Q3 2020 Green Thumb Industries Inc Earnings Call
At this time, all participants are in listen only mode.
Question and answer session will follow the can.
Just a formal remarks during the question and answer session. We will ask for a limit of one question and one follow up question per person.
As a reminder, a live audio webcast of the call is available on the Investor Relations section of Green Thumbs web site and will be archived for replay.
I'd like to remind everyone that todays.
This call is being recorded.
I will now turn the call over to Jennifer Dooley Chief Strategy Officer. Please go ahead.
Thanks, Rob Good afternoon, and welcome to Green thumb third quarter 2020 earnings call I'm here today, with founder and Chief Executive Officer, Dan Cobler, and Chief Financial Officer Anthony.
You need George on it today.
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.
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 the discussion greenbaum will refer to non-GAAP financial measures, including EBITDA and adjusted operating EBITDA.
A reconciliation of non-GAAP financials.
To the most directly comparable GAAP measures is included in our earnings press release and FCC inherit filings.
No.
Note all financial information is provided in us dollars unless otherwise indicated thanks, everyone and now here's Ben.
Okay.
Good afternoon, 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 of promoting wellbeing through cannabis a viable and credible reality.
Amid all the uncertainty Green thumbs mission.
Strategy and execution of our enter open scale playbook remain our north star as this combination delivered strong topline growth and.
For the first time since we have been public bottom line profitability.
Following a clean sweep of Ken.
This legislation measures across five states the green wave is big and real.
In fact, it's like a tidal wave as consumers demand cannabis for wellbeing.
People want a natural alternative to dangerous opioids.
Chemical pharmaceutical.
Goals 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 climates warm up to this tremendous new industry wellbeing through cannabis.
Canada 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 cannabis industry is becoming a significant contributor to both federal and state account.
Contemplates through job creation and tax revenue.
And in response to the capital markets are continuing to open up with a greater inflow of quality 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 Canada.
Thomas.
The us candidates industry is rapidly evolving into an estimated $100 billion consumer package goods category with projected annual growth rates of 20% for the next decade.
That makes Canada is larger than the us wine and spirits industry.
US confections and us beauty and personal care to give you a sense.
Five years in the legal cannabis in our home state of Illinois.
And only 10 months into adult use here industry wide, Canada sales for the state are approaching $1.5 billion on an annual.
We will run rate basis.
Yes.
Illinois adult use grew double digits, the month of October and over 330% year over year.
Thats impressive growth, but amazingly nowhere near the top.
We began shipping from our second production facility.
Billion, 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.
We have eight open 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.
In a divided country, we are United on this issue.
In the Green waves Americans voted in support of cannabis, Mississippi opens up for medical use and South Dakota, Montana.
Arizona, and New Jersey joined the adult used 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 person state in a densely populated east coast region raises.
It takes for Nabors to follow the adoption of adult use in fact after the New Jersey vote Governor Cuomo called on New York to legalize adult use in 2021.
We have one of the 10 licenses in New York.
In Connecticut Governor Lemont is also awake to what's happening around him in New Jersey and.
The Massachusetts as he expressed interest in adding adult use on top of a successful medical program in 2021 as a reminder, we have one of the four licenses in Connecticut.
And in Pennsylvania, Governor Tom Wolfe is urging legislators to legalize adult use to provide a new revenue stream to aid its economic recovery.
And and restore social justice.
Pennsylvania has over 11 million people, just like Illinois, and his legal cannabis 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 rise store in the state and our 49 stores 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 25 stores for the quarter.
It 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 for those of you that remember that compares to 8% on a base of 40 stores last quarter.
While we work to optimize our brick and mortar presence. We continue to think forward about the future of cannabis retail in this evolving digital age.
Whether physical.
Coal or virtual we are committed to delivering superior experiences for our consumers.
Our brands are now being distributed across 11 states coast to coast.
These are states, including California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts.
Nevada, Pennsylvania.
And new to the list in the third quarter.
Strong Pony is we have a lot of faith in.
Hi, Oh and of course, New Jersey.
Collectively this is roughly 130 million Americans or 40% of the population of this country.
As we have as we have always contended distributing brands at scale is the key to strong organic growth and we love our brands rhythm Incredibles dog walkers vivo Dr. Solomons. It is really about the connections they are forming with the kids.
Tumors.
This quarter Incredibles launched news Barry a gummy aimed to help the millions of people struggling to find that good night sleep.
We're very pleased to hear the positive feedback so far as Americans across the country reach for the stores.
Consistent growth and opportunity there is growth and opportunity across our our platform.
Our team continues 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 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 king.
Online during the quarter in New Jersey, Ohio, Illinois, and Pennsylvania.
As well as the bounce back in Nevada, and Massachusetts.
Our growing scale drove operating leverage and nearly three X revenue an eightx adjusted EBITDA year to date compared to last year.
These results are the outcome of continual investments and 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 green thumb, we have two highly complementary businesses that presents a tremendous opportunity for outsized growth overtime right here.
In the United States.
And 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.
Year to review, our financial results for the third quarter Anthony.
Anthony.
Thanks, Ben and good afternoon, everyone.
Before I begin I'd like to thank all those who served as without their sacrifices we would not be here today.
As you just heard in the third quarter Greenspan posted record quarterly revenue.
68 for the first time in company history positive earnings per share.
Performance it truly speaks to the breadth and depth of our team as well as our daily commitment to excellence.
In the backdrop of this financial performance, we cannot ignore the macro trend that is unfolding before our eyes.
The tidal wave of demand the Ben has been preaching tuition.
In years with fully on display during last week's election.
Our key takeaway as a management team.
Build a bigger boat.
The Green tsunami is on our doorstep in the walls of prohibition or directly in its 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, and Massachusetts to pre Celtic levels.
Gross revenue for our consumer package goods business CPG grew by eight.
$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 in sales.
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 Q.
To just slightly more tilted towards CPG.
As a reminder, the difference between gross and net is intercompany revenue, which approximated $30 million in Q3 and 24 million in Q2.
During the quarter, we completed our wholesale facility expansions in Illinois, Pennsylvania and Ohio.
Hi.
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.
There 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 are Whitney.
Missing the true potential of our platform when combined with solid execution in highly attractive limited license markets.
Below the gross margin line, our SGN, a $50 million was essentially flat to Q2.
Excluding DNA and stock based comp our normalized operating costs totaled $34 million or 2 million.
Better than last quarter.
It helps with the same quarter, we increased cash operating costs by $2 million, we increased revenue by $37 million.
Other expenses for the quarter approximated $2 million, which reflected a favorable valuation adjustment to our strategic investment portfolio as well as interest in war.
Dollars expenses associated with our senior debt.
Net of these expenses the company generated $39 million in pre tax income and over $9 million net income providing our shareholders with its first positive EPS at four cents a share.
The company also experienced significant improvement to its adjusted operating.
And a good da 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.
Sure.
Lever our balance sheet, we ended the quarter with $78 million in cash. This is 4 million less than last quarter that the company made substantial payments dunkel, 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 infant.
Moving to build out our highest cultivation license.
On our public float 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 Q.
Foundry in year to date financial results.
Looking ahead, it's impossible to ignore the opportunity ahead of us and I'll leave you with an interesting data point.
Colorado that the population of just under 6 million 80 million annual tourists is now averaging over $200 million of cannabis spend per.
For months.
It's an annual run rate in excess of 2.4 billion.
With Colorado can hit these sorts of numbers in the year since legalization.
What's going to happen in Illinois, New Jersey, New York, Pennsylvania, and others over the next several years.
We agree with them certainly.
And we have our thoughts.
While the world around us continues to evolve.
Many things for us largely stay the same.
As we look ahead to 2021 I'd expect us to continue to do the following.
Lead with the consumer.
Stay focused on markets, where we had been working create edge.
Bill.
Build and invest in our team.
Play hard in play to win.
Last continue to wave that green thumb flag widen high.
Until next time hope everyone has a safe holiday season with their loved ones.
And see you all in the new year.
Back to you then.
Thank you Anthony.
As always your remarks are both informative and colorful.
A rare combination 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 metric down the income statement and a balance sheet that leads to a good night sleep.
Yes.
All that is 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 our 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.
Community engaged.
And environmental stewardship.
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 being people first means listening.
And taking care of our key.
Team customers and communities.
We are very proud of our commitment to those who we serve.
First a profit from all new store openings go directly to community organizations, such as the last prisoner project.
Lows and fishes in Illinois for 12, food rescue in Pennsylvania, and next week to the Florida.
No rights restoration coalition.
With today being veterans day. It is also a timely reminder, to thank those who protect our democracy, our freedoms and the right to choose cannabis.
In November our brand dog walkers and operations 16 20.
Came up to help bring awareness education and support to veterans, who choose candidates as an alternative to pharmaceuticals.
And finally, our main job collectively is to promote well being through the power of cannabis and in doing so create opportunity and long term sustainable value.
For all of our stakeholders.
I want to thank our team our customers partners and you our shareholders for your continued contribution and support a green thumb and.
And everyone. Please stay safe and 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 star one on your telephone to withdraw. Your question you May press the pound key adds.
As a reminder, please limit yourself to one question and one follow up and your first question comes from the line of Lee Cooperman from Omega family Office. Your line is open.
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 in New York posted underneath my picture they referred to be the cannabis king knowing very little if any way first let me congratulate you on outstanding results.
I kind of making a.
Synalloy Gee you know at the turn of the century that we're a very very large number of automobile companies producing automobiles 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 the great CFO that you referenced.
And on the team.
And that we have first question if I can squeeze in a second what does your attitude towards listing on New York stock exchange.
Thank you really appreciate the.
The kind words and.
You know what we're focused on the execution over here you know you're right turn of the century, whether its automobiles.
Loot or prohibition and Weve used the phrase prohibition 2.0, and I believe that history Doesnt repeat it rhymes. So we really looked at history for those lessons and you're totally right.
Theres monstrous consolidation opportunities you've seen probably the industry finished in the US the first wave of consolidation that happened at the capital markets got frothy added calm down.
Sales and you know maybe they'll come back, but there is massive opportunity given how big the sectors. There is no you know, 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're exactly right, where it goes over time. The question is how quickly and when for us with.
CFO with the lens and shareholder capital in you know really shareholder returns with every dollar we spend is when does it make sense.
Like always everything's on the table, if it makes sense for shareholders and its accretive and it depends on lots of factors.
We have a huge opportunity within the portfolio.
But that's not to say, there's there's tuck in acquisitions that are accretive.
And especially as this industry evolves, we can see the field pretty well and we're excited about what's out there and we're excited about the current portfolio.
To the second question on the New York Stock Exchange I think just backing up a second.
Green thumb is registered with the FCC to use security Exchange Commission.
Puts us in a unique spot that includes we file GAAP financials, you'll see the 10-Q in the morning.
We filed eight Ks 10, Qs and Ks gap Stan.
Standard stuff that we have registration with the SEC is currently not enough clarity in the federal government for listing on the New York stock exchange, but I can tell you we positioned ourselves.
Like has been.
With history, even since before we went public to be a first mover in the capital markets and I would describe it as we're knocking on the door, we're getting ourselves ready.
Obviously doesn't make any real sense that the only access on the New York stock exchange as the Canadian operators don't have exposure to us consumers and here is where the monster is big.
Business is.
But we understand that regulatory structure, which creates 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 the US Securities Exchange Commission with really just gives us optionality another tool in the tool box as we've used over history or things like that.
Sale leaseback, all with the lens of what's most accretive for shareholders.
Well you've done an excellent job congratulations im very pleased thank you basically.
Your next question comes from the line of Vivien Azer from Cowen Your line is open.
Hi, good evening.
Evan.
Yes.
So in terms of the on the revenue growth sequentially, certainly better than I was expecting and I was wondering if you could unpack for dimensionalize, the relative contributions from Illinois and Pennsylvania.
Online a little faster than expected relative Q, Massachusetts, Nevada on.
Reopening.
That's helpful. Thanks.
Yes, great question.
Because we're putting on a lot of cylinders last quarter and as Anthony mentioned.
Somewhat tempered outlook versus a 30% or whatever the last quarter was.
But where did that come from to your question lots of factors you're exactly right.
Production turn on in Illinois, Pennsylvania drove a lot, Ohio, and New Jersey, as well new market turn on.
And then two things going in Massachusetts in Nevada is how I would describe it 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 there not been a dip.
But with the dip which is really an April right. After may with that's what we're comping in the third quarter.
There is some factor there.
But really I would say a vast majority probably.
We almost 75% as a result of organic growth in the portfolio versus lapping of coated situation, but thats because the business executed and turned on these things.
I've talked about last quarter it happened to be the third quarter could have been fourth quarter.
With that but that's the big step up.
That's great Super helpful. Thank you.
My follow up then I really appreciate the commentary around New York.
Attractive.
Limited license adult use marketplace and it does seem like the comp.
As Weve ministration really means at this time.
Legalizing it don't you.
I'm curious, though if you have any thoughts around what a potential licensing framework could look like in particular, given the sizeable koby driven budget deficit and stage spacing.
Thanks.
Good.
There are several ingredients of a successful rollout from medical that we don't use and we welcome a conversation with regulators industry participants those who are not yet industry participants 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 winners plenty of ways to when you can say admitted.
In different ways.
However, relying on the operators that can stand it up and deliver that supply whether tax revenue jobs capital to get this thing going it's very big.
And we're here we're constructive has the lot of people are talking a lot of people are brainstorming.
And so we are excited about whats ahead broadly.
Yeah.
Across the sales.
Your next question comes from a line of Matt Mcginley from Needham Your line is open.
Thank you the increase in retail revenue growth was quite impressive, but it was especially impressive given most of that was productivity increases.
Is that.
Broad based across the entire portfolio or did you have specific assets or states, where where it drove most of that and I guess importantly has that productivity held into the fourth quarter.
Sure. Thanks for the question Anthony here.
Obviously, we know historically haven't haven't kind of broken down kind of state.
Okay performance, but.
Ballistic, we what we seeing strength across the platform.
Certain markets, obviously more than others, but.
We have a business here given the limited license markets that we operate in we are bullish on all of them literally so we're in a situation where.
We continue.
We've seen nice.
Nice organic growth same store sales within each of the markets that we operate in.
Turn to Q4, it's it's a little early to speak to speak to speak to that but.
You know, 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 in.
We've been pleasantly surprised by the.
By the pickup that we've seen across the entire platform since the first quarter.
Great and then as far as gross margin I would think that the retail market. The retail gross margin wouldn't be that volatile and that most of the gross margin outside in this quarter came from production leverage it to.
CPG business grows at a faster rate than you reach operation in the fourth quarter is there anything with the mix, Sarah I guess product Nextera geographic standpoint that would.
Prevent you from expressing continued upside of those gross margin rates or.
I guess, how should we think about that in terms of what happened in the quarter in terms of the levers that you saw in gross margin and.
That look into the fourth quarter.
I guess you shouldnt be anything we should be thinking about that could keep that from going up even more.
Sure. This is Ben I'll take that one.
Don't really talk quarter to quarter on how to think about it if the overtime you're exactly right.
Retail gross margin does not have a lot of upside from what the retail businesses.
In fact, it's probably downside slow melt.
The other thing that works against gross margin obviously price.
Less input costs are rising since that's certainly the risk to the models and if you look at our business in your modeling it out just two real levers that will drive it one is which pieces are driving the biggest piece.
How is that production will.
Where are we making the most products.
And then what's the profitability at the places that have the largest profit so product mix and state waiting.
And really we see both kind of slow steady with the constant awareness around price for.
So thats kind.
How I would think about it.
We continue to optimize we continue to think about capital investments that can drive down those marginal cost per unit.
That's up pretty nicely for that sort of exercise.
And if you tell me where prices going I can tell you where gross margin is going but we don't know there's a lot of action within market.
Yes.
And we don't try to play the price game.
I'm trying to serve customers, we certainly cancer patients who are using this profit wellbeing.
Your next question comes from the line of Eric Hillary from Craig Hallum. Your line is open.
Thank you for taking my questions and congrats.
So on a really impressive quarter here.
The first question is a bit of a follow up on one of the previous questions regarding uplisting et cetera over form.
Especially with the with the Green wave and now the 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 GAAP reporting.
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 say banking.
Potentially.
The exchanges enough cover to allow for an uplisting. Thanks.
Sure This is Ben.
Your question is a great question without a great answer.
To be candid I, obviously cant speak for anybody else.
The truth is the situation right now does not have a lot of clarity.
To see ourselves on the doorstep.
With FCC registration I mean, with the US Securities Exchange Commission with a registered offering to sell you a security that I think that's very unique and.
And that and that differentiated from where things were a year or two ago right. We went public two and half years ago plus or minus.
The capital markets have been evolving.
When we see things like banking reform and and changes to this with that screams to me is a reduction in the change in cost to capital. Thank you change me cost of capital reduction.
That's really good for shareholders.
So this thing is one thing but.
We think about things I think it's important as I mentioned.
Sources of capital not just equity.
We wouldnt make shareholders nervous as we're big shareholders without an overhang here business is profitable. It was really interesting about banking change its cost of capital and thinking about our debt.
And with that cost of debt might be for the risk profile of the business is now profitable at 12%.
You know I think listening happens one day and it's hard for me to say if its 2021 2022 or later and frankly for US that's not the focus the focus is execute the business thinking about the cost of capital as we allocated to this massive business and how to be accretive for shareholders in order to big a monstrous.
Enterprise into an industry, that's bigger than us wine.
Or bigger than the newest beauty and personal care and those are big numbers and big Big industries that have been around for generations.
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're a participant in what's happening we are watching what's happening obviously, we're paying 10.
Tens of millions hundreds of millions of dollars in taxes.
Not going on notice.
So it's just a matter of time and setting ourselves up.
Putting credibility.
Whether it's high quality us institutional capital into the business.
Paying taxes having.
Having profitability.
As an industry not as a single.
Operator, really as a us Canada industry to make it so obvious that that should be limited.
Because you know.
We are you know this.
This is USA in America first in a major way, there's no reason to transfer the wealth 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 consumers that want it and we believe changes coming we know changes happen, but I.
Again.
No semblance of timing and safe.
And what's going to happen in the release Bill.
Senate, there's just too many variables and too many paths for us.
Speculate on and will focus on what we can control.
That makes sense and I appreciate the color there.
Certain machines.
We estimate for for you guys to be uplifted here, but anyway last question for me I'd like to just drill in 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 Oglesbee 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 build out is our perhaps give us a sense of order of magnitude how much further you can expand core.
Reaching your square footage cap and then.
Any comments on timing would of course be helpful too.
Yes, great question, Thanks, certain feel free to talk.
To the first part of your question feel free to talk to anybody about that believes that we should be lifted because.
More education that occurs in the industry with all kinds of participants.
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.
Let's say, we built 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.
Not worried about the wreck cap.
We know about the unlimited medical.
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 weather I mean, you go crazy unused Anthony's numbers, a 200 million a month in Colorado the numbers get very very big.
Big very very quickly.
So even like a $3 billion number for Illinois, and we see those dollars being invested into 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 other than become a multiple in the equity value.
For the enterprise value.
We're focused on that and there's plenty of room to grow we welcome you and anybody else to come to us.
Your next question comes from the line of Pablo Zuanic from Cantor Fitzgerald. Your line is open we.
Good afternoon, everyone. Thanks, and just talk about New Jersey in terms of your expectations of how soon Greg sales.
Alright, and on average just thinking about two years from from a bottle with approval in other states of course, Illinois exceptional six months.
Just briefly introduce Pennsylvania.
We the Democratic Governor there and we've already got legislature, theres still going to compromise would be to implement Rick.
State only equal stores, some rig kind of is.
Do you think about that thanks.
Thanks, Pablo Great question and I appreciate all the work you're doing well.
In terms of I think the P.A. one of them and then Anthony maybe hit New Jersey.
To tell you the change we don't think Thats very likely.
We think the regulatory for state owned enterprise.
Hi, I'm going to leave that to our friends up North we think the regulatory structures that are in place can protect the integrity of the industry really why was over three tier or other sorts of things, it's about inventory and tax right.
Right, making sure nothing's, leaving out the back door and there's a tight inventory.
Inventory tracking system seed to sales as you know and everybody knows in PA and is within.
Do you agree with your other states or whether it's with Biothrax how that works.
And attract the inventory.
So we don't really see a lot of upside to that.
And so that's not something that worries us, but we think it's a lot about how the sausage is made here as people become educated into structures that might work it might not work.
And there's a lot of discussion.
And a lot of progress to be made so.
So we're obviously bullish on PPA, we continue to invest in the market we continue to open stores.
Serve the consumer and the Pennsylvania market, that's really a patient now massive opioid problem.
And it's really a pleasure to operate in that state and ill, let Anthony talk about the New Jersey.
Sure.
So Pablo Great question.
No look it's really hard to say how quickly the rollout of New Jersey will actually take place you know, Illinois took took about six months plus or minus and that was very very fast.
I will tell you it feels like there's just a ton of momentum in last night 10 o'clock at night, Brian and Deb reading kind of the latest summary of one of the bill.
That seems to be getting internal momentum 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 they see an opportunity to take advantage of.
You know of that of that time.
You know an average I guess, we've seen different markets take as long as.
As two years, some shorter and then depending on.
The thing that no one's really talking about yet is how are the local municipality is going to play a role in that and once they set up the regime, how quickly can operators actually get to market right you've seen a situation in Massachusetts, where clearly the number of retail stores that have opened up in the last year is a lot.
There's a lot less.
Lower than anyone would have initially anticipated heading in.
But hard to say I can tell you. There is a lot of momentum you can feel it and I wouldn't be shocked if at some point next year the program. Good luck.
But two quick follow up well that's currently thanks.
Your guidance for tempered 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 it was clearly a big benefit of new capacity.
Fourth quarter utilization in the fourth quarter right can you give some color on that thanks.
Yes.
Most of the quarter was there because you are just in the last quarter say, Hey, we got all these things coming that's been all that pre.
The capital investment.
So you obviously have it only turned on in the last week, there will be hit inorganic growth thats not the story.
Your next question comes from the line of Michael Lavery from Piper Sandler Your line is open.
Thank you good evening.
And Michael.
You've talked about how important brand equity is and obviously as the category evolves, but I think that'll probably keep growing in importance.
Can you give a sense of what if any metrics you look at in terms of of tracking that is that sort.
Sort of a any loyalty measures or or price gap.
EPS in price premium pricing power, what what is it that you look at in terms of understanding how you're building equity with consumers and how sticky that might be going forward.
Thanks for your question something we really focused on what we think the data on the insight and certainly having a portfolio across the country.
Well it is about to be 50 open stores.
Consumers and medical but.
We don't really like to talk about those sorts of specific metrics that give us brand traction brand loyalty.
You know its sell in sell through.
Mmm are studying what consumers are saying how that feeling.
Often people collecting data.
We didn't but we think there's extreme power in the data that our business is building and collected.
The consumer business. Unlike all consumer businesses that are in late stage of maturity or wherever who rely on data for decision making seem to be.
Had here.
So we feel out of traction and 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.
They won't be both.
I want to feel better with Dr., Solomon, who we can feel it.
And we're pleased.
Where we are but it's not a done deal. This is kind of a no finish line situation as we build and cultivate that relationship with this consumer.
As they evolve and get educated and experienced this product in a new way.
What was the truly happening is a new experience across the American consumer.
Right.
With a 50% plus of the product is not smoked anymore, who and when and where.
And I think that we should welcome the spotlight of this and the data for everybody to see as it matures.
Okay. Thanks, that's helpful. And then just a follow up on the same store sales growth.
You called out a couple of drivers, there's obviously very very strong a little bit of a clarification and included in this when you talked about the comparable sales growth [noise], primarily being driven by increased transactions.
Is that the number of transactions similar to the to the foot traffic you call out in the sequential gains or is that.
Increased volume.
Im size of transactions, where they're getting bigger or is it possibly both and just.
I'm curious about that what what you point to with some of the key drivers 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, we pretty basic it's the former unless it's really been more transactions.
What's going to drive it to the ticket size or number of tickets.
And as much else.
And we're seeing more tickets.
Which is more people there's been an evolution of the ticket size and certainly the pantry loading in March.
And we've seen that spike and we've seen it come down to maybe it hasn't hit the pre cobot levels and big data, a little bit different but not back there, but marching back there slowly.
In versus air traffic control kind of the.
So.
Your next question comes from the line of Graham Chrysler from eight capital. Your line is open.
Yes, hi, good afternoon, and thank you for taking my questions here I wanted to follow up on the comments made earlier in the call about building a bigger boat and I understand there has been an intense focus on green thumb on allocating capital.
A few opportunities with the highest return on and also really running the company like.
Like you Didnt 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 little less year 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, once they get more color in terms of you go down that list you know how you make the capital decisions from there on out outside of what's happening in neighboring Illinois in the short term here. Thank you.
Yeah, the decision on capital allocation on what's that based on.
Where the market is.
First mover market opportunity what the licenses are you know where we can put it. This is really a return on invested capital game as we've been talking about for a long time everything's on the table constantly playing the game on where we can get the highest returns in the most protected way.
There is a massive greenway.
Wave going on here. So we don't want to have our head down too much we got to be watching whats happening everywhere. So we're we're studying we're learning.
But the basic principles of capital there. So if we can put 50 million into something what does it 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.
We don't know we don't know.
And so worried all the time about disruption or something else and so we're focused on building our brands and our relationships with consumers, which we think we're doing we're in the beginnings of but that's the value overtime. So the.
Portfolio.
And so thats really what drives the capital decision and there is accretive opportunities and great things not just in Illinois, Pennsylvania, New Jersey, Ohio.
And other markets.
Most of the country now just return on the retail thing cut off or something.
It's really more tickets more consumers coming in the one thing I will.
I would say about that has been unique as people buy more unlike consumer staple like for the paper that last you twice as long as you buy twice as much people buy twice as much Canada. So they have more Canada's they consume more.
That's not a bad thing for the business.
We don't think Thats, a bad thing for the consumer, but the fact that drives velocity.
Stores and so we're studying that to your question on what's driving that but the entities tickets over transaction price or even units, but we're watching all of those in order to serve the customer on the best way possible.
Thanks.
And then just just a follow up question here regarding the continued scale than.
With respect to the normalized operating costs, which had a very minimal change quarter over quarter. As you look into the next year on having even more states are the state getting even bigger.
How is that are we at a point here, where the businesses is sufficiently scaled up from that operating expense side of things or will there be a need to to add on.
Or that.
I think as we continue to grow and more market Valley continues to get almost year. Thank you.
Sure Anthony here, Yes, my comment about building a bigger boat part of that is is it the team in addition to the infrastructure.
And I don't think so we are still kind of building now.
Both the retail and wholesale pieces of our business and as the business grows the complexity grows.
Any opportunity grows so I think what you'll see from US is we will continue to invest in people obviously the right people.
We focus on cautious is decent business operators.
Just trying to run a good business, but.
At the same time, we kind of kind of underwrite these decisions from a ground up basis without kind of saying to ourselves hey, the target is X number. So it's not like we're sitting here, saying, okay that the.
Yes, she nay in Q2 of 2021 should approximate.
Now X y or Z you can't do that the businesses is moving too fast.
And Theres a lot of variables changing around us and one thing that we are going to continue to do his investment team and continue to build the team. 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.
This number increasing on a relative basis.
Quarter after quarter.
And a lot of that just has to do with.
Caught when certain facilities turned on or or how quickly. We can find additional team members that that can grab an order and help us help.
Help grow the side to show that we are building.
Your next question comes from the line of Aaron Grey from Alliance Global Your line is open.
Hi, good evening, thanks for the questions and ill add my congrats on the quarter.
Just want to add onto a question of EPS earlier in terms of obviously, the capital and what states thatll be specifically allocated to once.
Great in particular being Florida, just given you just recently opened up another.
Another store there one first ones you've opened and about a year. So just wondering just given.
The regulation in the same there being no wholesale market are there any plans for any type of cultivation expansion in the state.
And are any additional store openings, just kind of specifically focused on Florida. Thank you.
Sure Great question. Anthony here look we are we're big fans of afford a magnet for to market may not sound like it but but we are.
Look I think if you are aligned 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.
And we effectively.
When we looked at our.
Portfolio.
We had to we had earmarked dollars that perhaps could have been earmarked for Florida and move them elsewhere, because we thought it was better for the business.
I think as we look ahead to Florida, we continue to do the work we continue to assess it it's something we talk about on a regular basis, but again here we are now that.
During the past.
You know call. It last week that adds another layer of complexity and so as we sit here in our shoes and try to allocate capital access to the shareholders.
We're constantly reassessing the chips on the table and looking at them.
We're we're bullish on the Florida market, we see.
The growth we see some of the.
The performance of some of the operators down there have and it's impressive.
And I think for US what we'll do is we'll just continue to assess it well.
Week after week month after month, and if it makes sense and we'll go ahead and pull the trigger but right now I.
Think it'd be premature to communicate anything as it relates to 2021.
Okay. All right great. Thanks second question from me then obviously.
Obviously to a that is something that's still hinders you on the other operators out there just as we think about you guys getting more and more profitable and the impacts on free cash flow specifically between.
Retail and wholesale.
You talked about the impacts that tweedy might might have on the difference.
Between the two and how having more sales flow through either retail or wholesale could impact the free cash flow you guys get versus what you have to pay out on the on the taxes side. Thank you.
Sure. So look obviously acuity as it plays a role and within the business and.
We've been able to.
Now that now that we're cash flow positive and paying big Big tax payments uncle, Sam now the nice part is we have a business that.
That generates healthy after tax free cash flow.
In terms of the impact on the business.
Look obviously, the retail is a bit more punitive.
You know and so but.
Yes, I'll just sit here and tell you that that doesn't play a major role in how we kind of run the business, it's something we watch and something that we understand to that.
If we do see growth of X y or Z within the retail versus the wholesale side of the business the impact it will have.
From a cash basis, but but look here, we are sitting 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 and still generate healthy after tax cash flow returns for the shareholders and we'll continue to do that.
Your next question comes from the line of Andrew profit No from GMP. Your line is open.
Hi, Thanks for taking my questions and congrats on the incredible quarter guys.
I wanted to just talk a little bit about new Jersey, a bit more.
Within the enabling legislation. That's that's currently going through state Congress, if it gets past.
As it's written.
I believe there is there is a certification process where operators need to.
Sort.
Certify that they can meet existing medical patient demand to the state before serving rec customers do.
Do you have any color on on what that.
Entails and.
So assuming.
Or at the point, where Rex sales start to New Jersey, do you think that could impact.
Pricing and Massachusetts at all.
For demand.
So good question.
I think the details of the certification.
Are still a bit kind of ambiguous.
You know look the 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 put your put your finger on.
I didn't fully understand your question about the impact in Massachusetts, and New Jersey. So maybe if you could just kind of shed a little bit more light there.
Thank you.
When when New Jersey, Rick comes online.
Perhaps there might be some customers that shop.
Massachusetts that would prefer to shop in New Jersey.
Or.
As there could be any any impact at all.
To the Massachusetts Rec market as a result of New Jersey wreck coming online.
Hey, This is Ben I mean look of added just boil real simplistically.
And at this moment in time.
Yes. This is water in the desert.
It won't be that way forever.
Right now, yes messages as pricing as a result of New Jersey coming online is.
There's not a risk factor pricing broadly.
As I mentioned is a constant rig.
Risk factor is something we're thinking about how to do it but.
All the supply in New Jersey, and then some if needed.
Beyond the and then some.
Because the entities bigger boat is needed.
Because there's a huge amount of demand on the east coast.
Condemn familiar recognize though that with the underserved market in New Jersey.
Maybe switching gears and talking a little bit about the health of the consumer.
Have you seen any kind of trends.
Like a shift in and more purchasing of value products, you talked about the number of tick.
Tickets increasing.
What about.
Returning customers how how have.
They are 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.
[music].
Are there still purchasing restrictions in place and when do you think.
That could end.
When we think what Glen I just missed that last part of your question sorry, Andrew.
Any purchasing restriction that could.
All 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.
Go around.
So what's happening in the consumer basket has been pretty steady.
Unlike what happened last year sales vacate.
At the end repeat what consumers really shifted quick away from vapor vaporizers, and innovate and and then understood quickly after.
I think the media and everybody did a good job educating folks that it was truly.
Tested an unregistered pen.
That were making people thinking not legal in the consumer reacted back we thought maybe consumers would go away from.
Inhalable, given coated and then the respiratory elements and I think we said before that.
It did not happen.
And I think what's really happened in the bottom line to the core of your question is more people are consuming cannabis.
That translates to category growth across the board.
And the nuances, while very interesting important and.
Incredibly.
Detailed a lot happening core concept is massive new adoption by U.S. consumers and massive more consumption by those consuming.
So you know that the respond pretty heavy.
And we're excited about that opportunity.
Your next question.
And it comes from the line of Matt Bottomline from Canaccord Genuity. Your line is open.
Good evening, everyone. Thanks for taking the questions. This evening.
Ben you described a little bit more of that.
Note that we saw very rough rough figures, obviously about 25% of that rebounding in Nevada and use it and then there were some.
Specific date mentioned in the press release, the other 75% one that we haven't really chatted on this call this Ohio.
So given that there is a bit more about.
Our capterra on the retail side can you give any dynamic on your ability to carve out.
Greater market share there, whether it's wholesale channels or just other dynamics in that market with respect.
In APAC, where Ohio might ranking in what you're hitting your core market.
Yes, we love the Buckeye state.
The.
Look we've seen the movie before.
They are pretty transparent with what kind of data is going on there.
There and.
The 10 million plus person thing.
Revenue in 12.
And we know what that demand among those consumers look fine. We're excited to have the maximum number of retail stores open we've got great market positions places like Lakewood.
Lorraine Toledo unbelievable team out.
Out there.
So we're excited about where this has been.
We'll be putting capital into Ohio that.
That will drive really sort of high level.
2022 and beyond.
So.
We'll stay tuned.
All right and then just.
A follow up question on one or the other.
Sort of anecdotes you gave with respect to Florida are there any other markets and when one that that data you know sort of notable is that just sort of look to revenue exposure and just maybe California, where you know that's not where a lion share of the capital allocation is right now, but a lot of.
Different about those and other operators fate.
That are much more capital constraint than you guys seem to be going there as opposed to wider so is this an opportunistic time.
For GTS start expediting capital allocation in other markets or lineup everything we're doing we're going to be doing in new Jersey, and some of your core market, which still have very high growth rates is that something that.
That would be maybe a nice to have.
Nothing focus on right now in any anecdotes on other markets that you think might.
Might make 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 greenway.
Transform this country and create the next great American growth industry.
So it's happening everywhere because people are everywhere.
We understand the supply demand by those markets. We see this greenlee. We are studying we're watching we're playing an ROI Cie games in order to grow the chips for shareholders and put them back.
Back in the game.
Understand whats happening, we love our current portfolio broadly east of the Mississippi.
Everywhere, we love we see the flower shortage is happening there and then just watching what we call internally to state of the states.
And you really really watch the growth happening across this country.
Yes.
Quite tremendous and were excited for everybody else to eventually wake up.
Your next question comes from the line of Mike Higgins from Benchmark Company. Your line is open.
Hey, Ben Anthony Jennifer Andy Congrats on the quarter guys the per performance.
Well done thanks for getting me in here just want.
I guess just one question.
I guess just early days Greenway, it's just building here, 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.
To do business between CPG and retail that.
If you think those long term harmony there between those two if you think over time, maybe those benefits to separating those two separate companies. Thanks guys.
Great harmony there.
You know, there's a one plus one equals something bigger.
Within five.
And we're focused on building our brands and the relationship with consumers. So thats about being where consumers are it's about understanding the market and investing in those two businesses.
With different kinds of business to build the store for a million dollars and build to become platform than it is to put $50 million in the state of Pennsylvania in order to build.
Supply and make math, it's in the product sales to be distributed across the entire sales.
So we love both those businesses.
My job and the team to support those two businesses build teams that make sure that those folks go execute it's about optimizing distribution channels.
Getting dog Walker.
First every consumer that wants them.
Very easy message and by the way it might lead to a nice evening at home.
Try for yourself, the sort of the message and we watch what happens and isn't that a pleasure.
To own the booze and the bar.
It's quite simple at the same thesis from day one.
One.
We continue to optimize those and what we can do to unlock shareholder value in the future.
That's what keeps it exciting and it's fortunate for me that I get to think about those sorts of things and we believe we are just getting going.
Ben you seen.
I think we are talking for a couple of years now this is the most.
Fired up I think I've heard you.
I mean is it the quarter is the politics is it.
Growth in front of you like whats really driving I guess your enthusiasm that seem to sort of meet up here on this call.
Thanks, Jim and sanity tempered, but.
There's a tidal wave of demand that we've been talking about.
For six years in a row and.
And it's helping people feel better.
Makes me excited to help more people feel better through this product and then what watch comes out is these numbers.
Again like I, just got to Bang the table on this is a U.S. story.
It's 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 take 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.
Sema.
Keep buyers me up because you guys are doing a good job.
And then making a phone for everybody so.
I think the hearing next question. Your next question comes the line of Scott Fortune from Roth Capital. Your line is open.
No.
And thanks for the questions real quick just want to follow up kind of strategically pan around California in the market. We see 31 municipalities come onboard now to to really start opening up legalized.
Campus here in the state.
But what's your thought around brand.
Your focus eastern Mississippi.
Coming from California, and your strategy in California to gradually build that out with your brands just from a long term perspective.
We are studying it very very closely we have been for a long long time.
Yes, just because it's the biggest doesn't mean, it's the best it might be the best way to.
It was money that maybe a backwards looking statement we hope.
And we are studying it closely we obviously have a big presence in Nevada, and Las Vegas allows us close geographically, we have licenses in southern California, We plan to execute on and we are watching the entire supply chain of that market pricing.
Artist.
Pollutants brands retailers.
And then every part of that supply chain.
And.
Team did 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 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 stores, but where are we as far as an inflection point and kind of production and to actually.
Getting more distribution into a higher number stores whats that level. If you have a number.
Yes. Thanks.
Each of them for their what I would just the way we look at it really is how penetrated by state.
So when were a 100% penetrated in the state it's impossible to grow the doors.
Well, we're 98% of not like there is a lot of opportunity out there for new doors as many of the states that that dominate.
Our portfolio, whether it's Illinois.
Okay.
Pennsylvania, Maryland cetera.
So.
Thats the best measure I can give you a you know until it becomes more stores than we plan to continue you know in Illinois get 75, new stores out.
Finally, our 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 samples from Ashland Capital markets. Your line is open.
Hello, Good evening, everyone and congrats on yet index.
Yet another excellent quarter.
Hi, 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 million 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.
Great.
What's your thoughts on that on on potentially looking at a debt financing to accelerate capital expansion projects or programs where else.
Accelerate your M&A pipe pipeline.
Where you see the accretive opportunities.
And if.
Let him comment on whether there is anything holding you back.
From from pursuing.
Debt financing.
Great.
Then I can hit that a little bit.
We mentioned how accretive it is and what happens with the cost of capital as you know and I think everybody knows the depths of capital markets and U.S. candidates isn't not deep.
Got to the we have been 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 and we borrowed $200 million and we can put that money to work for shareholders.
Create huge amounts of equity value and we're ready to go.
But we're also very careful our partners are very methodical 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.
Accretion non dilution.
Not.
And.
That we need to raise equity capital and just kind of re emphasize that we don't need to raise the capital. There are attractive ways were measuring that all the time, we've been prudent stewards of that capital and as cost of debt goes down our re fi opportunity becomes interesting.
Thanks.
Those comments just my next question and speaking about putting a shareholder money to work.
No we're ending we're nearing the end of 2020 I was just wondering if you would perhaps clarify what's on the agenda for 2021 in terms of capital projects and what your overall capital budget for next year.
No no surprise I guess this one.
Just real high level on Capex, we spent $100 million in 2019.
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.
Thanks, where that capital is going.
I rattled off and we have great opportunities and we're excited about what's.
What's going to happen.
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.
Just about capital this quarter.
A lot of capacity came online all at once and really created the surgeon in revenue and stuff do you imagine.
More uniform or should we expect kind of stair step.
The increases in capacity next year.
No it really depends so.
I've been here the retail is easy that's more kind of linear just given kind of the.
Given the.
Spend their per store and then wholesale is where its very lumpy right.
Now as we kind of do a lot more facilities, we optimized our build out even more efficiently and so you know I'd say the size.
Yeah, that's kind of get bigger because our confidence gets bigger.
I don't think that'll that'll change much on a go forward basis.
One more quick one.
Hopefully by spring this isn't an issue anymore given the.
Ah various vaccines that are out there everything but there appears to be a.
Our significant increase in covert cases out there.
You have been through this once before the industry and you guys managed very well through it but what can you make any plans or contingencies or Oh, how do you prepare the business for what could you know for.
For any potential disruptions.
This winter related.
Oh for sure.
The unexpected keep the team ready for adaptability and you know investing the team. So so currently.
Only in his procedures as soapy adjustment Tpd split shifts flexibility testing Tim checks all the standard stuff that was new before when we invented it as did everybody across the country and all over.
Is now in the playbook part of the EPS soapy.
Fortunately, we got to kind of ramp a few things up in different levels on different facility.
But that's where we're at and we want to invest in the team keep it safe.
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 the 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 Philadelphia, Pennsylvania and understanding.
Comments around water in the desert, but just wondering given that given a supply expansions you brought online and in your peers, having some of your peers haven't gotten manner see the same have you seen any any evidence of supply shortages or tightness easing at all that whereas the race between demand and supply so where does that looks now relative to where it was.
Three to six months ago.
Well you know.
October in Illinois is way better than January without a doubt there is flower many operators have come online we had a $100 million versus you know whatever was out of the gate.
And 25 in December.
PA has pockets of tightness you know.
Probably power remains in demand.
So there's ebbs and flows.
Profit comes online effectively doesn't go back right to Anthonys point that stair step function. So once the supply comes on is there. There's more to go there is more to go there is more to go.
But it's better now.
Than it's been in any of these markets and with each.
It continues to get better the thing is the consumer base gross brandloyalty grows.
So it continues but it's not a.
Dire situation in 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 debt some Sean those markets have you.
Fully returned to pre Covance shutdown levels in both of those markets. I know you mentioned a lot of recovery, but just wondering if you if you crescent above water, if there's still a little bit more a mark to work to be done there.
Yeah is that quickly as a state each one of those are above pre covert levels pockets of strength opportunities within each what's happening, but as a state they're above and growing.
Your next question comes from a line of Howard Penney from Hedgeye. Your line is open.
Hi, Thanks.
So much for the question as institutional investors continue to come into the space and detailed looks to attract those institutional investors have you contemplated giving long term targets too.
Growth in revenues EBITDA profitability, whatever you think might be deemed important to contextualize youre.
Thank you growth relative to the industry. Thanks.
Hey, Howard Thanks, Ben if you if I thought we thought you thought that that would mean that things would change in the capital markets sure, but that's a non factor it's not that hard for the underwriting to happen here in front of portfolio manager gating item here, it's a compliance officer gating.
You weren't item.
So the investment cases, there this is very very simple.
We see massive growth.
Varied again anywhere what's happening in our profitability and cash flow and all the other kinds of something not about future targets, because it's easy to see 20% comp.
Compound annual growth for industry.
If you even be bigger and businesses growing over 100% plus included in others that the massive opportunity and whether you're a you know value garb growth.
You can find pockets of amazing opportunity here and we're seeing that.
But I don't think targets.
I would add to the bid.
Thanks for the question.
Sure. Thank you.
And there are no further questions at this time, Ben I turn the 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 with there is a great use for capital we're on that path to over $1 billion in sales and if the world wakes up to the U.S. cannabis opportunity. We're excited we feel the privilege of this happy veterans day to everybody safe holiday season.
We'll talk to you in March thanks, everybody.
Ladies and gentlemen, this concludes today's conference.
Paul Thank you for participating you may now disconnect.
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