Jushi Hldgs Inc Cl B

Good morning. My name is Donna, and I will be your conference operator today. At this time, I would like to welcome everyone to Jushi Holdings' second quarter 2021 earnings conference call. Today's call is being recorded. I will now turn the call over to Michael Pearlman, Executive Vice President of Investor Relations and Treasury. Thank you, sir. Please go ahead.

Good morning. Thank you for joining us today for Jushi Holdings, Inc.' 's second quarter 2021 earnings conference call. Joining me on today's call are Jim Cassioppo, Chief Executive Officer, Chairman, and Founder, and Kimberly Baumbach, Chief Financial Officer. This morning, we issued a press release announcing our second quarter 2021 financial results. The press release, along with unaudited financial statements, are available on our website under the Investor Relations section and are filed on CDAR. Before we begin, I'd like to remind listeners that certain matters discussed in today's presentation or answers that may be given to questions asked could constitute forward-looking statements within the meaning of Canadian and United States securities laws, which by their nature involve estimates, projections, plans, goals, forecasts, and assumptions. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect actual results are detailed in JUCHI's annual information form and other periodic filings and registration statements. These documents may be accessed via the CDAR database. These forward-looking statements speak only as of the date of this call and should not be relied upon as predictions of future events. With that, I'd now like to turn the call over to Jim Cassioppo, Chief Executive Officer, Chairman, and Founder. Jim?

Thank you, Michael, and thank you, everyone, for joining our call today. I would like to take a few minutes to review the significant progress we've made so far this year. provide an update on our second quarter performance, and review key developments within our operational footprint. I'll then turn it over to Kim to review our financials, and then we'll open it up to questions.

To start, let's review our second quarter 2021 results.

As previously announced, I am pleased to report that our revenue increased 14.6% to $47.7 million. as compared to the first quarter of 2021, and increased approximately 220% year over year. Our second quarter sequential revenue growth was driven by higher revenues at the companies beyond Hello Storage in Pennsylvania, Illinois, California, and Virginia, and increased operating activity at our Pennsylvania and Nevada growing processor facilities. In addition, we have continued to report sustained positive adjusted EBITDA in the second quarter of 2021. This was achieved as a result of continued revenue growth across the portfolio, supported by higher gross profit. Adjusted EBITDA was partially offset by an increase in staffing and expansion related expenses as we invested in our growth in advance of new store opening, the opening of Ohio cultivation, and manufacturing facilities, and the build-out of our Pennsylvania and Virginia growth processor assets. I'd also like to highlight some of the operational achievements and progress we've made across the organization. We continue to execute on our strategy to strategically expand our footprint, including opening our 19th and 20th Beyond Hello retail stores, optimizing and expanding our cultivation assets at Pennsylvania and Virginia, and entering new markets with our planned acquisition of Nature's Remedy of Massachusetts. In just a minute, we'll address each strategy in more detail in our state-level operations update. But first, I would like to note that I'm very proud that we have been able to establish a deep and talented management team, which includes some key hires we have recently made. During the quarter, we welcomed Leo Garcia-Berg as Chief Operations Officer. Leo will be responsible for driving growth strategies and efficiencies, as well as coaching and developing team members across our grower processor facilities. Leo has already hit the ground running and has begun to introduce what we call Jushi Production Systems, or JPS, which is based on lean manufacturing principles and has the objective of producing our products in the most efficient way and with the highest standards of quality. Under the JPS routine, our teams will focus on eliminating waste, reducing variability of results, and adding flexibility to our production systems to match our customers' needs. We are also very pleased to welcome Marina Hahn to our board of directors. Marina joins UC's board as an experienced consumer products and marketing industry leader. She has a strong track record of building culturally relevant consumer brands and disruptive new product categories. as well as driving value creation across startups, turnarounds, and Fortune 500 corporations. Subsequent to quarter end, we appointed Brendan Lynch as our Executive Vice President of Retail Operations. Brendan brings decades of retail experience to Jushi that he refined and developed while working with companies such as Anthropologie, Rudy's Barbershop, Tom's, David Yurman, and The Gap. He will be responsible for leading Jushi's retail strategies, including overseeing our retail footprint core markets, as well as introducing and expanding in-house delivery services. Now let's take a closer look at our U.S. operations state by state. Let's begin with Pennsylvania. During the second quarter, we opened our 12th and 13th medical dispensaries in the Commonwealth of Pennsylvania. With the opening of these new locations, we have broadened access for more Pennsylvania patients as well as expanded the reach of our newly introduced suite of highly innovative branded products, The Bank, The Lab, Mura Plus, and Seche. We expect to open our 14th Beyond Hello dispensary in Pennsylvania in just a few days and anticipate opening an additional four locations for a total of 18 dispensaries by year end. At the retail level, we remain focused on strong in-store staffing and inventory management to improve the patient experience. We have also partnered with leading grower processors to offer more tailored product assortment, focused promotional activity to align our patients' purchasing patterns, improved in-store visual educational tools, and have integrated additional technology solutions to streamline the purchasing process. We have also implemented local grassroots programs, including sponsoring concerts, festivals, and health-oriented types of activities where we look to deepen our relationships with local communities. The success of our in-store efforts can be measured by patient reviews. We are and have been for some time one of the top-rated cannabis dispensaries in Pennsylvania, according to Google reviews. We have also made significant progress redesigning and implementing operational improvements at the approximately 89,000 square foot Scranton-based grow processor facility. We plan to introduce new technologies, including hydrocarbon extraction in December 2021, which is expected to increase extraction productivity by four times and produce a much higher quality product. The redesign and ongoing construction of the Pennsylvania grow processor facility has resulted in the takedown of several productive grow rooms. which has had the short-term impact on revenue and profitability. However, we are making these changes with a long-term view and expect these enhancements to result in increased efficiencies and improve long-term productivity as we scale up the facility's operations to meet the inevitable demand associated with an adult use market. When we announced the acquisition of the Pennsylvania GROW processor last summer, we discussed an expansion to approximately 130,000 square feet. Since then, we have added many parcels of land to our footprint, and now we are close to being able to expand to over 300,000 square feet. With over 300,000 square feet of total plant capacity, the initial 89,000 square foot facility will become the center of all operations with a much larger manufacturing and post-harvest operation that will support the larger facility. As reported earlier this year, we commenced phase one of the expansion of the Pennsylvania Grower Processor Facility. Phase one of the expansion, which is expected to be completed by the first quarter of 2022, will add approximately 40,000 square feet, bringing the total square footage to approximately 130,000 square feet and total canopy to approximately 45,000 square feet. We expect phase two of our planned expansion to begin in the first quarter of 2022, which would add an additional 60,000 square feet to the building for a total of approximately 190,000 square feet. Phase two of the expansion would increase total canopy from 45,000 square feet to approximately 110,000 square feet and increase biomass capacity from approximately 30,000 pounds to approximately 70,000 pounds. We expect phase two of the expansion to be completed in the third quarter of 2022. Moving on to Illinois, we are pleased to announce that Jushi's partner Northern Cardinal Ventures LLC was awarded a conditional retail dispensary license in Illinois via the state's lottery process. The dispensary location is designated for the Peoria Bureau of Labor Statistics region in Illinois and will be Beyond Hello's fifth location in the state. As of the second quarter, we operate four high-performing Beyond Hello retail stores. Two of those stores are located in Assajay, adjacent to downtown St. Louis, and two are in Bloomington Normal metro area. Revenue in Illinois for the second quarter of 2021 remained robust, driven primarily by the successful procurement and promotion of in-demand adult use and medical products. which has led to improved product availability, more tailored product offerings, and an improved in-store customer experience. Also leading to an improved retail customer experience was the introduction of a new host role within each store that is focused on assisting customers who are looking for a more curated shopping experience. The host is available to walk the customer through the menu, show them product offer suggestions, and roll them into our loyalty program, the Hello Club. if they choose to join. This has resulted in improved customer engagement and an increase in loyalty club members and provides a differential in-store customer experience. Since the rebranding at the beginning of the year, the overall THC membership has doubled with the average THC member visiting our store 77% more than a non-member and spending 16% more per visit in the second quarter. As we move into the second half of the year, our two Saget locations should benefit from increased traffic as nearby clubs and entertainment venues get back to 100% capacity, while our two Bloomington Normal locations should see increased activity as local universities transition back to in-person learning this fall. Moving on to Virginia, let's begin by providing an update on our retail business. In December 2020, we officially began serving patients in-store at our Beyond Hello Manassas dispensary. Since opening Beyond Hello Manassas, we have focused on driving improved patient experiences by identifying patient needs, reducing wait times, and conducting more efficient pharmacist consultations. In the second quarter, we introduced a pilot delivery program that serves Beyond Hello Manassas dispensary patients. Since rolling out the program, we have seen a meaningful increase in demand for our delivery services. As a result, we expanded the number of days we offer delivery from three to five days, and we will likely expand to seven days a week as demand for delivery continues to grow. We expect to open one additional Biontello branded medical dispensary before year end, with an additional four dispensaries opening in 2022. The five new Virginia locations are expected to be freestanding buildings that range from 7,500 to 10,000 square feet, which is about twice the size of our Pennsylvania locations. These new stores will be in prime locations, be conveniently located near highways, have drive-through access and upwards near 50-plus parking spots. The stores will also feature 15 to 20 or more point-of-sale stations, and a separate delivery vault supported by a dedicated delivery space to capitalize on Virginia's delivery potential. We are targeting opening the new dispensaries in high density locations like Sterling, Fairfax, Alexandria, Arlington, and the Woodbridge area. I would now like to provide an update on our Virginia global process facility. In December 2020, we completed the initial 30,000 square foot build out of the 93,000 square foot vertically integrated facility operated by the LITSO LLC, our 100% owned pharmaceutical processor permit holder. In May 2021, we began phase two of the expansion. which is expected to add approximately 63,000 square feet of cultivation, manufacturing, and processing capacity and should be completed by the second quarter of 2022. At full capacity, the facility will produce approximately 14,000 pounds of biomass annually. We are also in the design phase of constructing a second connected onsite building that would also be built out in two phases. We expect phase one of the second building to add approximately 100,000 square feet and 50,000 pounds of biomass for a total of approximately 190,000 square feet and 64,000 pounds of biomass annually. We expect to be able to complete phase one of the second building by late 2022 or early 2023. Phase two would add another 65,000 square feet to the facility and 50,000 pounds of biomass production for a total of approximately 250,000 square feet and 115,000 pounds of biomass. Subsequent to quarter end, we announced a series of upcoming launches of cannabis brands and products in the Commonwealth of Virginia. beginning with the debut of our vaporization brand, The Lab, and our fused product brand, Tasteology. While it is still early, we have seen meaningful increase in revenue and gross profit after launching these two brands within our retail storefront. In September, pending Virginia Board of Pharmacy approval, we expect to launch our award-winning flower brand, The Bank, and our value flower brand, The Shade, in Virginia. In order to understand the potential revenue impact of adding FLOWER to a medical program, we can look to Florida as it offers a glimpse into the potential increase in revenue that Virginia may experience in the months following the launch. With FLOWER launching in Florida in Q1 2019, the patient count increased 21% in the first quarter and by 77% in the first year.

Let's take a look at our Ohio operations.

We expect to close on our acquisition of Franklin Bioscience Ohio LLC, a licensed medical cannabis processor in Ohio in the coming days. We have also recently launched a series of brands and products in the state, beginning with the debut of Sashay or Fine Flower Lines, which is currently available for purchase at partner dispensaries across the state. We plan to follow the Sashay brand launch with the debut of Tasteology, a brand of premium real fruit cannabis infused gummies and tarts. At the 8,000 square foot processing facility that utilizes CO2 extraction, we plan to introduce our second type of extraction capability, hydrocarbon, by the end of the year, which will allow us to begin production of our first live resin products in the first quarter of 2022, assuming we receive all necessary approvals. At scale, we project that the facility is capable of processing over 10,000 pounds of biomass annually. In July, we completed the acquisition of Ojai Grow LLC and Ohio Green Grow LLC, or collectively Ojai Grow. Ojai Grow holds a level two cultivation license that allows for an initial 3,000 square feet of cultivation area. Ohio Grow starts production this month and expects its first harvest by December 2021. Ohio Grow will operate approximately 2,200 square feet of canopy and expects to produce approximately 1,500 pounds of biomass annually to start. Ohio Grow has the right to apply for regulatory approval necessary to expand the cultivation area, ultimately up to the maximum of 9,000 square feet. which is expected to produce approximately 10,000 pounds of biomass per year. These two acquisitions solidify our presence in Ohio and move Jushi one step closer to full vertical integration within the state. In April 2021, the state's Board of Pharmacy approved the licensing of 73 new dispensaries totaling 130 across the state. The increase in number of dispensaries in Ohio is expected to result in more favorable pricing for potential acquisitions, as many of our peers are already at or near the max capacity of five dispensaries. We are currently evaluating several retail opportunities, including submitting applications and look forward to providing you with an update on our progress in subsequent quarters. Let's move to the West Coast and review our California retail operations. During the second quarter, we closed on our Palm Springs acquisition and now operate two stores in California, one in Santa Barbara and one in Palm Springs. We expect to open a third California store in Grover Beach during the fourth quarter of 2021 and have moved forward in the merit-based application process for a storefront retail and ancillary delivery permit in Culver City, California. As a reminder, the Culver City dispensary will be a bespoke, ground-up build with the expectations for it to open in mid-2022. In Santa Barbara, from an operational perspective, we remain focused on product selection, product diversity, and improving our inventory management. At our Palm Springs location, we are moving forward with a full-scale remodel of the store, which we anticipate completing before year-end. Turning to Nevada. In April, our subsidiary completed the previously announced acquisition of 100% of the equity of FBS Nevada. FBS Nevada holds a license to operate cultivation, production, and distribution facilities in North Las Vegas. FBS Nevada operates in one of two company-owned 7,500-square-foot adjacent facilities and has upgraded the facility with a state-of-the-art indoor double-stack cultivation that yields approximately 2,800 pounds of biomass per year. To better serve the Nevada market, we plan to connect the two facilities to create a single production space for a total of approximately 16,600 square feet. The expansion is expected to more than double cultivation capacity to approximately 5,500 pounds per year. The expansion is expected to be completed by the fourth quarter of 2022. FBS Nevada has partnered with third-party extractors to produce a suite of high-quality date products and concentrates under our award-winning brand, The Lab, and offer prepackaged flour and fused blunts under our award-winning brand, The Bank. We have also introduced new products, including edibles under the brand Pathology and fried flour and pre-rolls under the brand, The Sheck. Finally, let's review our planned Massachusetts acquisition. In April 2021, we entered into a definitive binding agreement to acquire Nature's Remedy of Massachusetts, a vertically integrated single state operator for a total consideration of up to $110 million. Nature's Remedy currently operates two retail dispensary in Millbury and Kingsborough and a 50,000 square foot cultivation and production facility in Lakeville, Massachusetts. The Lakeville Facilities flower canopy encompasses approximately 19,000 square feet, which Nature's Remedy expects to expand to approximately 31,000 square feet during the second half of 2021. In addition to the planned acquisition, Nature's Remedy is also evaluating further expansion opportunities in the existing Lakeville Industrial Complex, as well as on the 10 acres of land owned by Nature's Remedy in Crafton, Massachusetts. The Lakeville facility could potentially accommodate an additional 18,000 to 20,000 square feet of flower canopy through the expansion into approximately 26,000 square feet of adjacent space in the existing building. The 10 acres of land in Grafton could accommodate a 35,000 to 40,000 square foot facility with approximately 18,000 square feet of flower canopy. Our entrance into Massachusetts marks the seventh state where we will operate cannabis assets and the third state where we will have full vertical integration. I'm pleased to report the acquisition of Nature's Remedy is expected to close in September. Although our stock price has declined since the announcement, we expect the acquisition to be as robust as when we announced the deal. We plan to provide more specifics when we close the transaction. I would now like to ask Kim to review our financial results for the second quarter before we discuss our 2021 outlook. Kim?

Thanks, Jim, and good morning, everyone. Before starting, as a reminder, the results we'll be going over today can be found in our financial statements in MD&A and our U.S. dollars. Revenue in second quarter 2021 increased 14.6% to $47.7 million compared to $41.7 million in first quarter 2021. The increase in revenue was driven primarily by solid revenue growth at the companies beyond Hello Stores in Pennsylvania, Illinois, California, and Virginia, and increased operating activity at our grower processor facilities in Pennsylvania and Nevada. Gross profit in second quarter increased 9.2% to $21.9 million compared to $20.1 million in first quarter 2021. The increase in gross profit was a result of higher revenue partially offset by a decrease in net overall margins due to promotional activity within the quarter. Second quarter net income was $4.8 million or $0.03 per basic share with net loss per diluted share of $0.09 compared to a net loss of $26.8 million or negative $0.18 per basic and diluted share in first quarter 2021. The $31.6 million improvement in net income in the second quarter was primarily driven by the gain on the fair value derivative liabilities of $21.1 million. The net loss of $0.09 per diluted share in second quarter was due to the dilutive effects of the derivative warrants as accounted for under IFRS. The fair value gain on the derivative warrants is removed from basic earnings to calculate dilutive loss, which is then divided by the diluted weighted average number of shares. Adjusted EBITDA in the second quarter of 2021 was 4.6 million compared to adjusted EBITDA of 4.5 million in first quarter 2021, as updated for current period presentation. The increase in adjusted EBITDA was driven by higher revenues and gross profit. As a reminder, we have defined adjusted EBITDA a non-IFRS measure. As EBITDA before, fair value changes included in unitary sold and biological assets, share-based compensation expense, fair value changes in derivatives, gain loss on debt and warrant modifications, gain loss in investments and financial assets, acquisition and deal costs, severance costs, startup costs, and gain loss on legal settlements. More information regarding the company's use of non-IFRS financial measures can be found in the company's management discussion and analysis for the three and six months ended June 30th, 2021. Turning to the balance sheet, as of June 30th, we had 126.8 million of cash in short-term investments with total current assets of 164.3 million and current liabilities of 60.2 million. Networking capital at the end of the quarter was 104.1 million. Our reported cash balance does not include the proceeds we expect to receive pursuant to the approximately $14 million interim arbitration award. The company incurred approximately $32.8 million in capital expenditures during the quarter and $41.5 million year to date. We expect to incur an additional $65 to $85 million in capital expenditures for the remainder of the year, subject to market conditions and regulatory changes, of which a portion will be funded through our Pennsylvania grower processor sale leaseback facility. As of June 30, the company had 85.1 million principal amount of total debt, excluding leases and property plant and equipment financing obligations. We are in discussions with several potential financing partners to secure funding for retail locations in Virginia, as well as our Manassas facility, which we purchased for 22 million in cash earlier in the second quarter. In addition, we are also considering further options in the debt facility to fund the cash portions of acquisitions. Lastly, on August 9th, the company announced that all issued and outstanding super voting shares and multiple voting shares of Jushi were converted into subordinate voting shares of Jushi in accordance with the terms of the super voting shares and multiple voting shares. The outstanding warrants to acquire super voting shares and multiple voting shares were also converted into warrants to acquire subordinate voting shares without any amendment to the other terms. Following these conversions, there are no super voting shares or multiple voting shares or warrants issued in outstanding. As of August 20th, 2021, the company had 172.4 million subordinate voting shares. I would like to turn the call back over to Jim to discuss our outlook.

Thank you, Kim. Looking ahead to the remainder of the year, we expect to open an additional seven Beyond Hello dispensaries, add two additional dispensaries and the Gorill Processor facility in Massachusetts through the acquisition of Nature's Remedy of Massachusetts, and continue to build out our Pennsylvania and Virginia Gorill Processor facilities, which will fuel our business as we head into 2022. Assuming our Massachusetts acquisition closes late in the third quarter, we are revising our full year 2021 revenue guidance range from $205 million to $255 million to $220 million to $230 million. And our 2021 adjusted EBITDA guidance range from approximately $40 million to $50 million to... $32 million to $37 million. The reduction of adjusted EBITDA guidance relates to, one, the Virginia market developing slower than we initially forecast, mostly due to flour launching in September versus our assumption in July, or pivoting to a larger store format in Virginia, and the timing and regulations associated with the adult use program in Virginia, which resulted in new store openings being delayed. Two, reducing the flower room capacity at the existing 89,000 square foot Pennsylvania grow processor facility to accommodate post-harvest expansion related to expanding to a much larger facility than initially anticipated at acquisition in the summer of 2020. And three, growth in corporate overhead that reflects the opportunity and challenges of the very significant growth that is associated with the larger than planned growth processor expansion and with the upcoming adult use market in Virginia and Pennsylvania, both of which may happen by 2023. Originally, we believed our guidance would have more of a buffer due to potential acquisitions closed in 2021, but we were less aggressive in mergers and acquisitions this year due to several factors, including the need for capital for the larger than expected growth processor expansion in Pennsylvania and Virginia as we anticipate an increase in demand resulting from future adult use markets in these two states. We believe the most accretive investments we can make today are capital investments in our existing licenses. However, we see a very robust M&A pipeline and expect to continue to pursue accretive acquisitions, including acquiring assets that will allow us to strengthen our positions in existing markets and help us to move closer to our goal of being vertically integrated in all states we operate in. We will also selectively enter new limited license states that offer the best risk reward for our shareholders without meaningfully diluting our industry year-over-year organic revenue growth rate, meaning the growth rate exclusive of acquisitions. And these acquisitions also must be immediately value accretive based on our own adjusted EBITDA trading multiples. I'm very pleased with how 2021 developed for Jushi and our setup for what should be industry leading organic revenue and EBITDA growth rates for several years to come. Lastly, I'm excited to provide full year 2022 guidance. For the full year of 2022, We expect revenues to be between $375 million to $425 million and adjusted EBITDA to be between $110 million to $130 million on an IFRS basis. We have built out a robust, rapidly growing footprint in some of the most exciting markets in our industry. and are well-positioned to execute on our growth strategy to continue to drive long-term shareholder value. Thank you again for your time. Operator, please open the call for questions.

Thank you. Ladies and gentlemen, the floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we do ask that you limit yourself to two questions before rejoining the queue for any additional questions that you may have. Once again, that is star one to register a question at this time. Our first question is coming from Russell Stanley of Beacon Securities. Please go ahead.

Good morning, and thank you for taking my question. Maybe the first question is just around the introduction of 22 revenue and EBITDA guidance. I think when you originally introduced your 21 guidance, you provided a bit of a breakdown around how you expect the individual state contributions to contribute. I'm wondering, maybe not exact numbers, but if you can provide, I guess, a bit of similar help around 22 and how you expect that to look.

Hi, Russell. So thanks for the question. So in terms of the detail in 20 that we provided last year in October, I know that we did that guidance in October 1st. Last year, the growth rates were just so tremendous, and we just felt we needed to give people sort of a base of where the company was going market by market. This year, you sort of have our base. We're doing almost $200 million of revenues annualized in the second quarter. So we feel like there's enough information out there now, and people feel free to call Michael Pullman, but we don't want to issue guidance to that level of detail. Some of our competitors don't even issue any guidance, and we feel like one of the more disclosive of the large billion-dollar-plus companies. So this is our policy, and I think last year was the exception because of you know, the ramp up was so severe. So you could talk to Michael. He could try to provide you with more color on different things.

Got it. I appreciate that. And just my second question around the CapEx outlook for H2, understand part of that's to be covered by the sale lease back that you made $30 million available back in April. I guess just wondering what you think your net out-of-pocket CapEx would be in in H2, and if you have preliminary thoughts on 22 at this point. Thanks.

Yeah, in terms of CapEx for the rest of the year, the Pennsylvania facility was not fully drawn before we increased it, so we think potentially $35 to $40 million could get drawn against that, $35 to $40 million. And, you know, we have many, many offers on our Virginia real estate. I will... Point this out. We bought the real estate, the underlying real estate, for $22 million. But we had about $15 million of CapEx already in that facility when we purchased it, and we're putting more in. So if you look at the loan-to-value of that, you know, it could be quite high. So we haven't done the Virginia financing yet, not because it's not available, but because we've been – well, we have a robust balance sheet to start, and rates are coming down. The credit markets are quite robust. We have multiple, almost a half-dozen sale-leaseback proposals with very high loan-to-value ratios, with very competitive interest rates relative to what we've had in the past. And we have term loans from institutions, and we have some banks interested, or have had some banks interested. So it's a process of us really getting the best long-term financing in place where you're keeping in mind the fact that with federal legalization maybe on the horizon in the next 12 months, you know, that your cost of credit could come way down. So we're really, you know, we're really trying to do that, you know, as we should to get the best cost of capital for shareholders in Virginia. So when you look at that, most of that capital is in the growth processors, and almost all of that will be financed. at this point because we already have the equity capital in both Pennsylvania and Virginia because we've already put that capital out in both places. So most of that will be financed. The only part that will not be financed over time will be the stores.

Got it. Thanks for the call. I'll get back in the queue.

Thank you. Our next question is coming from Bobby Burleson of Canaccord Genuity. Please go ahead.

Hey, guys. Thanks for taking my questions. So I guess the first one is just, you know, back to the revised 2021 guidance. It sounded like you had, like you said, some buffer, you know, originally in there that you thought would be made up for with acquisitions that you ended up not pursuing. Curious, you know, in 2022, whether or not you've done something similar in terms of providing yourselves a buffer that might come from acquisitions and kind of

what uh how big that buffer is so we get some sense of what the organic is versus the inorganic great thanks bobby good question uh yes we do have buffers in there um you know first of all going back to 21 i'm actually quite proud of our performance relative to what we had guided remember we guided october 1st of 2020 so you know it's uh almost a year ago and you know we just come in and touch lower on eva doc mostly for things under our control that we changed what we did, and we're kind of toward the middle of the range in revenue. And so I'm quite proud of what we did. And so Jushi's policy is to be conservative and meet our projections. We never have withdrawn projections. We've never had these huge changes in projections, which cause a lot of volatility to shareholders. And so, yeah, so there's buffers for acquisitions. We also, we were somewhat conservative on, you know, Virginia because it's a new market. So we have some conservativeness built in in several areas. So, you know, we feel good about the numbers and, you know, we hope to do very well relative to our guidance.

Great. And then I know that, you know, it's hard to really predict this, but based on you know, the cities that you guys are focused on in that, you know, part of Northern Virginia and what you've seen with stores and other, you know, high performing markets. What's your sense of kind of how those stores might perform in terms of like, you know, do you expect, you know, higher than average kind of store performance in terms of annual revenue in that market? Do you think you'll get there in 22? Or is this something that really like we won't kind of get to that run rate in 23? Like maybe comparing to what you're doing in Illinois and some other really strong markets that you're performing well in?

Yeah, so in Illinois, you know, we have two stores in the Saget area, and before the second store was open, we had a medical store which, you know, was, you know, underinvested in, not a lot of POSs, would likely have lines between 30 minutes to 60 minutes. That store at its peak before we opened the second store did about low $30 million annualized in sales. And then we opened a second store and we purposely cannibalized that store and got customers to go to the second store so there was less wait. And so those stores are doing mid-20s each. You know, they're about the same. And, by the way, we think they could do more once, you know, the clubs open up close to the newest Sajay store, which we call Route 3. So I think that's a good example of adult-use, high-performing store. I've seen stores that are very well positioned with limited competition in markets that were just opened up doing as much as $50 million. So I think these stores could do very, very well. I'm not – protecting anything on a, you know, store-by-store basis. But I think that gives you, you know, so that high-end, what we've experienced, and I think a, you know, a store that was doing way more than it should have because of the, you know, 5,000 square feet or 4,000 square feet and limited number of POSs, set up wrong, the whole thing, we inherited that in an acquisition. So when you look at that versus what we're doing in Virginia, I don't see why we wouldn't be at the high end of that range. Okay, great.

And I guess the 21 guidance is predicated on the Massachusetts transaction closing. How would you handicap that transaction? Is it pretty much just going through red tape? Are there any kind of real obstacles there?

No. We're at the tail end of... the approval processes, and for when you get the last approval. We have HSR, Hock, Scott, Rodino expired. We've gotten the Cannabis Control Commission, which are the two biggies, and then it's just a matter of getting through the local stuff, and then there's some waiting periods, and then once you say, oh, let's go, there's about a 10-day period for you to actually close it where the lawyer's and our internal people wire money and get all the paperwork finalized. So I think we're going through that very tail-end process at the moment with minimal risk on the regulatory side.

Great. Thank you.

Thank you. Our next question is coming from Kenric Taiki of ATB Capital Markets. Please go ahead.

Thank you, and good morning. Jim, I'd like to just focus in a little more on Pennsylvania. We've seen both yourself and one of your major wholesale-focused competitors in the state, you know, either in the midst of an expansion taking down rooms or more rooms than were expected. Can you sort of speak to supply-demand balance and dynamics in the Pennsylvania market today? Perhaps how much more disruptive your taking down of those rooms proved in quarter to And then I'll circle back with the follow-up, just understanding the Pennsylvania promotional market in the context of that supply-demand balance.

Yeah, thanks for the question, Kendra. Good question. So, yeah, so basically we inherited this facility through an acquisition, and then we went in there. Originally we had planned 130,000 square foot is what we announced. To go back to the announcement, we bought some parcels of land around it so we were able to do another expansion to 190,000 square feet. So when you do that, the whole flow of the facility changes. One expansion is on the east side of the building. The other expansion is the west side of the building. So the middle of the building becomes the hub where people enter, the employees enter. So that's where you have your lockers and all those types of things. And then that's where manufacturing is, and that's where the post-harvest trimming, bucking, and all that other stuff that happens. So it was just a matter of taking down rooms to expand – manufacturing and post-harvest activities so we could scale those to what could be a 300,000 square foot facility. And so getting the flow to be the most efficient flow so we could be a low-cost provider for years to come. So that's what happened. I don't think it's major. I think it's minor change. Again, we just were under our EBITDA lowland, and some of that was because we ramped up G&A because we see adult use coming in January. So there's multiple reasons. I don't want to overplay that one. And so that's why we did that. And in the process, we've also refurbished the grow rooms, some of the grow rooms, which are coming back online. A couple are coming back online in the third and fourth quarters. So we're seeing benefits that were through the, I would say, nadir, the low point of that. for sure. And so, you know, I think it's a great long-term decision. And naturally, when we closed the acquisition, we didn't have architects in there. We didn't have, you know, this, you know, huge expansion sort of, you know, papered out. So it's natural that something like that may happen. And it's relatively minor relative to what we're doing in terms of the expansion. So in terms of the demand in the market and supply-demand, a lot of supply has come on in Pennsylvania, but demand keeps ticking up. Stores are opening up. There's quite a few more stores opening up. So, for instance, Jushi's been sort of on average for the market. I think we caught up. We may be above average this year because we've gotten really good at it. And we reduced the time in opening stores quite dramatically from what we used to do last year. And, by the way, typically on budget or below budget this year. And so you're seeing stores open up, and the GPs open up in very large amounts, right? And stores come online in smaller amounts, right? Because the stores are much smaller than the GPs. So I think you're going to see some balancing of the market going into the first quarter of next year as more stores open. And people are rushing to open their stores to get set for adult use in Pennsylvania just because there's no value in a licensed and great market. A fallow license doesn't create any cash flow for a company. So we think all that's happening, and we think the best example for what probably happens in Pennsylvania is Illinois. And what you saw in Illinois is as you got closer to adult use, the big role processors, the wealth finance folks, built up, grow processors in anticipation of adult use, and then you had, the worst point of pricing was in the year before it went adult use, It was in the first six months of that year because that's when the most, you know, these things were coming on. In the last six months of the year, you tended to see people hold back inventory for adult use because you have this 3X demand when it goes to adult use. So I think the low point pricing will be the first six months of next year. It won't be that bad, but, you know, who knows? We'll see. And I don't think it'll be, you know, more like, you know, maybe 10% kind of thing. You know, but that's a rough guess. You know, that's not like something we're, you know, the world's expert on, you know, supply-demand. In the second half of the year, we anticipate adult use by January 1st of 2023. And the second half of the year, you will see people sort of holding back from inventory for the expected, you know, pop that you'll get in the first quarter of 2023.

That's right, Carl. Thanks, Jim. Just one quick second question for me here. On Virginia, is the delay in sort of, you know, flower through to September from July, is that medicine that needs to be taken and you think potentially net positive for the evolution of the market and the market being able to actually support what is expected demand? And it's a case of, you know, taking the medicine now yields dividends for the market and the existing players down the line while everybody... you know, gets their houses better in order than they were? Or how should we frame up and think about, you know, that the flower delay in Virginia and the readiness of the markets in Virginia in that context?

Yeah, I would look at the flower delay, you know, honestly, as a bump in the road, like a very small bump in the road. You don't have to go to the tire store to get a realignment of your tires, you know. If you hit the bump, this is a very small thing, you know, to sort of nail when regulators are going to do something within a three-month time frame. I'm actually pretty proud of getting it within three months. I mean, the people who are, you know, I know people projecting New Jersey is you know, beginning of this year and middle of this year, and, you know, six, nine months off. And some folks who don't have their facilities up and going in New Jersey are going to be 12, 15 months different from what they were saying. So I actually think we're pretty close. I'm pretty proud of that. And, you know, a flower coming into a market, you know, in a medical market, I cannot stress how important that is for patient counts going up, and for, you know, the growth in the market. You saw it in Florida. Patient counts went up. Revenues went up, you know, quite dramatically in the first nine months. We saw it in Pennsylvania. We had better statistics in Florida, so we actually talked about that in the prepared remarks. But in Pennsylvania, you saw the same thing. And it typically flowers 50% of the market, 5.0%. And if you're not offering flour in a medical program, then a lot of people are going to stay in the illicit markets. That's the bottom line.

Great. Thank you. I'll leave it at that.

Thank you. Our next question is coming from Brian Cady of Canaccord Genuity. Please go ahead.

Hi, Jim. I just want to sort of circle back to those numbers you mentioned. The output in Pennsylvania, 70,000 pounds, and Virginia, 115,000 pounds. If I remember in Illinois, retail prices were something like $10,000 a pound. So those are pretty big revenue numbers. Can you give us a little more detail on how that will impact EBITDA going forward?

Yes. Thanks, Brian. Yeah, good question. So, yeah, I think we tried to be, going back to what Russell, you know, we tried to provide information so everybody could run their models for the out years, including 2023. And we're very positive on 2022 and very confident we're going to hit our projections. that we put out of the guidance. I would note that our EBITDA is increasing in 2022 from 2021 at a multiple of 4.2 times, about midpoint to midpoint, more or less, 4.2 times. So that's a huge multiple increase in 2022. Super proud of the inflection there. And then in 2023, what we've shown the market is you can do the math there. You can take the $70,000 and $115,000. I would look at Illinois as a stock analyst. I used to do that in my early days. I would look at that, and if you do that math, you'll see that our EBIT, because the profitability goes way up for a vertical business. Because, I mean, I think most people on this call know this, but when you're selling to your own retail, right? So let's say we're targeting about 30%, 35% to our own retail from our world processors. We think that's very achievable. There might be upside to that. That doesn't count as a sale. That just brings down your sales. your cost of goods sold, and all that margin is captured in retail. So your margins go way up, and I think our multiple in 2023, the increase of EBITDA from 2023, excuse me, the increase in EBITDA in 2023 will be lower than what would happen between 21 and 22, but it won't be that much lower. It'll be a huge uptick, assuming Virginia and Pennsylvania both go adult use by January 1st of 2023, which is our base case assumption in our out years.

Great. That's very useful. Thanks.

Thank you. Our next question is coming from Jason. Zandberg of PI Financial, please go ahead.

Thanks for taking my questions. Just wanted to quickly talk about California. I know you only have a limited presence there in Santa Barbara and Palm Springs, but just wanted to get your take in terms of how those stores are performing, either on an absolute basis or relative to your expectations.

Great, thanks for the question, California. So California is a market we spend a lot of time in. And, you know, relative to the time spent, we've done very little. So I would note, you know, from shareholder perspective, you know, there's a tendency for investors or corporate leaders to spend all this time and say, ah, we spent so much time, let's just do the deals. You know, it's just all this sunk cost. So we've spent years in California, and I think we've gotten real dividends out of it in terms of our branding. If you look at tasteology, our edibles, They're on California quality. Of course, we looked at what's happening in California because they really have some of the best products in the country. If you look at people across the country and the world who buy illicit products, they prefer California stuff and they're very notable. I think we've gotten dividends on understanding that market. I think tasteology is probably the biggest example of that. In terms of our view of the market, we've really gone slow, and we've gone slow because the market is somewhat mature, and we feel like people price expectations for sellers has been too high because the growth is limited. And of course, I laid out the juicy growth for the market in 2022, and I gave you some ways to analyze it in 2023. These are industry-leading growth rates on EBITDA and revenue. This is organic growth. This is an acquisition-led growth. So I have to give up that super high growth for a fairly mature acquisition. So I have to get something for that. So the answer for you on California is, You know, we've gone slow. The stores were the most COVID affected of all of our stores and continue to be. You see what's going on in the States. They're doing a recall. And, you know, early, it's very early. We don't have a lot of data because we just really have a Santa Barbara store. Palm Springs, we're doing, it was a great location. It is a great location, but it's a horrible store. We only paid a million and a half up front for it, and we have some seller notes that go on forever. So if you discount those back, we didn't pay much for it, and we're doing a complete redo of it. So we're still in a beta stage of understanding California. Early reviews is, you know, it's a somewhat competitive market, and prices are too high, so we're going to go slow in California, but we have a few deals in the pipeline with some great prospects and great sellers, and we think, you know, we think they're going to fit right in, and we have two more stores opening up. So if we have four, you know, by the second quarter of next year and we do a couple more acquisitions, and then we have a pipeline with three or four earlier stage, we could get to 10 stores. And at that point, I'll have more data for you about what we think. It's pretty limited right now.

Okay, fair enough. And then if I could switch over to Illinois, just in terms of your retail inventory levels, I know the supply has been tight in that state. Just wanted to get your thoughts or what that retail inventory looks like in Q2 and then coming out of Q2 into Q3, if that's possible.

Yeah, you know, supply I don't think is tight anymore in Illinois. We're not finding it difficult to keep our vaults full. We have the highest amount of inventory. We measure that. We are aware of what we have. We actually haven't had a ton of issues for inventory as a company, even going back to last year, because we have good relationships, we pay well, we have this great retail franchise in Pennsylvania, so a lot of those growth processors want to get on our shelves in Pennsylvania. We never really had a problem. Once we managed it correctly last year in the April-May timeframe, we really got more focused. I would say that, you know, you're seeing prices come down a bit from the growth processors. You know, I would say that's a – and, you know, the volumes, you know, a lot more stores are coming on. So I think that's not – I would say that's not the highest growth portfolio we have in our portfolio. You know, but we're doing really, really well, kind of a cash cow for us and growing at a decent pace.

Well, that's good to hear. Thanks for your answers.

Thank you. Our next question is coming from Grant Kreindler of Eight Capital. Please go ahead.

Hi, good morning, and thank you for taking my questions here. I just wanted to follow up with respect to the guidance, the revised guidance in fiscal 2022. When looking at the implied EBITDA margin into fiscal 22 from 21, the margin is expected to double. And I know, Jim, you outlined a number of the different expansion initiatives across the various states. With a lot of those projects looking to be completed or phase of those projects looking to be completed, you know, middle of the year towards the end of the year, I'm just wondering what that scaling impact will have for the overall EBITDA margin and particularly thinking about the gross margin here. Just wondering if you could provide some color on the moving parts and why you're confident in the fact that the margin is going to increase substantially in 22. Thank you very much.

Yeah, thank you, Graham. So I would say, you know, we announced a delay in those projects of three months. I think it's coming in at two months because we were conservative. You know, we don't like to, you know, like to get the bad news out fully and, you know, all at once. We were, you know, that was not in our control. That was supply chain stuff, you know, mostly, you know, the AC, you know, the humidifiers, all those types of equipment. We've since, you know, we were able to mitigate that delay by switching, you know, vendors and stuff like that. So we think those plants are coming on earlier than we had suspected, and I think they'll be finished early in the year or late this year in Virginia, I think. and we'll be able to plant them and go through that cycle. So they're coming on, actually, in the beginning of the year, in the first half of the year, and I think you could start to see some of that in early Q2 as flower room sales. So we think it's well-timed for adult use. If you remember You know, what I said about the first six months of next year being the lower point in prices and then last six months being, you know, where medical prices go back up because people are holding on to the inventory. I think we're well-timed for that. So we're very confident in our EBITDA margins. And I point out that, if you remember what I said earlier, we plan to sell at the low end between 30% to 35%, which may be our target, but we may work it up over time through our own system. Those sales don't count. sales it just so you're actually selling you're actually putting that product into your stores at your cost which is a you know somewhat hundreds of dollars a pound and you're selling it for thousands of dollars a pound so your gross margins go way up and you read the DOM margins go way up when you do that and and so you know that's why our margins are lower this year then if you look at the vertically integrated players Because we have retail margins, about 90% of our revenue this year is retail. Next year, we're getting vertical margins in Pennsylvania and Virginia, and our third state is Illinois, which we don't have. a world processor in, but that would be the only state. But having said that, those are the highest retail margins in the businesses in Illinois because prices are still very high. So having said that, we think our assumptions for next year are conservative. We stand by that.

Okay, understood. Thank you for that, Culler. And just as a quick follow-up there, With respect to the amount of owned products and brands that are sold through, or I guess I should say vertically integrated products sold through Njushi's network as of today, can you give any indication of where that stands just to get an idea of the bridge towards that 30% to 35% mark? Thank you.

Yes. So I'll talk about Pennsylvania because Virginia, we're just getting approvals. You have to go through this regulatory approval process to get your products on the shelves. So we've gotten some on the shelves. They sold out. So Virginia is too early to have a meaningful data. So I would say that in the first half of the year, our sell-through compared to our competitors is quite low because we have very high retail sales versus what we had in Grow a Processor. And the Grow a Processor side would demand – We're in about 100 stores or so in Pennsylvania, and the demand for our product was good. So we wanted to get the product in other people's markets. We also used it as a bargaining chip, give them our product, we get more of their product to keep our shelves full. In Pennsylvania this year, in the first part of the year, probably had more problems getting the right product on the shelves for the customers. the patients than Illinois did. So we were, you know, wheeling and dealing and did a great job. The team did a fantastic job, our commercial team. And so now our focus is changing, and we're at about 25% right now, but that's a third quarter thing as opposed to the first half.

Okay. Thank you very much for that. That's it for me.

Yep.

Thank you. Our next question is coming from Pablo Zuanek of Cantor Fitzgerald. Please go ahead.

Good morning. Look, just one question on my side. In the case of Virginia, I know we talk about medical flower, but can you talk about conditions that are being allowed, the complexity of getting a medical card, the process to get a prescription, how often do you have to renew it, and just if you can contrast that with Pennsylvania right now. Because It's a reminder also where you are with patient counts in Virginia. I mean, we're all, of course, looking forward to flour being introduced and totally agree that that will boost the market, but I'm just trying to understand in terms of the whole chain how complex is Virginia and how that may impact the ramp-up in sales. Thanks.

Yeah, thank you, Pablo. So we're at about 30,000 patients, which is not too bad, and it's actually quite good. Recently, we released, to give you a sense of how this works, we released gummies are very popular there. We released our own gummies. which in our market, and the patients aren't happy with the inventory because, you know, quite frankly, there's only three players producing. One of them got acquired by a large player who's completely redoing their plant. So their inventory disappeared because they, you know, they basically shut it down, it seems to us, and they're completely redoing their grower processor. Of course, they're very focused on adult use. And, you know, And then, so there's two of us producing, so inventory's been quite short. And our gummies, when we put them on the shelves, sold out in two weeks. Similarly with the vape. So as we get products onto the market, it stimulates demand. The ticket goes up by the existing patients. More patients come in. So there's a good base of patients who feel like there's not enough product for them. So I think the market's more inventory constrained than anything else at the moment. So flour, yes, will be a very good product, and we have good inventories of everything. We just need to be able, in our factory, we just need to be able to get the regulatory approval and get them on a shelf, which we think is coming very, very shortly, in a matter of days or weeks. But you never know with the regulators, right? You just don't know. In terms of what you're talking about, in terms of patient access to the cards, in terms of qualifying conditions, Virginia, I would say, is a very good state. You know, that's not an issue. You know, the issue in Virginia has been it's been a manual process. They've recently opened up online registration. We're watching.

Yeah, they're looking at potential third parties to open up online and streamline the process for registration because it's taking about four or five weeks currently for each individual patient to get their card.

Okay. So, yeah, Michael corrected me. I thought we had got there already. So it's a slow process, but we are working through improvements. We got about, you know, a lot of improvements done in the medical cleanup bill in the second quarter, and some of this stuff just needs to get through a regulator who is, you know, a pharmaceutical regulator. So, yeah, I think that continues to be something we're working on, and it will improve, but But, you know, they're aware of the issue. Politicians are aware of the issue. There's a lot of pressure on the regulator to, you know, get patients their cards.

And one last one. I realize the Nature's Remedy deal has not closed yet, but what are you hearing in Massachusetts about delivery? Because it's not allowed at the moment for the retailers, right? And I think there's going to be social equity licenses being issued. Some retailers will partner, I guess, with these operators. But what are you hearing in that regard, and what are your plans? for delivery in Massachusetts?

Yeah, you know, like you said, there's some of the social equity. You know, it's not something that we spend a lot of time on, to be quite frank with you, because it's such a minimal part of the market. Once we're in the market, we'll begin our sort of government education and get a part of the industry effort to help the laws improve. I know that it required two people in the car, and that makes it quite a lot less economic. Delivery already is more expensive. If you have two people in the car, that makes it a lot more expensive. So I think we're going to be hopefully a leader in the industry on delivery because of our Virginia experience. You know, we're going to learn in Virginia. We're going to take it to California. We're going to learn in California. We're going to take it to other markets. So we're going slow in delivery because we don't want to, you know, in these beta stages in markets, you don't make a lot of money, and you're kind of learning more than anything else. And when it gets bigger, we'll have the skills in markets where you actually can deliver in a cost-efficient way. And in Virginia, obviously, we have the exclusive right to serve the patient population from six stores, so delivery is going to be key. In our projections, we assume we'll generate 30% of our revenues or so from delivery. In Massachusetts, you know, it's just not something, you know, that is going to be, you know, profitable for us. So we haven't spent a lot of time on that, to be quite frank.

Got it. Thank you.

Thank you. Our next question is coming from Glenn Mastin of Lattenberg Salmon. Please go ahead.

Yeah, just one quick one for me, too. It's been an extensive call, so thanks for all the information. Just part of the guidance for the back half has always been kind of a return to more normal conditions in the Illinois facilities in Solge and Bloomington Normal, and you guys didn't stick by that today, but a lot of it, like you said, is college campuses and a big nightlife scene. Can you Can you just maybe give us some confidence in that none of that has gotten derailed by the Delta variant and, you know, just from your guys' view on the ground in those very local markets?

Yeah, I mean, I would say, you know, it's not like we really ramped up Virginia in our model, you know, so it's It's more of an upside for us, I think, to start with. But, you know, I'm less concerned about in-person learning because you're not seeing that with vaccination rates. And, you know, Illinois has pretty good vaccination compliance and rules relative to where we are in Florida. You know, the fourth quarter for us, the third or fourth quarter for us, are really based upon opening stores and PA. We have super confidence in our ability to get it done on the construction side. There could be some regulatory delays, but we haven't seen a lot of that. We've only had one instance of that this year. We've opened up a lot of stores in Pennsylvania. And then I guess, you know, I think the area you're probably more, you asked about the Sajay nightclubs. I would think that's more at risk, those opening up further due to the Delta variant. And so, you know, we'll have to see the Delta variant, you know, it's going to do what it's going to do. And we're not the world's expert. I would note that, you know, the Delta variant hit in the United Kingdom earlier than the U.S. and hit in China earlier than the U.S., In both cases, it has sort of the curves have come way, way down. So there's a lot of expectations for the Delta variant to recede in September. I'm not obviously an expert in that. I just look at what's out there. But we're not being aggressive in Illinois, so I'm not too worried about that.

And just quick, a little bit more on the partner lottery process. Just give us a reminder of either how the economics work there or just exactly the relationship between you and the partner in Illinois.

So that's a pretty detailed question. I think you're best off, Michael will give you a call to talk about that. You know, we've gone over here. But, you know, it's a great win for us. We have a great partner. And so, you know, we anticipate this being a store that, you know, is going to, you know, the ownership and stuff, everything is going to progress over time. It's very favorable for Jushi, and we're very happy about the win. And by the way, I would point out, I would point out, I think the more significant part of that, yeah, we want a dispensary, fantastic. And we have some good economics there. We tend not to cut bad deals with Jushi. But, you know, that'll put us at five dispensaries. We're getting calls, like, all the time from sellers. So for us to go from five to ten... you know, ain't going to be like, you know, so hard and so expensive anymore. I would point out that if you look at the top companies, GTI, Verano, Cresco, Cura, they can't buy anymore. You know, there's very few of us that can buy and there's a lot more dispensaries, sellers, and buyers. So we feel really good about growth there. I would point out that's not in our numbers for 2022. So when we talk about M&A upside, there's a key area right there. And by the way, we expect CraftGrow, we have an application in for CraftGrow, which we expect them to do at the end of the year to let us know who the winners are. There's been delays there, but we'll see. You never depend on regulators for timing. But we expect similarly to be able to acquire – we could acquire three of those. They may change the capacities of the craft grows so you can grow more than it's initially done. I mean, I think there's an expectation in the market for that. So, you know, we anticipate being vertically integrated, whether we do a big deal or we do accumulation of these smaller deals. The accumulation of smaller deals could be a much better value, but the growth process obviously wouldn't be nearly as large if we did it that way. So I anticipate being vertically integrated in Illinois, having a license in place at some point next year, and then building it out and all that kind of stuff, which, by the way, will be great. We have some of the highest performing stores. Keep in mind that 30% to 35% coming from our own facilities, that's going to boost our margins. So really exciting developments in Illinois for Jushi.

Great. Thanks for the call. Thanks, Glenn.

Thank you. At this time, I would like to turn the floor back over to Mr. Perlman for closing comments.

Thank you for participating on today's conference call. We look forward to keeping you updated on the advancement of our business on our next call. Have a great day.

Ladies and gentlemen, thank you for your participation and interest in Jushi Holdings. You may disconnect your lines at this time or log off the webcast and have a wonderful day.