Green Thumb Industries Inc. (GTII) Earnings Call Transcript & Summary

Good afternoon and welcome to Green Thumb's Third Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, a live audio webcast of the call is available on the Investor Relations section of Green FIMS website and will be archived for replay. I'd like to remind everyone that today's 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's Third Quarter 2020 Earnings Call. I'm here today with Founder and Chief Executive Officer, Ben Kovler and Chief Financial Officer, Anthony Georgiadis. 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 company's reports filed with the United States Securities and Exchange Commission and Canadian securities regulators, including our quarterly report on Form 10-Q, which we expect will be filed tomorrow. This report, along with today's earnings press release can be found under the Investors section of our website. Green Thumb assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. Throughout the discussion, Green Thumb 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 SEC and SEDAR filings. Please note all financial information is provided in U.S. dollars unless otherwise indicated. Thanks, everyone. And now here is Ben.

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 well-being through cannabis, a viable and credible reality. Amid all the uncertainty, Green Thumb's mission strategy and execution of our enter, open, scale playbook remain our North Star as this combination delivered strong top line growth and for the first time since we have been public, bottom line profitability. Following a clean sweep of cannabis legislation measures across 5 states, the green wave is big and real. In fact, it's like a tidal wave as consumers demand cannabis for well-being. People want a natural alternative to dangerous opioids, chemical pharmaceuticals and painful hangovers. People are alarmed by the social, economic and health disparities brought on by the war on drugs. The ingredients are in place as the political and capital climates warm up to this tremendous new industry. Well-being through cannabis is the next great American growth story. While the U.S. Canada stocks are posting strong revenue growth, the S&P is posting consecutive quarterly revenue declines. It's important to note the cannabis industry is becoming a significant contributor to both federal and state economies through job creation and tax revenue. And in response, 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 U.S. 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 sleep through cannabis. The U.S. cannabis industry is rapidly evolving into an estimated $100 billion consumer packaged goods category with projected annual growth rates of 20% for the next decade. That makes cannabis larger than the U.S. wine and spirits industry, U.S. confections and U.S. Beauty & Personal Care, to give you a sense. Five years into legal cannabis in our home state of Illinois and only 10 months into adult-use here, industry-wide cannabis sales for the state are approaching $1.5 billion on an annual run rate basis. Illinois adult-use grew double digits for the month of October and over 330% year-over-year. That's impressive growth, but amazingly, nowhere near the top. We began shipping from our second production facility in Illinois in the third quarter. And in October, we opened the first adult-use store in Naperville, a Chicago suburb that is the third largest city in Illinois. We have 8 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 wave, Americans voted in support of cannabis. Mississippi opens up for medical-use and South Dakota, Montana, Arizona and New Jersey join the adult-use 21 and older roster. New Jersey has great news for Green Thumb, and we began the timely production and distribution of our brand portfolio there in the third quarter. Furthermore, this 9 million person state in the densely populated East Coast region raises the stakes for neighbors 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 Lamont is also awake to what's happening around him in New Jersey and 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 4 licenses in Connecticut. And in Pennsylvania, Governor Tom Wolf is urging legislators to legalize adult-use to provide a new revenue stream to aid its economic recovery and restore social justice. Pennsylvania has over 11 million people, just like Illinois and its 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 drive store in the state and our 49th store across the country. Next week, we'll open our 50th 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 worth noting that the 3 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 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 colonies, we have a lot of faith in Ohio and, of course, New Jersey. Collectively, this is roughly 130 million Americans or 40% of the population of this country. As we have always contended, distributing brands at scale is the key to strong organic growth, and we love our brands, Rhythm, incredibles, Dogwalkers, Beboe, Dr. Solomon's. It is really about the connections they are forming with the consumers. This quarter, incredibles launched Snoozzzeberry, 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 snores. This is growth and opportunity. There is growth and opportunity across 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, it is a $53 million dollars. These quarterly results were largely driven by the production expansions that came 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 at nearly 3x revenue and 8x adjusted EBITDA year-to-date compared to last year. These results are the outcome of continual investment and constant evolution of our people and processes over the years. We know there's more to do, but we feel good about what's ahead for Green Thumb. We have 2 highly complementary businesses that present a tremendous opportunity for outsized growth over time, 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'll turn the call over to the best CFO in the business to review our financial results for the third quarter. Anthony?

Thanks, Ben, and good afternoon, everyone. Before I begin, I'd like to thank all those who served and without their sacrifices, we would not be here today. As you just heard, in the third quarter, Green Thumb posted record quarterly revenue, EBITDA, and for the first time in company history, positive earnings per share. Performance that 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 title wave of demand that Ben has been preaching to us for years was 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 and the walls of prohibition are directly in its path. In the third quarter, the company generated a robust $157 million of revenue. Our top line growth of 31% is primarily driven by earlier than expected contribution from our recently completed cultivation expansion in Illinois and Pennsylvania as well as the rebounding of Nevada and Massachusetts to pre-COVID levels. Gross revenue for our consumer packaged goods business, CPG, grew by $18 million or 33% quarter-over-quarter. On a net basis, which accounts for intercompany revenue, our growth approximated $13 million or 41%. In retail, revenue increased $24 million or 28%, driven by new store openings and same-store sales growth that exceeded 65%. On a gross basis, our revenue split for the quarter was approximately 60% retail, 40% CPG. On a net basis, 71% retail, 29% CPG. These numbers are similar to Q2 to 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. All 3 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, their 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 witnessing the true potential of our platform when combined with solid execution and highly attractive limited license markets. Below the gross margin line, our SG&A of $50 million was essentially flat to Q2. Excluding D&A and stock-based comp, our normalized operating costs totaled $34 million or $2 million greater than last quarter. It helps. At 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 and warrant expenses associated with our senior debt. Net of these expenses, the company generated $39 million in pretax income and over $9 million in net income, providing our shareholders with its first positive EPS of $0.04 a share. The company also experienced significant improvement to its adjusted operating EBITDA, which totaled $53 million, just under 34% of revenue. Year-to-date, the company has generated $114 million in adjusted operating EBITDA, 4x greater than our full year 2019 figure, another monster achievement for the team. Turning to our balance sheet. We ended the quarter with $78 million in cash. This is $4 million less than last quarter, as the company made substantial payments to Uncle Sam and also kept its foot on the gas on the CapEx front. Subsequent to quarter end, we executed an agreement with innovative industrial properties that will provide an additional $25 million in funding to build out our Ohio cultivation license. On 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 Q3 and 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, with the population of just under 6 million and 80 million annual tourists is now averaging over $200 million of cannabis spend per month. That's an annual run rate in excess of $2.4 billion. If Colorado can hit these sorts of numbers in a year since legalization, what's going to happen in Illinois, New Jersey, New York, Pennsylvania and others over the next several years. We at Green Thumb certainly have our thoughts. And 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 have or can create edge, build and invest in our team, play hard and play to win. And last, continue to wave that Green Thumb flag, wide and high. Until next time, I hope everyone has a safe holiday season with their love ones and see you all in the new year. Back to you, Ben.

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. While 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 strengths 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 engagement and environmental stewardship. We must continue to do what we say we're going to do. We must never lose sight that first and foremost, this is a people business. And being people first means listening and taking care of our team, customers and communities. We are very proud of our commitment to those who we serve. First day profits from all new store openings go directly to community organizations, such as the Last Prisoner Project, Loaves & Fishes in Illinois, 412 Food Rescue in Pennsylvania and next week to the Florida 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, Dogwalkers and Operation 1620 team up to help bring awareness, education and support to veterans who choose cannabis 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 New York shareholders, for your continued contribution and support to Green Thumb. And everyone, please stay safe and well during this holiday season. Thank you, everybody. And with that, I'll turn the call over to operator, and we welcome your questions.

[Operator Instructions] And your first question comes from the line of Lee Cooperman from Omega Family Office.

Yes. I hesitate asking questions. 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 Post and underneath my picture, they referred to me as a cannabis king knowing very little. But anyway, first, let me congratulate you on outstanding results. I kind of making a loose analogy. With the turn of the century, there were a very, very large number of automobile companies producing automobiles. And of course, the industry consolidated. There are a large number of companies in this space. Do you see an opportunity to consolidate the space given the superior job you've done and having the great CFO that you referenced on the team. And that will be first question. If I can squeeze in a second, what is your act towards listing in the New York Stock Exchange?

Thanks, Lee. Really appreciate the kind words, and we're focused on the execution over here. You're right, turn of the century, whether it's automobiles or prohibition, and we've used the phrase Prohibition 2.0. And I believe that history doesn't repeat it rhymes. So we really look to history for those lessons and you're totally right. There's monstrous consolidation opportunities. You've seen probably the industry finish in the U.S. The first wave of consolidation that happened as the capital markets got frothy, they calmed down. Maybe they'll come back, but there is massive opportunity given how big the sector is. There's no $50 billion or $80 billion space, which is where we're going to be where the biggest companies only do $2 billion, $3 billion, $4 billion in sales. You're exactly right of where it goes over time. The question is how quickly and when for us, with the CFO with the lens and shareholder capital and really shareholder returns with every dollar we spend is when does it make sense. Like always, everything is on the table, if it makes sense for shareholders and if it's accretive and it depends on lots of factors. We have a huge opportunity within the portfolio. But that's not to say 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 SEC, the U.S. Securities and Exchange Commission, which puts us in a unique spot. That includes we file GAAP financials. You'll see the 10-Q in the morning. We file 8-Ks, 10-Qs, 10-Ks, GAAP, standard stuff. And we have a registration with the SEC. There's currently not enough clarity in the federal government for a listing on the New York Stock Exchange. But I can tell you, we positioned ourselves like has been our history, even since before we went public, 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. It obviously doesn't make any real sense that the only access on the New York Stock Exchange is the Canadian operators who don't have exposure to U.S. consumers, and here's where the monstrous business is. But we understand that regulatory structure, which creates a moat around our business. And makes us extremely bullish about what's ahead. But you've seen us put out things like an S-1 which is a registered offering with the U.S. Security and Exchange Commission, which really just gives us optionality, another tool in the toolbox. As we've used over history, things like debt, sale leaseback, all with the lens of what's most accretive for shareholders.

Well, you've done an excellent job, congratulations and very pleased.

Your next question comes from the line of Vivian Azer from Cowen.

So in terms of the revenue growth sequentially, certainly better than I was expecting. I was wondering if you could unpack or dimensionalize the relative contributions from Illinois and Pennsylvania coming online a little faster than expected relative to Massachusetts and Nevada, reopening and recovering from the COVID lockdown?

Yes, great question. The truth is clicking on a lot of cylinders last quarter, and as Anthony mentioned, somewhat of a tempered outlook versus a 30% or whatever the last quarter was. But where did it 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 2 things going in Massachusetts and Nevada is how we describe it. One is the recovery. And two is growth within that market. So sort of all things being equal, there would have been growth out of Massachusetts and Nevada had they not been the dip. But with the dip, which was really in April, right? And half of May, which that's what we're comping in the third quarter, there's some factor there. But really, I would say, a vast majority, probably, back of the envelope, 75% is a result of organic growth. In the portfolio versus lapping a COVID situation. But that's because the business executed and turned on these things we talked about last quarter, it happened to be the third quarter, it could have been fourth quarter, but that's a big step-up.

That's great. Super helpful. And for my follow-up, then, I really appreciate the commentary around New York, very attractive potential limited license adult-use marketplace, and it does seem like the Cuomo administration really means at this time in terms of legalizing adult-use. I am curious, though, if you have any thoughts around what a potential licensing framework could look like, in particular, given the sizable COVID-driven budget deficit the state is facing?

Thanks. There are several ingredients of a successful rollout from medical to adult use. And we welcome the conversation with regulators, industry participants, those who are not yet industry participants. There's 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 of winners. Plenty of ways to win. You can say it in many different ways. However, relying on the operators that can stand it up and deliver that supply, whether it's tax revenue, jobs, capital to get this thing going. It's very big. And we're here, we're constructive. A lot of people are talking and a lot of people are brainstorming. And so we are excited about what's ahead broadly across the East Coast.

Our next question comes from the line of Matt McGinley from Needham.

The increase in retail revenue growth was quite impressive, but it was especially impressive given most of that was productivity increases. Was that broad-based across the entire portfolio? Or did you have specific assets or states 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 historically haven't kind of broken down kind of state-by-state performance. But holistically, we've seen 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're bullish on all of them, literally. So we're in a situation where we continue to see nice organic growth, same-store sales within each of the markets that we operate in. In terms of Q4, it's a little early to speak to that. But it's been a strong year. And obviously, with COVID, we had no idea what to expect when it hit in the first quarter, and we've been pleasantly surprised 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 -- the retail gross margin wouldn't be that volatile. And most of the gross margin outside in this quarter came from production leverage. If the CPG business grows at a faster rate than your retail operation in the fourth quarter, is there anything with a mix or, I guess, a product mix or a 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 leverage that you saw in gross margin? And how would that look into the fourth quarter -- I guess there should 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. I don't really talk quarter-to-quarter on how to think about it. Over time, you're exactly right. The retail gross margin does not have a lot of upside from what the retail business is. In fact, it's probably downside or a slow mill. The other thing that works against gross margin is obviously price. Less input costs are rising. So that's certainly the risk that models. And if you look at our business and you're modeling it out, there's 2 real levers that will drive it. One is, which pieces are driving the biggest piece of that production. Where are we making the most products? And then what's the profitability at the places that have the largest product? So product mix and state weighting. And really, we see both kind of slow study with the constant awareness around price. But that's kind of how I would think about it. We continue to optimize. We continue to think about capital investments that can drive down gross marginal cost per unit. It sets up pretty nicely for that sort of exercise. And if you tell me where price is going, I can tell you where gross margin is going, but we don't know. There's a lot of action within markets, and we don't try to play the price game. And we try to serve customers, and we certainly try to serve patients who are using this product for well-being.

Your next question comes from the line of Eric Des Lauriers from Craig-Hallum.

Congrats on a really impressive quarter here. First question is a bit of a follow up on one of the previous questions regarding uplifting in federal reform, especially with the green wave and now a prospect of a Democratic President. Certainly, a lot of talk about federal reform and especially up listing to major exchanges. You guys mentioned that you are ahead of your peers in terms of registering with the SEC and GAAP reporting. First, is there anything else that you guys need to do to be able to uplist? 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 safe banking potentially give the exchanges enough cover to allow for an uplisting?

Sure. This is Ben. Your question is a great question without a great answer, to be candid. I obviously can't speak for anybody else. But the truth is the situation right now does not have a lot of clarity. We see ourselves on the doorstep with SEC registration. I mean with the U.S. Securities and Exchange Commission, with a registered offering to sell U.S. securities, I think that's very unique. And that's differentiated from where things were a year or 2 ago, right? We went public 2.5 years ago, plus or minus. So the capital markets have been evolving. When we see things like banking reform and changes to this, what that thing is to me is a reduction and a change in cost of capital. Banking change means cost of capital reduction. And that's really good for shareholders. And so listing is one thing. But when we think about things, and I think it's important, as I mentioned, sources of capital, not just equity -- and I wouldn't make shareholders notice we're big shareholders without an overhang here as the business is profitable. But what's really interesting about banking change is cost of capital and thinking about our debt, and what that cost of debt might be for the risk profile of the business. It's now profitable at 12%. I think a listing happens 1 day, and it's hard for me to say if it's 2021, 2022 or later. And frankly, for us, that's not the focus. The focus is execute the business, think 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 U.S. wine. Are bigger than U.S. beauty and personal care, like those are big, big numbers and big, big industries that have been around for generations. And we believe our relationship with the consumer effectively has been around for generations, we know it. And that's the opportunity to execute into. And we are a participant in what's happening. We are watching what's happening. Obviously, we're paying tens of millions, hundreds of millions of dollars in taxes is not going unnoticed. So it's just a matter of time in setting ourselves up and putting credibility, whether it's high-quality U.S. institutional capital into the business, paying taxes having profitability as an industry, not as a single operator, but really as a U.S. cannabis industry to make it so obvious that it should be listed, because we are -- this is USA and America first. In a major way, there's no reason to transfer the wealth to another country for the cannabis bid and it's 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 change is coming. We know change is happening. But again, no semblance of timing and safe what's going to happen in the relief bill and senate. And there's too many variables and too many paths for us to speculate on, and we'll just focus on what we can control.

That makes sense. And I appreciate the color there. It certainly seems obvious to me 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 Oglesby 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 or perhaps give us a sense of order of magnitude? How much further you can expand before reaching your square footage cap? And then any comments on timing would of course be helpful, too.

Yes. I mean great question. Thanks, Eric, and feel free to -- to the first part of your question, feel free to talk to anybody about that belief that we should be listed because the more education that occurs in the industry with all kinds of participants, the better, and you've done a great job. So thank you. We don't give a lot of details about what's going on in Illinois. So I would 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 we're not worried about the rec cap. We know about the unlimited medical. We have 2 sites. The business at $100 million now, right? And last month, we see going bigger. It's very simple to see how big Illinois could be, whether -- I mean, you could go crazy and use Anthony's numbers of $200 million a month in Colorado, the numbers get very, very big, very, very quickly. So we 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 its $1 on the balance sheet that becomes many dollars of EBITDA or some dollars of EBITDA has then become a multiple in the equity value or the enterprise value. So we're focused on that, and there's plenty of room to grow. We welcome you and anybody else to come tour.

Your next question comes from the line of Pablo Zuanic from Cantor Fitzgerald.

Ben, can you just talk about New Jersey in terms of your expectations of how soon rec sales will start, on average is taking about 2 years from a ballot approval in other states, of course, Illinois is exceptional 6 months. And just briefly, in the case of Pennsylvania, with the democratic governor there and reporting legislature, there's a talk that a compromise would be to implement rec but have the state-owned liquor stores sell rec cannabis? How do you think about that?

Thanks, Pablo. Great question, and appreciate all the work you're doing as well. In terms of -- I'll take the PA one and then Anthony, maybe take New Jersey. Cutting the chase, we don't think that's very likely. We think the regulatory for state-owned enterprise, we're 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, right? Why was there ever a 3-tier or other sorts of things? It's about inventory and tax, right? Making sure nothing is leaving out the back door. And there's a tight inventory tracking system, seed to sale, as you know and everybody knows. In PA, whether it's with MJ Freeway or other states, whether it's with BioTrack that works and attracts 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 and might not work. And there's a lot of discussion, a lot of progress to be made. So we're obviously bullish on PA. We continue to invest in the market. We continue to open stores and serve the consumer in the Pennsylvanian market. It's really impatient now, massive opioid problem. And it's really a pleasure to operate in that state. And I'll let Anthony talk about New Jersey.

Sure. So Pablo, great question. Look, it's really hard to say how quickly the rollout in New Jersey will actually take place. Illinois took about 6 months, plus or minus, and that was very, very fast. I will tell you, it feels like there's just a ton of momentum. Last night, 10 o clock at night, there are in the bed reading kind of the latest summary of one of the bills 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 we see an opportunity to take advantage of that time. An average, I guess, we've seen different markets take as long as 2 years, some shorter. And then depending on -- the thing that no one's really talking about yet is how are the local municipalities 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 the situation in Massachusetts where, clearly, the number of retail stores that have opened up in the last few years is a lot 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 goes live.

Yes. I have a follow-up. No, that's good, Anthony. And I know you're guiding for temper growth in the fourth quarter. But just remind us that new capacity that came in was that like early July or late September because you would still have a big benefit of new capacity the full quarter utilization in the fourth quarter, right? Can you give some color on that?

Yes. Really, most of the quarter was there because you heard us on the last quarter, say, hey, we got all these things coming. It's been all that pre capital investment. So yes, obviously, it only turned on in the last week, there would be hidden organic growth, but that's not the story.

Your next question comes from the line of Michael Lavery from Piper Sandler.

You've mentioned -- you've talked about how important brand equity is. And obviously, as the category evolves, I think that will probably keep growing in importance. Can you give a sense of what if any metrics you look at in terms of tracking that? Is it sort of any loyalty measures or price gaps and pricing power? 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, great question. Something we really focus on. We think that data and the insight and certainly having a portfolio across the country of what is about 50 open stores with consumers and medical. But we don't really like to talk about those sorts of specific metrics that can give us brand traction, brand loyalty. It's sell and sell-through. And we're studying what consumers are saying, how they're feeling. Talking to people, collecting data. We think there's extreme power in the data that our business is building and collecting. It is a consumer business, and like all consumer businesses that are in late-stage or maturity or wherever, we rely on data for decision-making the same that we had here. So we see a lot of traction. And at the end of the day, we want to be making more. Consumers want more. They want more Dogwalkers. They want more Rythm premium flower. They want Beboe. They want to feel better with Dr. Solomon's. So we can feel it. And we're pleased with where we are, but it's not a done deal, right? 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 experience this product in a new way. What's truly happening is a new experience across the American consumer capacity, right? If 50% plus of the product is not smoked anymore and who and when, where, and I think that we did welcome a spotlight of this and the data for everybody to see as it matures.

Okay. That's helpful. And just a follow-up on the same-store sales growth. You've called out a couple of drivers there. It's obviously very, very strong. A little bit of a clarification included in this. When you talked about the comparable sales growth, primarily being driven by increased transactions. Is that the number of transactions similar to the foot traffic you called out and the sequential gains? Or is that increased volume of -- size of transactions where they're getting bigger? Or is it possibly both? And just I'm curious about that. What you point to as some of the key drivers. Is it gains from illicit trade? Is it share from competitors? A bit of both? How do you think about where you're sourcing there?

Yes. Great question. Pretty basic. It's the former and you know, which really means more transactions. What's going to drive it? It is either ticket size or number of tickets, I don't think there is much else. And we're seeing more tickets, which is more people. There's been evolution of the ticket size. And certainly, there was pantry loading in March, and we've seen that spike, and we've seen it come down and maybe it hasn't hit the pre-COVID levels and maybe the data is a little bit different, but not back there, but marching back there slowly. Maybe versus the air traffic control kind of the -- so.

Your next question comes from the line of Graeme Kreindler from Ink Capital.

I wanted to follow up on the comments made earlier in the call about building a bigger boat. And I understand there's been an intense focus from Green Thumb on allocating capital to opportunities with the highest return. And also really running the company like you didn't have to raise another dollar. There were some questions earlier on the call with respect to Illinois. So that appears to be really, really top of the list here 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. I wanted to get more color in terms of -- you go down that list, how do you make the capital decisions from there on outside of what's happening in Illinois in the short term here?

Yes. The decision on capital allocation on what's best based on where the market is, first mover, market opportunity, what the licenses are, where we can put it. This is really a return on invested capital gain, as we've been talking about for a long time. Everything is on the table. We're constantly playing the game on where we can get the highest returns in the most protected way. There is a massive green wave going on here. So we don't want to have our head down too much. We've got to be watching what's happening everywhere. So we're studying, we're learning. But the basic principles of capital are 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 over time to the portfolio. And so that's really what drives the capital decision, and there's accretive opportunities and great things, not just in Illinois, Pennsylvania, New Jersey, Ohio and other markets across the country. I would just return on the retail thing, cut off or something. It's really more tickets, more consumers coming in. The one thing I would say about that has been unique as people buy more, unlike consumer staple like toilet paper that last you twice as long if you buy twice as much. People buy twice as much cannabis so they have more cannabis. They consume more. That's not a bad thing for the business. We don't think that's a bad thing for the consumer. But there's a fact that drives velocity into the stores. And so we're studying that to your question on what's driving that. But at the end of the day, it's the tickets over transaction price or even units, but we're watching all of those in order to serve the customer in the best way possible.

And then just a follow-up question here regarding the continued scale then. With respect to the normalized operating costs, which had a very minimal change quarter-over-quarter. If you look into next year and adding even more states or the states getting even bigger, is that -- are we at a point here where the business is sufficiently scaled up from that operating expense side of things? Or will there be a need to add on more of that as we continue to grow and more market value continues to get than last year?

Sure. Anthony here. Yes, my comment about building a bigger boat, part of that is the team in addition to the infrastructure. And I don't think so. I mean we are still kind of building out both the retail and wholesale pieces of our business. And as the business grows, the complexity grows and the opportunity grows. And so I think what you'll see from us is we will continue to invest in people. Obviously, the right people. We focus on costs just as decent business operators just trying to run a good business. But at the same time, we 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 there saying, okay, the SG&A in Q2 of 2021 should approximate x, y or z. We can't do that. The business is moving too fast. And there's a lot of variables changing around us. And one thing that we are going to continue to do is invest in the team and continue to build the team so that we can execute on the opportunity ahead of us that we know it's just massive. So I would expect to see that gross number increasing on a relative basis quarter after quarter. And a lot of that just has to do with, call it, when certain facilities turn on or how quickly we can find additional team members that can grab an oar and help grow this build that we're building.

Your next question comes from the line of Aaron Grey from Alliance Global.

I'll add my congrats on the quarter. I just want to add on to a question I was asked earlier in terms of, obviously, the capital in which states that will be specifically allocated to. One state, in particular, being Florida, just given you just recently opened up another store there, one of the first ones you've opened in about a year. So just wondering, just given the regulation on the same -- there being no wholesale market. Are there any plans for any type of cultivation expansion in the state? And any additional store openings just kind of specifically focused on Florida?

Sure. Great question, Anthony here. Look, we're big fans of the Florida market. May not sound like it, but we are. Look, I think if you rewind, call it, 9 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 earmark dollars that perhaps could have been earmarked for Florida and moved 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, and it's something we talk about on a regular basis. But again, here we are now that New Jersey passed, call it, last week, that adds another layer of complexity. And so as we sit here in our shoes and try to allocate capital that's best for the shareholders, we're constantly reassessing the chips on the table and looking at them. We're bullish on the Florida market. We see the growth. We see some of 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. 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 would be premature to communicate anything as it relates to 2021.

Okay. All right. Great. A second question for me then. Obviously, 280E is something that still hinders you and 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. Can you talk about the impacts that 280E might have on the difference between the 2 and how having more sales flow through either retail or wholesale could impact the free cash flow you guys give versus what you have to pay out on the taxes side?

Sure. So look, obviously, 280E plays a role in -- within the business. And we've been able to, obviously, now that we're cash flow positive and paying big tax payments to Uncle Sam. The nice part is we have a business 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. And so -- but 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, so that if we do see growth of x, y or z within the retail versus the wholesale side of the business, the impact that will have from a cash basis. But look, here we are sitting, and it's not like a situation where we don't have the dollars on a pretax 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 Partheniou from GMP.

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 currently going through state Congress, if it gets passed as it's written, I believe there is a certification process where operators need to certify that they can meet existing medical patient demand to the state before serving rec customers. Do you have any color on what that entails? And assuming -- or at the point where rec sales start in New Jersey, do you think that could impact pricing in Massachusetts at all or demand?

So good question. I think the details of the certification are still a bit kind of ambiguous. Look, 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 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.

When New Jersey rec comes online, perhaps there might be some customers that shop in Massachusetts that would prefer to shop in New Jersey or if there could be any impact at all to the Massachusetts rec market as a result of New Jersey rec coming online?

This is Ben. No, I mean, look, if I had to just boil real simplistically, at this moment in time, this is water in the desert. It won't be that way forever. But right now, Massachusetts pricing as a result of New Jersey coming online is not a risk factor. Pricing, broadly, as I mentioned, is a constant risk factor and something we're thinking about how to do it. But all the supply in New Jersey and then some is needed, heavy on the and then some. Because Anthony's bigger boat is needed because there is a huge amount of demand on the East Coast.

Can definitely recognized 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 more purchasing of value products. You talked about the number of tickets increasing. What about returning customers? How have their purchasing patterns changed or perhaps not changed over the past several months. And particularly in Illinois or any other state that you would like to call out, are there still purchasing restrictions in place? And when do you think that could end?

When we could -- what could end? I just missed that last part of your question? Sorry, Andrew.

Any purchasing restrictions that could be in place, particularly in Illinois or any other state that you'd like to call out?

Well, I mean, purchasing restrictions, what I would call is really sort of opportunities for retailers to sort of serve more consumers in a place where there's really not enough water to go around. So what's happening in the consumer basket has been pretty steady. Unlike what happened last year, say, in vape gate at the end where people -- consumers really shifted, quick away from vaporizers and the vape pen and then understood quickly after, as I think the media and everybody did a good job educating folks that it was truly untested and unregistered pen that were making people sick and not legal and the consumer reacted back. We thought maybe consumers would go away from inhalables given COVID and the respiratory elements. And I think we said before, that did not happen. And I think what's really happening 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 nuance is, while very interesting, important, an incredibly detailed and a lot happening, core concept is massive new adoption by U.S. consumers and massive more consumption by those consuming. The river is flowing pretty heavy. And we're excited about that opportunity.

Your next question comes from the line of Matt Bottomley from Canaccord Genuity.

Ben, you described a little bit before that the sequential growth that we saw, very rough figures, obviously, about 25% of that was some rebounding in Nevada and Massachusetts. And then there was some specific state mentioned in the press release for the other 75%, one that we haven't really chatted on, on this call is Ohio. So given that there's a bit more of a hard cap there on the retail side, can you give any dynamics on your ability to carve out greater market share there, whether it's in wholesale channels or just other dynamics in that market with respect to patient uptake and where Ohio might rank? And then what does it sit in your core markets at this moment?

Yes. We love the Buckeye State. The -- look, we've seen the movie before. They're pretty transparent with what kind of data is going on there. And the 10 million plus person stake, 11 or 12, and we know what that demand among those consumers looks like. We're excited to have the maximum number of retail stores open. We've got great market positions, places like Lakewood, Lorraine, Toledo, unbelievable team out there. So we're excited about where this heads, and we'll be putting capital into Ohio that will drive really sort of high level, 2022 and beyond. So well stay tuned.

All right. And then just a follow-up question on one of the other sort of anecdotes you gave with respect to Florida. Are there any other markets and one that sort of notable as it just sort of look through where your exposure is maybe California, were that's not where a lion's share of the capital allocation is right now. But a lot of different MSOs and other operators in the space that are much more capital constrained than you guys at this time seem to be going narrower as opposed to wider. So is this an opportunistic time for GTI to start expediting capital allocation in other markets? Or if you line up everything you're doing or going to be doing in New Jersey and then some of your core markets, which still have very high growth rates. Is that something that, again, could be maybe a nice to have as opposed to something to focus on right now? And any anecdotes on other markets that you think might make sense in the nearest term here would be helpful.

Sure. I would summarize it by saying everything is on the table if it makes sense. And we are watching a massive green wave transform this country and create the next great American growth industry. So it's happening everywhere because people are everywhere. And we understand the supply demand by those markets. We see this the green wave. We are studying. We are watching. We're playing an ROIC game in order to grow the chips for shareholders and put them back in the game to understand what's happening. We love our current portfolio, broadly east of the Mississippi. Everywhere we love, we see the flower shortages happening there and then just watching what we call internally the state of the states, and you really watch the growth happening across this country. It's quite tremendous and we're excited for everybody else to eventually wake up.

Your next question comes from the line of Mike Hickey from Benchmark Company.

Congrats on the quarter guys, the performance you have done. I guess just one question. I guess it's still early days. Green wave is just building here, but it's going to be a monster. You continue to scale and I'm just wondering how you think about sort of the construct of your business between CPG and retail that do you think there is long-term harmony there between those 2. If you think over time, maybe there's benefit to separate those 2 and separate companies?

There's great harmony there. There's a 1 plus 1 equals something bigger than 5. And we're focused on building our brands and the relationship with consumers. So that's about being where consumers are. It's about understanding the market and investing in those 2 businesses. It's a different kind of business to build a store for $1 million and build an e-com platform then there is about $50 million into the state of Pennsylvania in order to build supply and make mass consumer products at scale to be distributed across the entire state. So we love both those businesses. My job and the team's is to support those 2 businesses, build teams that can make sure that those folks can go execute. It's about optimizing the distribution channels. It's about getting Dogwalkers to every consumer that wants them. A very easy message. And by the way, it might lead to a nice evening at home. Try for yourself to sort of the message, and we'll watch what happens. And isn't it a pleasure to own the booze and the bar. It's quite simple. It's the same thesis from day 1. And we continue to optimize those. And what we can do to unlock shareholder value in the future. That's what keeps it exciting, and 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've seen -- I think we're slogging for a couple of years now. This is the most fired up I think I've heard of you. I mean is it the quarter? Or is it the politics? Is it the growth in front of you? Like what's really driving, I guess, your enthusiasm? It seems to have sort of metered up here on this call.

Thanks. Yes. I mean, kind of be tempered. But there's a tideway of demand that we've been talking about for 6 years in a row, and it's helping people feel better. And it 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. This is a U.S. story. It's still misunderstood in the media, literally. Like the wrong ticker symbols are on 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 we're fired up about that. And we're fired up about the tens of thousands of people that we can help. And really like big picture, small picture and the team. Team fires me up because you guys are doing a good job and then making it fun for everybody. So...

Your next question comes from the line of Scott Fortune from Roth Capital.

Real quick. I just want to follow-up kind of strategically, Ben, around California in the market. We've seen 31 municipalities come on board now to really start opening up legalized cannabis here in the state, kind of. But what's your thought around brands, your focus is east of Mississippi, but coming from California and your strategy in California, like 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. Because -- but the biggest doesn't mean it's the best. It might be the best way to lose money. That may be a backward-looking statement, we hope. And we are studying it closely. We obviously have a big presence in Nevada, in Las Vegas. A lot of this is close geographically. We have licenses in Southern California. We plan to execute on. We are watching the entire supply chain of that market: pricing participants, brands, retailers and every part of that supply chain. And the 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, it's about 700. You had good 33% quarter-over-quarter CPG growth, but it sounds like that's mainly coming through throughput in your existing stores. But where are we as far as an inflection point of kind of production into actually getting more distribution into a higher number of stores? What's that level at if you have a number?

Yes. Thanks. I don't have a detailed number for the what I would -- the way we look at it really is how penetrated by state. So when we're 100% penetrated in the state, it's impossible to grow the doors. When we're 98%. So it's not like there's a lot of opportunity out there for new doors in many of the states that dominate our portfolio, whether it's Illinois, Pennsylvania, Maryland, et cetera. So that's the best measure I can give you until there becomes more stores, and we plan to continue. When Illinois get 75 new stores out, we plan to have products in the doors there. And as new stores open, it's important for us to have product on the shelf for those consumers.

Your next question comes from the line of Andrew Semple from Echelon Capital Markets.

Congrats on yet another excellent quarter. 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 leverage. What's your thoughts on that, on potentially looking at debt financing to accelerate capital expansion programs or else accelerate your M&A pipeline, where you see accretive opportunities? And if you had any comments on whether there's anything holding you back from pursuing debt financing?

I can hit that a little bit. I think we mentioned how accretive it is and what happens with the cost of capital. As you know, and I think everybody knows the depth of capital markets in U.S. cannabis, it's not deep. We have been forging new ground for 2.5 years publicly and 5, 6 years privately. So somebody would like to refinance our debt at 6%. We think our interest cash costs would stay the same if we borrow $200 million and we can put that money to work for shareholders and create huge amounts of equity value, and we're ready to go. But we're also very careful where our partners are in a methodical approach. We're examining everything on the table. And I think I've talked to kind of where the best places are like this for shareholder accretion, non dilution. And if not, that we need to raise equity capital. And just to kind of emphasize that we don't need to raise the capital. There are attractive ways, and we're measuring that all the time. We've been prudent stewards of that capital. And as cost of debt goes down, our refi opportunity becomes interesting.

Just my next question, and speaking about putting shareholder money to work, we're nearing the end of 2020. 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 might be?

No surprise. I can hit this one. There's a real high level on CapEx. We spent $100 million in 2019. We spent a little over $90 million so far this year, and there's no reason to slow down. I would look for us going bigger in 2021. And no surprise on the list of where that capital is going. I've rattled it all off, and we have great opportunities, and we're excited about what's going to happen.

Our next question comes from the line of Glenn Mattson from Ladenburg.

Building on that last question about capital. This quarter, a lot of capacity came online all at once and really created this surge in revenue and stuff. Do you imagine more uniform? Or should we expect kind of stair step increases in capacity next year?

It really depends. So Anthony here. The retail is easy, that's more kind of linear, just given kind of the -- just given the spend there per store. And then wholesale is where it's very lumpy, right? Now as we kind of build out more facilities, we optimize our build-outs even more efficiently. And so I'd say the size of our bets kind of get bigger because our confidence gets bigger. I don't think that will change much on a go-forward basis.

One more quick one. Hopefully, by spring, this isn't an issue anymore given the various vaccines that are out there and everything, but there appears to be a significant increase in COVID cases out there. You've 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 how do you prepare the business for what could -- for any potential disruptions this winter related to COVID?

For sure. Expect the unexpected, keep the team ready for adaptability and invest in the team. So cleanliness procedures, SOP adjustments, PPE, split shifts, flexibility, testing, temp 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 SOP. It's unfortunate we got to kind of ramp a few things up and different levels on different facilities. But that's where we're at, and we want to invest in the team and 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've 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.

I guess the first one, with respect to Illinois, Pennsylvania, and understanding your comments around water in the desert. But just wondering, given the supply expansions you brought online and your peers having -- some of your peers having managed through the same. Have you seen any evidence of supply shortages or tightness easing at all? Where is the race between demand and supply? Where does that look now relative to where it was 3 to 6 months ago?

Both October in Illinois is way better than January. Without a doubt, there is flower, many operators have come online. We had $100 million versus whatever it was out of the gate and 25 in December. PA has pockets of tightness. High-quality flower remains in demand. So there's ebbs and flows. Product that comes online effectively doesn't go back, right? To Anthony's point, that's fair step function. So once the supply comes on, it's there, if there's more to go. There's more to go. There's more to go. But it's better now than it's been in any of these markets. And with each year, it continues to get better. The thing is the consumer base growth. Brand loyalty grows. So it continues, but it's not a dire situation in Illinois, the way it might have been in the beginning. But there's still massive unmet demand.

Excellent. And just as my follow-up, I wanted to clarify, I think something you said earlier with respect to Nevada and Massachusetts and the dips we saw in those markets. Have you fully returned to pre-COVID shutdown levels in both of those markets? I know you mentioned a lot of recovery, but just wondering if you've crested above water, if there's still a little bit more work to be done there?

Yes. I hit that quickly. As of state, each one of those are above pre-COVID levels pockets of strength, opportunities within each, what's happening. But as a state, they are above and growing.

Your next question comes from the line of Howard Penney from Hedgeye.

As institutional investors continue to come into the space and GTI looks to attract those institutional investors, have you contemplated giving long-term targets to growth in revenues, EBITDA, profitability, whatever you think might be deemed important to contextualize your growth relative to the industry?

Howard, thanks. It's Ben. If I thought, we thought, you thought that, that would mean that things would change in the capital markets, sure. But that's a nonfactor. It's not that hard for the underwriting to happen here. It's not a portfolio manager gating item here. It's a compliance officer gating item. So the investment case is there. This is very, very simple. We see massive growth. We compare it against anywhere what's happening and how profitability and cash flow and all the other kinds of funding. It's not about future targets because it's easy to see 20% compound annual growth for an industry that could even be bigger, and business is growing over 100%, us included and others. But that's a massive opportunity and whether you're value garb growth, you can find pockets of amazing opportunity here, and we're seeing that. So I don't think targets would add to the bid.

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 gone 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, but there's a great use for capital. We're on that path to over $1 billion in sales. And as the world wakes up to the U.S. cannabis opportunity, we're excited to feel the privilege of this. Happy Veterans Day to everybody, safe holiday season. And we'll talk to you in March. Thanks, everybody.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.