This evening.
Okay, and then can you describe a little bit for that.
That was very rough rough figures.
5% of that rebounding in order to do that and then there were some thoughts.
I think Dave mentioned in the press release, the other 75% of one that we haven't really changed it on this call in Ohio to.
So given that there is.
More of a.
Capterra on the retail side can you give any dynamic going on.
Your ability to carve out.
Better market share there, whether it's wholesale channel for just other dynamics in that market with respect isn't about where Ohio might ranking and where you're getting your car market.
Yes.
We love the Buckeyes sales.
The.
What we've seen the movie before.
They are pretty transparent with what kind of data is going on there.
And.
The 10 million plus person thing.
Revenue flow.
And we know what.
That demand on those consumers looks like we're excited to have the maximum number of retail stores open we've got great market positions places like Lakewood Ranch.
Brain Toledo unbelievable team out there.
So we're excited about where that stands and we'll be putting capital into Ohio.
Will drive really sort of high level too.
Only 22 and beyond.
So.
We'll stay tuned.
All right and then just a follow up question on one of the other part.
Sort of anecdotes you gave with respect to Florida are there any other market and one that that data.
Notable is that just sort of look through where your exposures as maybe California, where that's not where a lion's share of the capital allocation is right now, but a lot of.
Different MF those and other operators.
That are much more capital constraints and you guys seem to be going there are supposed to wider so no is this an opportunistic time.
Hi, guys start expediting capital allocation in other markets are lining up everything you may going to be doing in new Jersey.
Core markets still have very high growth rate is that something that again would be.
Make a nice to have.
Nothing is focused on right now and any anecdote another market that you think.
That makes sense in the nearest term here would be it would be helpful.
Sure I would summarize it by saying everything is on the table if it makes sense.
And we are watching a massive green wave transform this country and create the next great American growth industry.
So it happens everywhere because people.
People are everywhere.
And we understand the supply demand by those markets and see this greenlee. We are studying we're watching we're playing an ROI fee game in order to grow the chips for shareholders approved back in the game.
Understand whats happening, we love our current portfolio broadly east of the Mississippi.
Everywhere, we love.
We see the flower shortages happening there and then just watching what we call internally the state of the state.
And you really.
Really watch the growth happening across this country.
It's quite tremendous and were excited for everybody else to eventually wake up.
Your next question comes.
From a line of Mike Hickey from Benchmark Company. Your line is open.
Hey, Dan Anthony Jennifer Andy Congrats on the quarter guys the poor performance.
Well done thanks within the end here.
I guess just one question.
Nine.
I guess, it's still early days Green, which is building, but it's going to be a monster you continue to scale.
And I am just wondering how you think about sort of the cost structure of your business between C.
BG and recall that.
You can see anything.
Long term hung in there between those two.
If you think over time.
Maybe there's benefit to separate into two separate companies. Thanks guys.
Great harmony there.
The one good one equals something bigger than five.
And we're focused on building our brands and the relationship with consumers. So that's about being where consumers are not under.
Understand the market and investing in those two businesses.
It's a different kind of business with over $4 million in building the platform than it is to put $50 million in the state of Pennsylvania in order to build supply and make mass consumer product sales to be distributed across the entire sales.
Well both those businesses.
My.
My job and the team to support those two businesses build teams this and make sure that those folks to go execute it's about optimizing distribution channels.
Getting dog walkers to every consumer that wants them.
Very easy message and by the way it might lead to a nice evening.
At home.
Try for yourself to serve the message and we watch what happens and isn't that a pleasure.
To own the booze and the bar is.
It's quite simple as the scene thesis from day, one and we continue to optimize those and what we can do to unlock shareholder value in the future.
That's what keeps it exciting and.
Fortunately for needed I get to think about those sorts of things.
We believe we are just getting dawn.
Dan the scene.
I think we're talking for a couple of years now. This is the most buyer that I think that for you.
I mean is that a quarter is that politics is that the growth in front.
Would you like whats really driving I guess your.
The sales and looking to sort of meet up here on the call.
Thanks, Tim.
To be tempered, but from.
Tidal wave of demand we've been talking about for six years in a row.
And it's helping people feel better.
And make me excited to help more people feel better through this.
Or another and then what watch comes out is these numbers.
Again like I, just got a bang the table on this is a new story.
Still misunderstood in the media.
Literally like the wrong ticker symbols around TV.
And I don't think the average consumer is understanding how to.
Probably advantage of the American story here.
For all of us and fired up about that.
And were fired up about the tens of thousands of people that we can help.
And really like Big picture small picture.
And the team came on.
Key buyers, we up because you've got to do with the.
And then making the phone to everybody so.
Your next question. Your next question comes from the line of Scott Fortune from Roth Capital. Your line is open.
Good afternoon, and thanks for the questions real quick just want to follow up kind of strategically been around California in the market.
John you've seen 31 million fatalities come onboard now to to really start opening up legalized.
Campus here in the state.
But what's your thought around brand.
Your focus Keith in Mississippi, but coming from California, and your strategy in California to gradually build that out with your brands is from a.
In term perspective.
We are studying that very very closely we have been for a long long time.
They are just because it's the biggest doesn't but that might be the best way to lose money that may be a backwards looking statement we hope.
And we are studying the cost is obviously.
A lot of big presence in Nevada, and Las Vegas.
A lot of course geographically, we have licenses in southern California, We plan to execute on and we are watching the entire supply chain of that market pricing participants brands retailers.
And every part of that supply chain.
The team.
Thats a really good job.
Okay and then last question for me can you provide an update on kind of the number of stores that you're you're serving at one point about 700.
Yes, good 33% quarter over quarter, CPG growth, but it sounds like that mainly come into throughput in your existing store.
But where are we as far as an inflection point in time production into actually.
Getting more distribution into a higher number stores whats that level at if we have a number.
Yes. Thanks.
Revenue for the what I would do the way we look at it really is how penetrated by state so when.
100% penetrated in the state it's impossible to grow the doors.
90% of its not like Theres, a lot of opportunity out there for new doors as many of the states that that dominate.
Our portfolio, whether it's Illinois.
Pennsylvania, Maryland.
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So.
Thats not the best measure I can give you.
Until they become more stores and we plan to continue you know in Illinois get 75, new stores out.
We plan to have product in the doors, there and as new stores opened its important for us to have product on the shelf for those consumers.
Your next question comes from the line of Andrew assembled from.
Sean Capital markets. Your line is open.
Hello, Good evening, everyone and congrats on yet index.
You had another excellent quarter.
Thanks, Andrew.
So my first question is just on the balance sheet.
It appears to be in great shape.
When you look at debt of about 100.
And and you compare that to about $50 million of EBITDA being generated this quarter.
And that figure is obviously growing.
Quite quickly.
It would appear that there is capacity to add leverage.
What's your thoughts on that on on potentially looking at a debt financing to.
Accelerate capital expansion project programs where else.
Accelerate your M&A pipeline.
Where you see the accretive opportunities.
And if you had any comments on whether there's anything holding you back.
From pursuing.
Debt financing.
Right.
Then I can is that a little bit I think we mentioned how accretive it is and what happens with the cost of capital as you know and I think everybody knows the depth of capital markets and use cannabis is not deep.
We even forging new ground for two and a half years publicly in five six years privately.
So.
You know somebody would like to refinance our debt at 6%, we think our interest cash cost would stay the same as we borrowed $200 million and we've put our money to work for shareholders and create huge amounts of equity value and we're ready to go.
But we're also very careful our partners are.
Who approach.
We are examining everything on the table and I think I think I've talked to kind of where the best places are like this for shareholder.
Appreciate the non dilution.
Not.
That we need to raise equity capital and just with kind of.
Besides that we don't need to raise the capital there are attractive ways.
Bottom or measuring that all the time, we're being prudent stewards of that capital and as cost of debt goes down or refinance opportunity becomes interesting.
Thanks sales Comex just my next question.
And speaking about putting a shareholder money to work.
We're ending.
It is nearing the end of 2020.
Was wondering if you could perhaps clarify.
What's on the agenda for 2021 in terms of capital projects and.
What your overall capital budget for next year might be.
Yes.
No surprise I guess just one.
The real high level on Capex, we spent $100 million.
During the 19.
Spent little over $90 million so far this year.
And there's no reason to slow down I would look for us going bigger in 2021.
And no surprise on the list of where that capital is going.
I rattled off and we have great opportunities and we're excited about.
Yeah.
Your next question comes from the line of Glenn Mattson from Ladenburg. Your line is open.
Hi, Thanks for taking the questions great quarter building on that last question about capital.
Last quarter, you know a lot of capacity came online.
All at once and really.
Created this surge in revenue subdued you imagine.
More uniform or should we expect kind of stair steps.
Increases in capacity next year.
No it really depends so EBITDA here the rig.
Retail is easy that's more kind of linear just given kind of the.
Given the.
The spend there per store and then wholesale hereditary lumber right.
Now as we kind of do a lot more facilities, we optimized our build out even more efficiently and so I'd say the size of our best get bigger because our confidence.
I don't think that'll that'll change much on a go forward basis.
One more quick one.
Hopefully by spring this is an issue anymore given.
Various vaccines that are out there everything but it appears to me.
A significant increase in KOVA cases out there.
I've been doing this once before the industry and you guys, then very well through it but what do you make any plans or contingency.
As or.
How do you prepare the business for what could be.
Any potential disruptions.
Winter related.
For sure we don't expect the unexpected keeping team ready for adaptability.
And invest in the team so so.
Only mis procedures as Sophia adjusting TPV.
The split shifts flexibility testing them check all the standard stuff that was new before when we invented it added everybody across the country and all over is now in the playbook part of the SLP.
You know, it's unfortunate we got to kind of ramp a few things up in different levels on different facility.
But.
So thats where were at and we will.
While investments in people say.
But the plants don't stop.
And the consumer wants the product and that motivates us so we've got to be safe.
We got to watch what's going on in the building.
But we continue to operate.
Your next question comes from a line of Russell Stanley from.
Beacon Securities Your line is open.
Hello, and thanks for taking my question I guess, the first one with respect to Illinois, Pennsylvania, I understanding your comments around water and the guys are but just wondering given that given a supply expansions, we brought online and in your peers, having some of your peers, having machine sales have you seen any.
Any any evidence of supply shortages or tightness easing at all that whereas the race between demand and supply.
Where does that work now relative to where it was three to six months ago.
Both.
October in Illinois is way better than January without a doubt there is flowers many operators.
Turning them online, we are $100 million versus whatever was out of the gate.
And 25 in December.
PA has pockets of tightness in a high quality power remains in demand.
So there's ebbs and flows.
That comes online effectively doesn't go back right there before that stair step.
Function. So once the supply comes on it there theres more to go there is more to go there is more to go.
But better now.
Anything in any of these markets and with each year continues to get better. The thing is the consumer base gross brandloyalty grows.
So it continues but it's not a dire situation.
And.
Illinois, the way it might have been in the beginning but.
But there is still a massive unmet demand.
Excellent and just as my follow up I wanted to clarify something you said earlier with respect to Nevada in Massachusetts, and the depth and Sean those markets have you.
Fully returned to pre co venture.
Levels in both of those markets I know you mentioned a lot of recovery, but just wondering if you if youve crescent above water, if there's still a little bit more.
More to work to be done there.
Yes, I used that quickly address the each one of those are above pre coded levels pockets of strength opportunities within each what's happening but.
Sales of state air above and growing.
Your next question comes from a line of Howard Penney from Hedgeye. Your line is open.
Thank you so much for the question as institutional investors continue to come into the space and detailed looks to attract those institutional investors have E content.
Added, giving long term targets too.
The growth in revenues EBITDA profitability, whatever you think might be team.
I want you to contextualize your growth relative to the industry. Thanks.
Hey, Howard Thanks, Ben if I thought we thought you thought that that would mean.
Putting to change in the capital markets sure, but thats a non factor, it's not that hard for the underwriting to happen here, it's not a portfolio manager gating item here, it's a compliance officer gating item.
So the investment case is there.
This is very very simple.
We see massive growth.
Rarely get anywhere what's happening in our profitability and cash flow and all the other kinds of.
Nothing not about future targets as easy to see 20% compound annual growth for industry to be bigger and businesses growing over 100% plus included in others, but thats, a massive opportunity and whether you're right.
Value GARP.
Gross.
You can find pockets of amazing opportunity here, we are seeing that.
But I don't think targets.
I would add to that.
Thanks for the question.
Sure. Thank you.
And there are no further questions at this time bandwidth.
Call back over to you for some closing remarks.
Sure. Thanks, everybody I know, we've got a little long.
We're excited about what's happening here for everybody to see.
The business is in a good spot there's not a need for capital where there is a great use for capital we're on that path to over $1 billion in sales and the world wakes up to use cannabis opportunity.
We were excited to feel the privilege of this happy veterans day to everybody safe holiday season, and we'll talk to you in March thanks, everybody.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Hello.
[music].
Yes.