Jushi Holdings Inc. (JUSHF) Earnings Call Transcript & Summary

Good morning. My name is Sherry, and I will be your conference operator today. At this time, I would like to welcome everyone to Jushi Holdings Third Quarter 2020 Earnings Conference Call. Today's call is being recorded. I will now turn the call over to Michael Perlman, Executive Vice President of Investor Relations and Treasury. Thank you. You may begin.

Good morning. Thank you for joining us today for Jushi Holdings, Inc. Third Quarter 2020 Earnings Conference Call. Joining me on today's call are Jim Cacioppo, Chief Executive Officer, Chairman and Founder; and Kimberly Bambach, Executive Vice President and Chief Financial Officer. This morning, we issued a press release announcing our financial results for the third quarter ended September 30, 2020. The press release along with unaudited financial statements are available on our website under the Investor Relations section and filed on SEDAR. Before we begin, I'd like to remind listeners that certain matters discussed in today's call or answers that may be given to questions asked could constitute forward-looking statements within the meaning of Canadian and United States securities laws. Such statements, by their nature, involve estimates, projections, plans, goals, forecasts and assumptions that may prove to be inaccurate. As a result, actual results could differ materially from those expressed by such forward-looking statements, and such statements should not be relied upon. Key expectations and assumptions may by Jushi include, but are not limited to, the continued performance of existing operations in Pennsylvania, Illinois and Nevada; the anticipated opening of additional dispensaries in 2020 and 2021; the expansion and optimization of the grower-processor in Pennsylvania and the facility in Nevada; and the opening of new facilities in Ohio, Virginia and California, which are subject to licensing approval. Risk factors that may affect actual results are detailed in Jushi's annual information form and other periodic filings. These documents may be accessed via SEDAR database. The forward-looking statements discussed in today's presentation represents Jushi's expectations as of the date of this call and are subject to change after this date. Jushi assumes no obligation to update and provide any forward-looking statements, whether as a result of new information, future events or otherwise, except or as required by applicable law. Please also keep in mind that all dollar amounts presented on this call are in U.S. dollars, unless otherwise specified. With that, I'd like to turn the call over to Jim Cacioppo, Chief Executive Officer, Chairman and Founder.

Thank you, Michael, and thank you, everyone, for joining our call today. I hope everyone is doing well and staying healthy during this time. This morning, I would like to take a few minutes to review the progress we have made since our last call and provide a broader update on our operational footprint and outlook. I'll then turn it over to Kim to review our financials, then we'll open it up to questions. Today, I'm very pleased to report we achieved sequential revenue growth of 67% to $24.9 million for the third quarter of 2020. Our revenue growth was primarily driven by a strong performance for our BEYOND/HELLO stores in Illinois and Pennsylvania, revenue contributions from our recently acquired Pennsylvania grower-processor permit holder and improved market conditions in Nevada. Importantly, during the quarter, we also accomplished a significant milestone as I am proud to report that we generated positive adjusted EBITDA for the first time in our company's history. Our results indicate that our strategy is working. By focusing on a select few high-growth limited license markets, Jushi remains well positioned to continue to deliver strong results. We also continued to upgrade our talent by adding several new hires in the third and fourth quarters with expertise in retail, cultivation and security. These individuals are experts in their respective fields and come from both inside and outside of the industry. Their focus will be on optimizing our current operations along with further developing our retail cultivation expansion initiatives. Before I discuss our operations by state, I'd like to take a moment to review our recent development since completing the third quarter. We've had a busy couple of months. First, we plan to nearly double the square footage of our Pennsylvania grower-processor facility at Scranton, Pennsylvania, to over 160,000 square feet in a phased expansion, which will nearly triple our canopy space to 98,000 square feet. The first phase of the expansion is expected to come online in mid-2020-21, and the final phase will be completed by the second quarter of 2022. Second, we increased our equity ownership interest in Dalitso LLC, Jushi's majority-owned Virginia-based pharmaceutical processor license holder from approximately 62% to 79% and plan to begin retail sales on December 1. Third, we opened our 11th BEYOND/HELLO retail location in Santa Barbara, California. We are opening our first Virginia retail location on December 1, 2020, and we expect to open 2 new locations in Illinois by the end of January 2021. Fourth, we closed on an approximate $29 million in net proceeds from our overnight marketed equity financing. With this recent raise as well as debt financing that we completed in July, we have further strengthened our balance sheet and have the liquidity to support further opportunistic M&A activity. Fifth, we announced the award of a provisional license for a medical cannabis cultivation of Portugal to its majority-owned subsidiary, Jushi Europe. Jushi is contemplating a spin-off to shareholders of Jushi Holdings' 51% ownership interest in Jushi Europe. Now let's take a look at our state-by-state operations. In Pennsylvania, in August, we further solidified our position as a leader through the completion of our acquisition of a Pennsylvania-based grower-processor permit holder, which added a 90,000 square foot cultivation and processing facility to our in-state footprint. The facility is ideally located as it resides within minutes of Interstate 81, Interstate 84 and the Pennsylvania Turnpike, facilitating efficient wholesale distribution to the 98 open dispensaries in the state, including our 8 BEYOND/HELLO dispensaries in Pennsylvania. Since closing the acquisition, the company's focus has shifted to optimizing the facility to ensure long-term growth and market share expansion in the Pennsylvania market. Jushi has begun implementing a series of operational facility improvements, including introducing new extraction technologies and equipment, implementing complete facility automation and improving room utilization to double overall yield while increasing product quality. These upgrades, which will be implemented over the next 12 months, are expected to significantly increase the production of both prepackaged flower and extracted products. Furthermore, as mentioned earlier, we plan to significantly expand the building footprint as well as the cultivation space. We continue to expand our retail reach with the opening of a dispensary in Reading, Pennsylvania, back in July and continue to consolidate our retail footprint in the state. We anticipate opening additional 7 locations in Pennsylvania by the end of 2021 with the first location opening in April and opening 1 location per month thereafter. In Illinois, we currently operate 2 BEYOND/HELLO retail dispensaries, servicing both medical and adult-use customers in Sauget and the Bloomington-Normal metro areas. These locations have both been performing strongly. And as a result of increased customer demand, we have extended operating hours and added additional point-of-sale stations at both locations to accommodate the increase in customer traffic, while ensuring that we allow for sufficient space for proper distancing for both customers and staff. Both of these stores have the option to open a second adult-use retail location, and we intend to exercise both options, doubling our store presence in Illinois to 4 stores. The additional locations have been chosen with design and construction currently in process. We are targeting the opening of the second Sauget location in December and the second Bloomington-Normal location in January of 2021. Both locations will emphasize speed and flow of foot traffic over browsing and will support customer shopping behaviors identified through months of research. In Virginia, we received approval from the Virginia Board of Pharmacy to commence vertically integrated operations. Our Dalitso operation is one of only 5 applications who have received this conditional approval and one of only 4 to have received final approval and permit issuance. We recently announced that operations have successfully commenced at Dalitso facility near Manassas and that we will be opening our first BEYOND/HELLO medical dispensary in Virginia on December 1, 2020. This is our first location in Virginia, and we anticipate adding an additional 5 BEYOND/HELLO branded medical dispensaries in the Commonwealth. We are targeting new store openings in prime areas, including Fairfax, Leesburg, Falls Church, Woodbridge, Arlington and Tysons Corner. This will significantly increase our reach of Virginia, allowing us to introduce our high level of customer service and premium products to another key market. Moving to the West Coast. In October, we opened our 11th national retail location and our first retail store in California with BEYOND/HELLO Santa Barbara. We are only 1 of 3 dispensaries permitted to operate at Santa Barbara as it is a limited license market. As previously disclosed, we continue to develop our plans related to moving forward in the merit-based application process as one of only 3 selective applicants for store firm retail and ancillary delivery permit in Culver City, California. In Ohio, the construction of our extraction and processing facility remains on track, and we anticipate opening in early 2021. And finally, in Nevada, improved marketing conditions have resulted in increased demand and improved performance on a sequential quarterly basis. However, the market continues to suffer from the lack of tourism. In the interim, we plan on expanding our operations into a second-owned facility, increasing our cultivation and scaling our processing and manufacturing. Before we further discuss our outlook, I will now ask Kim to review our third quarter performance. Kim?

Thanks, Jim, and good morning, everyone. Before starting, as a reminder, the results I will be going over today can be found in our financial statements and MD&A and all are in U.S. dollars, unless where noted. Third quarter revenue was $24.9 million, a 67% increase compared to $14.9 million in the second quarter of 2020. As Jim mentioned, the growth in our revenue was largely due to strong organic growth at our BEYOND/HELLO stores in Illinois and Pennsylvania, a partial contribution from the recently acquired Pennsylvania grower-processor in Scranton and improved market conditions in the third quarter for Nevada. On a same-store sales basis, our retail revenue increased by approximately 45% as compared to the second quarter of 2020, excluding 2 stores that were temporarily closed in Philadelphia. Gross profit was $12.3 million for the third quarter compared to $7.5 million in the second quarter of 2020. The 64% increase in gross profit over the prior quarter was primarily due to the aforementioned increases in revenue. Gross profit was 49% for the third quarter and 50% in the second quarter of 2020. Our adjusted EBITDA improved to a positive $1.9 million in third quarter compared to an adjusted EBITDA loss of $1.2 million in the second quarter of 2020. As in prior quarters, we define adjusted EBITDA, a non-IFRS measure, as EBITDA before fair value changes on biological assets and fair value changes on the sale of inventory, share-based compensation expense, fair value changes in derivative warrants, net gain on business combinations, gain and losses on investments in financial assets as well as gains or losses on legal settlements. Net loss for the third quarter was $30 million or $0.31 per diluted share compared to a net loss of $9.3 million or $0.10 per diluted share in the second quarter. The increase in net loss for the third quarter was driven primarily by the increase in the derivative warrant liability caused by the rise of the company's share price from $1.31 at June 30 to $2.44 at September 30, partially offset by a net gain in a business combination, higher revenue and gross profit. Turning to the balance sheet. As of the end of the third quarter, we had $35.8 million in cash and $7.4 million in short-term investments. total current assets of $62.6 million and current liability of $41.2 million as of September 30. Additionally, the company had $99 million principal amount of total debt, excluding leases and property, plant and equipment financing obligations. In October, the company received approximately $29 million in net proceeds from its latest overnight market equity financing rounds. Including this raise, and as of October 31, the company had approximately $73 million in cash and short-term investments and is fully funded for the build-out of the current portfolio as well as having excess liquidity to pursue opportunistic acquisitions. I would like to turn the call back over to Jim to discuss our outlook.

Thank you, Kim. This was a strong quarter for us, and I'm very proud of the hard work and dedication to execution by our team that has enabled us to achieve record results for our company. We expect to maintain this trajectory of robust operating results for the remainder of the year. And as a result, we have increased our fourth quarter 2020 revenue guidance from $25 million to $30 million to a range of $28 million to $30 million. And we expect fourth quarter adjusted EBITDA to be between $2.5 million and $3 million. For the first quarter of 2021, we expect revenues to be between $37 million and $40 million and adjusted EBITDA to be between $4 million and $5 million. We are also maintaining our 2021 revenue guidance of $205 million to $255 million and our 2021 adjusted EBITDA guidance of approximately $40 million to $50 million. We are incredibly pleased with our year-to-date financial and operating results. We achieved our first quarter of positive adjusted EBITDA, have grown our retail footprint in our key markets and have further developed our best-in-class cultivation and processing assets, all of which are supported by management's strong operational experience, deep consumer insights, award-winning genetics and comprehensive suite of innovative brands. As we look forward, our strategy remains focused on building out our footprint organically, while also pursuing attractive acquisition opportunities in both new and existing markets. With our corporate platform well built out, we can further pursue acquisitions and organic growth without incurring significant additional overhead expense. This gives us the foundation we need to act on opportunities while improving profitability. With our enhanced financial flexibility following our latest raise and our disciplined approach to capital deployment, we are very excited to enter our next phase of growth. Thank you again for your time. Operator, please open the call for questions.

[Operator Instructions] Our first question is from Graeme Kreindler with Eight Capital.

I wanted to start off with a question regarding the Virginia market and with that expected start of operations on December 1. Jim, you've discussed in the past about the Virginia, really in that early days, that patient uptake being very, very important in terms of that market getting up off the ground. So I was wondering if you could provide a bit of an update or some more detail in terms of what you're seeing right now in terms of patient sign-ups, patient uptake? And what sort of efforts are being made to ensure that that remains robust, not only on December 1 but through the first couple of months or first year of operations there?

Thank you for questions. In terms of the patient uptake, I don't have the numbers handy, but we do have numbers internally. We track this. Again, we're not sure exactly how accurate it is, but we do have numbers. It's been a very good outcome for us. The patients are coming to us. We have tons of e-mails. There's a lot of patients out there that want to get into the program. And that's been going on, by the way, for the year, really, the whole year. So that -- it's really good right now. And we're understanding from talking to some of the others in the market that some of those things are going on. Again, the data is not necessarily robust for me to share or quote on a public conference call, but we have some numbers that we look at and track. In terms of -- I think the market will be constrained more by supply and not by patient uptake for months to come. And when that sort of tips over, I don't know, but it wouldn't surprise me if the market is more constrained by supply for a good 12 months. And then in terms of our efforts to keep the patients educated about how to sign up for a card, we have particular people signed to this task. There's some very important regulatory requirements about what we as a licensed producer can do and cannot do, and obviously, we're very careful with that. But a lot of what we do is through doctors and pharmacists. So -- and -- but -- we had the regulatory constraints, but we have people in the organization, specifically assigned to this task. And the online presence, of course, is very important in the way society works now. So we do as much as we can.

Okay. Understood. I appreciate the color there, Jim. Moving on, I had a question regarding the gross margin and looking at it on an adjusted basis before any impacts from biological assets. This quarter seeing a bit of a sequential denigration from the Q2 period. So I was wondering if that was we're seeing an impact of the acquisition in this quarter and potentially what you expect in Q4 and beyond? Can we expect to see things revert back to where they were in Q2 and potentially higher as you continue to work on expanding that cultivation facility and improving the various processes within that?

Kim will answer your question.

Yes, Graeme, you're exactly right. We did ingest PAMS in the middle of August, and part of that was purchase accounting, fair valuing the inventory in progress, in growth stages. The margin was lower because we did take in Vireo's initial business economics at acquisition. But we've made a significant amount of changes in a very short amount of time, and you're going to see that margin coming back up in all of our future quarters.

From the business standpoint, not looking at the specific trend of the margin, I mean, the operation that we took on had a very -- a big plant that was underutilized and not run particularly well in our view. So we have to make investment, which gets expensed into that facility to get it to where we need to be. And there's a curve of investment and then returns after it. I'm very confident that over the coming months, I don't know if it's 2 months or 4 or 6 months, but we're going to drive significant growth in terms of what we can sell. And in a market that's short, at least to flower products, significantly short to flower product, we're going to grow what we can sell, and we'll do better on the margin front as a result of the expenses being more front-loaded.

Okay. Understood. Then my last question is, I just wanted to follow up regarding the comments made in my prepared remarks with respect to M&A. Could you give us any sort of color in terms of what the market looks like right now? Sort of what -- how close or far apart sellers and buyers might be in terms of valuation expectations? And then if there's any particular targeted geographies or points to the value chain that seem particularly compelling to Jushi right now? That would be much appreciated.

Yes. So yes, I'm just writing this down, so I can remember. So in terms of the sort of deal flow and the negotiation process, I think, was your first question. The -- I'd like to look at it as just been a long hibernation. You've had a cannabis bear market, I like the history associated with that. You've had a cannabis bear market since sort of we went public in May of last year. It sort of started that was maybe in the peak and then June. And so I think what you saw develop was a wide disparity between the ask, which is based upon the historical valuations and access to capital that didn't exist anymore and some poor management teams acquiring companies at such a rapid pace and events are virtually close to 0. And I think our deal to acquire the access of Vireo at the PAM asset, and it was one of the first deals that was done. And I think the market is starting to wake up, and it's still in that wake-up phase where people are kind of trying to figure out what's what on the -- when I say people, I sort of mean more the sellers. The buyers kind of know what they're willing to do and can do. I recently looked at -- we had our Board meeting yesterday, and I looked at the deal flow of what's been announced and what's closed. It's very, very minor if you look back compared to 2019 -- first half of '19 and 2018, very, very minor deal flow. So if you're sellers, you don't have a lot of choices. If you are a seller and want cash, you have even fewer choices. The sellers remain numerous. There's many, many distressed companies, as I keep saying, large ones and small ones that are public, in particular, that have -- don't have robust access to capital even though the capital markets have recovered. A lot of that have to do with their capital structures with too much debt and also the track record their management teams. So you have a robust group of sellers that really are out there, and they're on the sidelines of buying for sure. So what we see is we see markets where the sellers are seeing no bid activity, by and large, very, very few transactions. And the sellers, I think, remain somewhat confused and require handholding and education to understand what the -- how we would value them and what their possibilities are. And for us, that means that we can offer them cash. Obviously, we have a very strong balance sheet, especially with this recent announcement we've made regarding the warrants. And if they want some cash, there's very few people that do it, and then they have to understand the Jushi stock as well if they want to take part in that upside. So it's just an education process. And I think that it's hard work. We're very well positioned to do that with our business development group that now has been active for 3.5 years before we even started the company. So we're very, very good at this. And we like the fact that people are confused and require a lot of handholding. In terms of the value chain, which part of the value chain that we're focused on, we're focused on all aspects of the value chain and vertical licenses, a retail-only. For example, Nevada, that we have a grower-processor. We'd love to have retail. In Ohio, we have the middle of the chain, the processing. We'd love to have some cultivation or retail. And then California, we have a retail. First, retail-only strategy at the moment. And then in other markets, newer markets that are more developed, we look to get into -- with the corporate growth, we look to get into the grower-processors. I would say that the 1 node on value chain if you look as we get into a space that's very, very robust and very popular like Pennsylvania, and you're looking for retail, those assets virtually don't exist. So I think there's -- in the robust space, there's a very big fit for retail, and there's not a lot of it. So we feel like there is -- given how small we are that there's tons of opportunities and we play them off one and other. Whether -- for us, we're kind of agnostic to whether when we enter a new state. We're looking for the state plus the value plus the growth plus the management it comes with. And we can only do 1 or 2 decent-sized deals. So people have to be realistic. And there's lots of things we like. Our target markets, listen, we would love to build out further in every one of our markets. Pennsylvania, obviously, we're very fully built out. We're building our own assets. Virginia, we're built-out. We're building our own assets. Illinois, we'd love to get a grower-processor, and they're out there. And we can also buy more retail there, and they're out there. Maybe Illinois is a little too expensive, but people may be getting more realistic. And then -- and as mentioned, how we'd like to build out the markets, Ohio, California and Nevada already. And then in new markets, there's some good ones out there. I think we all know what they are. We have an advantage in Massachusetts. We're one of the only public companies that can buy Massachusetts. Why is that, but we're not in it. So there's a very limited number of buyers in Massachusetts. We have -- I mean there's a half a dozen people who'd like to sell to us. Another half dozen who -- they wish we would talk to them, but we don't particularly love their assets relative to the first half dozen. So we see -- we like that supply-demand imbalance in a state like that, and that's giving you some examples. Thank you, Graeme.

Our next question is from Russell Stanley with Beacon Securities.

Congrats on the EBITDA-positive quarter. Just wondering with, I guess, my first question with respect to the same-store sales growth quarter-over-quarter. I guess that was both increased traffic and basket size. But are you able to break that down into those 2 components? And comment as to the extent where those trends have continued so far in Q4?

Yes. So yes, in terms of the same-store sales, I don't have those numbers in front of me, but Michael can get to you with the specifics. But from my view, I don't think the baskets change all that much. I think it has more to do with more patients coming in, particularly in Pennsylvania, sort of new patients coming in, opening new stores. When you open -- I'm not saying the same-store sales, obviously, when you open a new store, there's a period of time where it becomes ripe. So we haven't been opening. We've opened -- we have some stores that weren't ripe. For example, in Ardmore and in Reading, Pennsylvania that are doing great. We also have some stores like Scranton, Pennsylvania. There's construction going on in the main pass. We repainted the store. You couldn't even know what's there. It's a fantastic, tremendous location. And there are stores like that, that we turned around the store from acquisition. It was opened before we acquired it or shortly after we acquired it. They did the work before we really -- that seller really opened it. So we've had these ripening of stores. I think Scranton is probably the best example where we're sort of turning around, I would say, a poorly positioned asset and then newer stores like Reading and Ardmore getting ripe. And then the Philly thing is they come and go to shut them down. We had to shut them down during the protest in the second quarter. And then the third quarter, we've had some issues with what was going on in the city. We had to take some precautions around the election. We hadn't -- we reduced hours to make sure the staff got home safely in case anything happen. So there's always some odd issues going on. There's some COVID issues going on, where you need to close stores once in a while to clean them up if somebody's caught COVID. Luckily, we've had everything very well under control. We have very good controls in place to make sure that happens. But I would say it has a lot to do with ripening of the newer stores and the patient count.

Great. That's great color. If I can move on to sort of....

And the other thing too -- Kim just pointed out to me that the same-store sales count could be helped or hindered by with supply. Pennsylvania has been short of flower. So as we build our internal supply coming out of Scranton, Pennsylvania at our PAMS facility, that will help us, I would think, gain market share. So in a supply-constrained market like Pennsylvania, supply is very important to driving sales.

Great. That addition, that's helpful. Just moving on to Virginia. Given the governor's recent statement of support for adult-use legalization. Just wondering if you can provide your latest thoughts on getting greedy here because your first dispensary is due to open in basically a little more than a week. Just wondering if you have your thoughts around time lines for the additional 5 dispensaries that you can open in that market.

We have a call this afternoon. We have 2 that were [indiscernible] and they're in pretty good shape. The time line for opening a dispensary in most markets, again, we're not really familiar with the Virginia market opening the 3 cannabis dispensary because one that's opened is in our cultivation facility. It's a great spot, but it's in our cultivation facility. So you learn a lot about the local regulatory requirements and what the state requires, but the time line from when you sign and when you say go, the earliest you could do it at 6 or 7 months and shouldn't drag on to more than 12 months, certainly. So that's a pretty wide range. But we tried to -- in Virginia, if we're supply constrained, we'll make those decisions. We have things under our control to push it to 6 or 7 months by, quite frankly, spending more money, deploying more resources at it. And if we're in a supply-constrained market, we'll make that judgment whether we want to spend excess capital on accelerating store openings. But we have a couple of great spots, I mean, tremendous spots picked out. And obviously, with what's going on with COVID, the unfortunate circumstance, there's a lot of vacant retail. And so unfortunately, it does work in our favor. But I think the Virginia market will be supply constrained, not retail constrained. Remember, we can deliver too at the Manassas. So it's a tremendous advantage in that new market.

Great. If I could sneak one last question in there with respect to yesterday's expansion news for Pennsylvania. Understanding there's a first and final phase, I guess, can you elaborate as to how many phases there are and what the approximate scale would be of each?

We -- yes, we have those numbers. I don't want to probably disclose them yet because it's too early. We still require some permits, and we haven't -- we think we know the order of go. We know the first phase, of course, where it's already underway. But in terms of Phase 2, Phase 3, which is -- there's 2 extra phases, which are very expansionary, only to our cultivation, we think we're doing one thing Phase 2 right now, but that could change. And then there is a Phase 4, which has to do with some excess properties that we're bringing into our property line. And those are further out there. So it's a multiphase project. And they're not -- Phase 2 and 3 are not too dissimilar in size, let's put it that way. And Phase 1 is smaller, and -- but it will be much more immediate because it's working within the existing facility.

Our next question is from Jason Zandberg with PI Financial.

I just wanted to ask about your outlook on operating expenses. You've been in that range of $10 million to $12 million for the last 6 quarters. I was surprised this quarter given your surge in revenue that your OpEx costs were still in that sort of similar range. So great cost control on your part. Just wanted to know in terms of modeling going forward, when -- I would imagine that that isn't -- that you would need to increase that to support $200 million to $250 million in sales next year. Just kind of wondering what the outlook is in terms of when we should expect to see OpEx costs increase going forward?

Well, as we mentioned previously, we fully built out our corporate structure to be able to ingest a number of acquisitions without having to increase our corporate overhead. So the incremental increases in operating expense that you're seeing is really as we stand up new stores and new facilities or expand facilities, and we're hiring operating teams to manage those -- each individual facility. So in general, you're going to see a much lower percentage increase in OpEx versus our revenue growth.

Yes. I mean the important component there is the corporate G&A. We have 2 larger corporate offices, one in Boca Raton, Florida and the other in Denver, Colorado. Obviously, Denver is where our cultivation -- long history of cultivation and processing and manufacturing comes out of. And then we have smaller pod, very much small pods in Southern California and in New York. But a substantial portion of our administrative expense is built out. As we grow the company, the hires tend to be -- right now, the vast majority over the last 3 to 6 months, which haven't been that big, it's been in accounting. We have to account for this and finance controls. So that's one. Compliance will be much smaller. Human resources is one that we're going to sort of gear up. And again, it's not the senior people, it's down below the most senior person. But human resources maybe the one area that we focus on a little bit more on the corporate G&A side. So it's very incremental, and we're substantially built out. And I've always said that in the last about 6 months that when we do acquisitions, growth going to be very, very accretive because we don't have to add much corporate G&A. What Kim is talking about, state-level expenses, there are some of those, especially in the grower-processors fall into the growth line, they fall into COGs. And so you don't see that in the operating expense. And -- but state level, it's very much related to opening facilities, so the revenue far exceeds what you're putting into the state level.

Okay. That's fantastic. Just wanted to, I don't know, if you have any early read on the Santa Barbara retail location that was opened, I guess, probably just under a month ago. Any -- so I guess this would be the third store that exists in Santa Barbara. Just wanted to kind of get an idea whether you have any sort of early read on either the run rate of that or just how it's been embraced by the community?

Yes. So the Santa Barbara stores, as you said, just opened up, and it's too early for us to really talk about it much. And I will say that we anticipate having -- before we open that store, you go into a market like California, where there's robust existing market for cannabis, whether it's just those 2 stores or listed market or stores, people pick up their cannabis when they're in L.A. or wherever they else they might be. There's robust supply in California relative to state like Illinois or Pennsylvania, of course. And so there tends to be a curve that you get on for 6 to 9 months. It's not like, hopefully, when we open up in Illinois, which should happen in December, as long as we have stock with inventory, we think there'll be this very large sort of uptick. But I would say California is a very -- most of the markets, any limited licensed markets like Illinois and Pennsylvania that we operate in, the product has tended to go short and demand has increased because people are using it more for medicinal purposes and adult-use purposes in Illinois. And so demand has been robust. And Illinois is quite recently more supply constrained. And Pennsylvania, it is supply constrained still. So that tends to be the governor in those states because there's such a massive unmet demand that's a new market. Now in California, so COVID has exacerbated that because people are home. We suspect, we don't know, but we suspect that there they're using it more. Now in terms of California and in a market with robust supply and it's also a state that has been shut down much, much more and COVID related than if you look at some states like Florida, for example, there are few tourists. Santa Barbara is a tourist market, you have 9 million tourists per annum that typically go in. That's probably closer to 0. And you also have a large university, University of California, Santa Barbara, they're not in session. So it's a very COVID-affected market. So the early returns in that market are COVID related, I think, the to some degree, and -- but there is also on top of that a natural curve, and we'll get more disclosive on California as we go up that curve because as we get more comfortable with what's going on there.

Our next question is from Bobby Burleson with Canaccord.

So nicely narrowing to the top end of the range for Q4. So you guys are seeing some healthy momentum. Curious if you could kind of touch on some of the elements of what's driving that upside?

Yes. I mean, I will say -- thank you, Bobby. I will say the disappointing aspect is the store openings which seems to take longer than you would like to. And I think that is COVID affected because you're relying on people who're outside your control. There's general contacting grew could -- somebody could come in and get COVID and they kind of have to shut it down. You can't get something that you used to, you require municipal state approvals. And they're working from home and they're backlog with other health-related things. So the process moves slower than we would like. So that's -- when we did that first, we hit that range at $25 million to $30 million, we took into account the low end of the range, some of the things that were out of our control. And I would say we -- so we've been disappointed by particularly Sauget 2. We thought, we'd open that store maybe a month ago, if we could add on that, that should be a very, very strong store for us. And that will open, it looks like mid-December, maybe even delayed a week for mid-December. So that would be a negative, but that's been offset by the organic growth. And the organic growth has been surprising us to the upside, which has allowed us to make the top end of the range. So there's 2 offsetting factors there. I view that as very positive because I know the store openings are coming. I mean we have 2 coming in Illinois, 1 in December and 1 of January. We had the Virginia store in December. We had some supply to the Virginia store, which is fantastic. And then we have a tremendous number of stores being opened up in Pennsylvania starting in April. So there'll be almost have one a month -- and they're not one a month for me for that, don't hole me for that please, but almost like one a month for the rest of the year in Pennsylvania. So there's a tremendous -- that's why we feel confident about a great curve of growth going forward in 2021.

Great. And then just touching on 2021, you've got about 20% range in your guidance from $205 million to $255 million top line. What are some of the key things we should be watching for as the year commences and progresses, to get a sense for whether or not you guys are towards the middle or the higher low of that range? Are there some key specific projects, regions, where there are store openings? What are probably some of the bigger factors in determining that outcome?

Sure. So on the organic growth, which -- that may be in some ways the toughest thing to project because it just kind of happens or doesn't happen. But we have a lot of things under our control. We're opening -- we're increasing hours of operation, for example. We've done that in this quarter. We're in the stage of increasing and analyzing whether it's cost-effective, meaning we're making good margins in the off hours, meaning the worst hours of when we were closed, but we're increasing -- we're going through a max hours policy basically, and very rarely when we not open max hours as allowed by the regulatory authorities. So we have things like that under control. We have BEYOND-HELLO.com, which is driving traffic. I think 80% of our customers come in knowing what they're going to buy. We have things in Sauget 1, our first store in Sauget, where we have lines and lines and lines, and where we've added POSs, we put in the plastic shield, so we can service more, we're changing the way the store goes. So we have these things that we've done in our own stores that help to drive organic growth. So that's one thing that's maybe the hardest to predict. Number two is opening stores. I just mentioned the Sauget store. I would take a look at how the new one does and the new Bloomington-Normal stores. We're very bullish on those stores. And then number 3 would be the stores in Pennsylvania. April, we expect to open the store in Irwin, which is the suburb of Pittsburgh. That's a very, very constrained market, probably -- I mean, it's obviously the Pittsburgh area is a very, very big market in Pennsylvania. The second biggest is Metropolis outside the Philadelphia area. So we have Irwin, and then we hope to open the one in Downtown, Pittsburgh, and then we opened -- we expect to open one that's in University City in Philadelphia by June-July time. That one is right in the middle of our next University of Pennsylvania and Drexel University, very robust traffic there. So we have a tremendous number of great stores. We have one in Easton which I really love. It's right by this A grade mall where everybody goes to shop next to Wawa. So we have these great locations that we are opening one after another. So that -- we keep track at that. I mean that's kind of like if you're supply constrained, these people tend to want to go. They want to go the closest dispensary if you have competitive product with a robust menu which we believe they'll have. The third factor would be the growth of PAMS, which is our grower-processor. We have these expansions. And then we have the turnaround. So 2 different things. The turnaround is taking something that requires a lot more management than they -- and that CapEx dollars and operating expense dollars, meaning different layers of management that required a lot more than it was given. So that's the kind of process, we're underway doing that. And again, that's go back to organic same-store sales growth, a little hard to predict when that love and care and a little more attention to CapEx and dollars spent on the operating expense side, when does that kick in. It will kick in, but that's something to follow. And then you have the first phase of the expansion. I think those are the big things on the upside. In Illinois, you have to watch for new stores opening. They have new licenses. It seems to be -- those seem to be going slow because of COVID and some regulatory stuff that's going on that causes it to slow down beyond COVID. So that may be a positive, but new stores could cause us to -- slow the growth rate in Illinois, that happened sooner than we thought. And then, listen, Virginia, it's supply constrained, a little bit of a wildcard. It could really surprise us either way relative to our projections. It was not -- we're super aggressive with Virginia. So that's the stuff that's under our control. And the third factor is we have acquisitions. We're sitting here with -- we've raised $30 million in the equity offering that we recently -- just under $30 million of net proceeds in the equity offering we did in October. And then we have this warrant acceleration that we just announced this morning, which should raise over $30 million that we think it won't be determined for 30 more days. But we think $30 million more, so $60 million. If I take $10 million aside of that and put it to the side for rainy day fund, I have a lot of buying power. We're not doing 100% cash deals with virtually anybody. And so we have a lot of buying power. And now do we get it in 2020? Well, we have to sign a deal, we have to close the deal, and we have to get it into the year. And that's the tough part. And I think if we do acquisitions, if I were on your seat, I would ask, hey, when do you think that's going to hit your numbers? Is it the third quarter? Is it fourth quarter? Unlikely the second quarter at this point, although that could happen. Yes, it's a small one but that could happen. So there's things like that going on. And so that's the -- I think that's the rough between that wide range. So I hope that helps you out, Bobby.

Yes, it does help. And I appreciate the mention of the Wawa. I haven't heard anybody talk about Wawa a while. Virginia sounds pretty exciting.

They don't how to a [ site ] retail at Wawa. It's my favorite [indiscernible] chain.

And they sell Scrabble. Okay. Well, guys. Really appreciate that feedback. And I'm pretty excited about Northern Virginia. That's a really good metro area where you guys are. So maybe that will actually end up being something material to the upside.

Yes, thank you.

[Operator Instructions] Our next question is by Tom Carroll with Stansberry Research.

I would like to echo the enthusiasm that I'm hearing on the call here. You guys have done a great job establishing yourself and driving strong revenue growth. So congrats on that. My question is, really, I think it's important over the next 12 to 18 months, right, as the company continues to grow, again, over the next 12 months or so, how will you build and test financial controls between kind of both the state operations up to corporate, right? And is this an active exercise within the company at this point?

I'll start, and I'll turn it over to Kim. So yes, it's a really active exercise at our company. Kim is a very experienced CFO who's done this many, many times. I have the distinction of having been an auditor before. I went to business school. It's not something that I particularly brag about, but that was the truth though. And so -- but I'm totally into internal controls. I don't like surprises. And we sort of have that top-down to the CEO pushes people and doesn't like surprises. And like -- so we have a robust program. So the thing I ask for, and I'll turn it over to Kim, is I want like secret shoppers going around in Pennsylvania, our own people. I want people going to stores to see if they're doing what they're supposed to be doing. And so I want to build up an auditing staff for both compliance and financial controls. And then on her -- we have a very large accounting department. Kim will give you the numbers, but we have a ton of checks and balances in the accounting department that would prevent any kind of a fraud or anything else. We have a lot of cash on the balance sheet, upward -- close to $100 million, I think. So we have to worry about -- it's not close to $100 million, but I'm assuming the warrant proceeds go successfully. So sorry, that's a little optimism in there. So -- but we have a ton of controls around that. And if somebody lies to us, we recently fired employee where there was some dishonesty. And so there's a culture of, if you have a mistake, you bring it to us very, very quickly. If it's a significant mistake and you don't, you'll get fired. And that's an important thing. Kim, why don't you talk more details?

Sure. Tom, my background is actually a high-growth startups. I worked in a number of different industries. And I also have public company background in the U.S. I did go through serving actually in the early 2000s as well. So a lot of my background in history really put into place that it was really important for me to put in place financial control, systems process, documentation very early from day 1 from the first acquisition that we acquired. We did actually stand up a financial service center very early, knowing that we're going to be highly acquisitive, which results in us ingesting acquisitions within the first 60 days into a centralized financial system -- financial service center, the same financial system, POS systems, tracking of KPIs. We work really closely with the senior management team to monitor very closely all of our acquisitions and our operating businesses. In addition, we still have very early compliance team as well, working with our legal department and regulatory in order to ensure that we are compliant with all local and state rules in regards to our operation of cannabis facilities in those states. We actually work really closely as well with our auditors, M&P, who work with us to do quarterly and annual inventory accounts and assessment of our fair value of inventory as we are both cultivating and manufacturing. We will continue to evolve that. And right now, as a venture company and the CSC, we don't certify the controls, but we absolutely have them. We're in one of the most highly regulated industries there is, and there's no question that our procedures and our policies exceed anything that normal U.S. SEC companies are required. But it's important to us. We wouldn't do it any other way.

Yes. And I'll just end up by saying, listen, I've operated in a highly regulated industry and best services, running -- starting and building multibillion-dollar hedge funds right at the top of the chain. And there's always lots of regulators who would love to take down a hedge fund people. So we were always [indiscernible] culture, and we fired a bunch of people already at Jushi who have done the wrong things. So it's something that we do.

Wow, a lot of laughing when you talk about firing people. That's actually...

Well, there's nothing serious that has occurred at.

No. But I mean, seriously, if you don't your job, it could be something like a COVID thing where you didn't alert us to a COVID thing. It could be little things, but you need to alert us when there's a problem, that's the culture. Because things happen every day in a retail environment, not every day, but certainly, most months, there is something that's going to happen. What you're supposed to do is gives up to the food chain and then our legal people, compliance people figure out me to a lot to regulators or whatever. Those little things happen. You've got to -- you have too many employees. We have almost 500 employees. You have to have a culture of zero tolerance for dishonesty and not putting up the chain of command. Just if you're running a business that's large and highly regulated business, you have no other choice.

Yes, that's great. That's a very good answer, very positive. And I just worry that as this industry reaches a tipping point from a political and regulatory and just acceptance standpoint that some of these companies, including yourself, that continue to get bigger and bigger and bigger, maybe lose sight of some of the financial controls. So any update you can give us on that in future quarters is appreciated.

Thank you, Tom.

We have reached the end of our question-and-answer section. I would like to turn the conference back over to Jim for closing remarks.

Thank you for participating on today's conference call. We would like to invite those of you listening to join us at our upcoming conferences and events, including Cowen's Third Annual Boston Cannabis Conference on December 1 and Cantor Fitzgerald's Virtual MSO Cannabis Summit on December 16. Have a great day and look forward to speaking to you soon again. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.