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

Welcome, everyone, to Jushi's first teach-in. Thank you very much for joining us today. My name is Michael Perlman, Head of Investor Relations at Jushi. I'm going to be walking you through a presentation, walking you through a general industry outlined investment thesis within the MSO space, what sets Jushi apart. And hope to lay open it up for Q&A. So with that, before we begin, I'd like to just remind listeners that certain matters discussed in today's presentation or answers that may be given to questions asked could constitute forward-looking statements within the meaning of Canadian and United States Securities Laws. Actual results could differ materially from those anticipated in these forward-looking statements. So let's get the presentation started here. The first slide, as I mentioned, we're going to talk about the cannabis industry opportunity. As you can see from the left-hand side of the slide, the cannabis market is one of the fastest actually growing markets in the United States today, growing at a 17% compounded annual growth rate between the period of between 2020 and 2025. The 17% CAGR is being driven by an increase in the recreational cannabis market, driven by additional states adopting adult-use legislation, also the continued maturation of adult-use programs that have been recently implemented. The migration from the illicit market to the regulated market and also an increase in markets from the medical side of the industry. Moving to the right-hand side -- right-hand portion of the slide, U.S. market size 2021. As of 2021, the legal U.S. cannabis market is $25 billion. That includes the recreational and medical markets. That's only the legal side. You can see if you look at the total U.S. cannabis market, both legal and illicit, it's combined for $65 billion. So the legal market only accounts for less than 40% of a total U.S. cannabis market. So the most compelling market share opportunity for regulated participants within the industry today is not going after their -- our peer market share, but actually trying to migrate folks from the illicit market into the regulated market. For illustration purposes, we're also including the total alcoholic drink market as well as the U.S. prescription drug market. These are adjacent markets to cannabis. We expect further market share to be gained from these markets over time. We're already seeing it in certain demographics as certain younger audience are moving towards alcohol into the cannabis market. The next slide reviews the investment opportunity within cannabis. What you see here is based -- if you look at the blue diamond on the screen, it shows the growth profile for U.S. MSOs as an industry between the period of 2019 through 2022. The industry is -- as an industry is going to be growing at just less than 100% during this period of time. On an EBIT -- an enterprise value to EBITDA basis, you can see from an industry perspective, the industry is gaining applied a less than 10x multiple. This compares to other 225 other industries where they are growing at a fraction of the pace that the U.S. MSOs are growing, but yet are being valued at multiples higher than the U.S. cannabis space. And the reason for this is the structural deficiencies within the market itself. So the 2 top issues that we have is the lack of institutional participation within the cannabis space due to compliance issues, as well as custodian issues that we hear more often every single day from a lot of folks that are just waiting on the sidelines. The other main issue is the lack of access to traditional capital markets not being able to list our equity on the New York Stock Exchange or on NASDAQ is an impediment in terms of getting people involved in the industry. This actually provides a very compelling opportunity for folks that can get involved today to be able to essentially front-run the smart money that we think will come into the space as soon as some of these dates come down in the industry. We think there's a wall of capital sitting out there doing their research on the industry today, developing that short list of folks that they're going to be interested in and going to come into the market at some point in the future. The next part of the presentation, I want to walk through what ultimately sets Jushi apart from our other U.S. MSO peers. So I think it's most commonly asked question that I receive on a daily basis from those folks that I speak to is given the investable universe within the MSO space, there's approximately about 10 what we think investable companies. Jushi, of course, is one of those companies. How are we different from those other players in the space? So these are the key topics on a summary level that I'm going to run through. So first, Jushi has had industry-leading organic revenue and adjusted EBITDA margin growth, both on a sequential and year-over-year basis. Jushi has most highly concentrated position in states with favorable regulatory developments. We have a best-in-class M&A track record. We have an industry-leading online platform that allows customers to gain access to product, menus and be able to procure product in an expressed fashion. And we have a very experienced management team, which we've recently just bolstered and we have an early focus on ESG principles. So with that, we'll go through each of these items. So as I mentioned, industry-leading revenue and adjusted EBITDA margin growth. For the most recently reported period of time, we announced our third quarter 2020 revenue and adjusted EBITDA results. We plan to release our fourth quarter and full year results towards the end of March. But for the period that we've already reported, Jushi reported revenue of over 117% year-over-year. Adjusted EBITDA was up over 125%, and we saw sequential double-digit improvements as compared to Q3 to Q2. Moving to the right-hand side of the slide, when I discussed earlier that as an industry, the MSOs are growing at about just shy of 100% between 2019 and 2022. You can see Jushi during the same time period is growing at a compounded annual growth rate of 242%. From 2019, when we had about $10 million of revenue to the expectation in 2022, where we're going to do approximately $375 million to $425 million. So tremendous growth during this period of time. We also have guided that we expect adjusted EBITDA on an IFRS cap basis to be about $110 million to $130 million. Next slide speaks to our footprint. This is a graphical illustration of all the Jushi assets across the U.S. As I mentioned earlier, we believe we have the most highly concentrated position in assets that have or have favorable regulatory developments. I'm going to highlight those 2 first, and then we're going to go through the rest of the portfolio. Those 2 markets are Pennsylvania and Virginia, Pennsylvania, there's been a lot of talk about potential adult-use legislation. Of course, within the state of Pennsylvania, over 60% are in favor of adult-use legislation. The state itself has had multiple bipartisan bills being introduced within the state. And of course, in the adjacent states surrounding Pennsylvania, you've seen a number of states at adult-use legislation, putting more pressure on Pennsylvania to roll out its own adult-use program. From a Jushi asset perspective, we have 18 operational stores. We opened up our 18th store late in December of 2021. So 2022 is all going to be about optimization of those 18 stores. We also operate a grower-processor facility that we acquired back in the summer of 2020. That facility is 81,000 square feet. We are expanding that facility from 81,000 square feet to 210,000 square feet, and we expect that to be completed by the first quarter of 2023. That will position us to shore up the supply chain, to be able to send product to our 18 stores as well as to be a much larger player in the wholesale market as the medical market continues to evolve and as we plan for a potential adult-use scenario in the near future. The second market that we have significant exposure to that has had favorable regulatory developments is Virginia. Virginia enacted adult-use legislation, pass adult-use legislation back in April 2021. That program is expected to begin on January 1, 2024. But there's been a lot of positive regulatory movement in the last 12 to 24 -- last 12-plus months, including the -- essentially the decriminalization effort within the state. So as of July 1, 2021, consumption and possession is legal within the state. However, the state did not put together a framework for the legal procurement of product. So what ultimately happens because you can consume it and possess it legally but you have no way to procure it legally, that pushes folks into the illicit market. That pushes folks across state lines, bringing product back illegally. So what they're working towards right now, the legislature is potentially implementing a transition bill. And this is more of a health and safety issue within the state to prevent the illicit market from creeping up and for bad product coming through the system where ultimately people may end up purchasing. So Virginia is moving quite quickly. Also recent developments in Virginia. The medical program is rapidly evolving. Most recently, Flower was added to the program as of September 2021. Flower typically accounts for 50%, 55% of total volume within a program. It's the most attractive product within the entire assortment. So once we saw flower added, we saw a tremendous increase in volume in our business come September. However, right now, given the backlog of patients just trying to get medical cards, it's currently about 4 or 5 months, the time it takes to get your medical card in the state. It's just taking time for that medical program to develop over this past couple of quarters. In terms of our assets, the Jushi assets in Virginia, we have 2 operational dispensaries. Those 2 operational dispensaries are going to be -- we're going to be expanding that to 6, which we expect to be completed by the first quarter of 2023. We also operate a 93,000 square feet processing facility. That processing facility, we had initially built out the first 30,000 square feet as the medical program was maturing over time. The full 93,000 square feet is expected to be online by the second quarter of this year. And then we are also looking to expand that 93,000 square feet upwards near to 195,000 square feet, once again, in anticipation of an evolving medical program and as adult-use legislation comes into play. So really excited about Virginia. One of the most -- one of the special things about Virginia that I want to call out, the focus on is the state itself is a very limited license market. Currently, the state was carved up into 5 geographic regions where there is a single vertically integrated license within each of those regions. That vertically integrated license requires each participant to be once in vertically integrated, also gives that license holder the opportunity to open up, up to 6 retail licenses within the state. It also allows you to deliver, and it also allows you to wholesale anywhere in the state. What's important about how the geographic zones are broken up is novel geographic zones are created equally. HSA II, which is the region in which Jushi has a license for is Northern Virginia. And Northern Virginia, we think, is the crown jewel of Virginia. We're talking about 2.5 million of the 8.5 million population-based within Virginia. We have 5 of the most wealthiest neighborhoods in the entire state based in HSA II, our region. We have the lowest median average age of 37 years old. It's home of Amazon each Q2, which is opening up in Crystal City. So a very desirable location that we are opening our stores. And keep in mind, the license holders that are based in the state can only open retail locations within their specific geographic region. So Jushi can only open up those 6 assets in HSA II. So it's important that the -- in other programs, you'll see across the U.S., there is no restrictions on where you can open up retail assets. This provides us exclusive operating right within one of the best regions in the entire state. Moving along. So we talked Pennsylvania, we talked about Virginia. Illinois is one of our other top markets within the country. Currently, we are -- we only have retail assets within the state. We operate 4 stores, 4 high-performing stores, 2 of which are in a border town called Sauget, which is just outside of downtown St. Louis in Missouri. And the other 2 stores are in a region called Bloomington-Normal, which is a college town, home of Illinois State University and also local number of corporate headquarters based in that area. We were recently awarded an additional license for the Peoria region, which puts us at a count of 5. The state cap within Illinois is 10. We would -- we are looking to potentially through M&A to add additional licenses to complement the existing 5 that we have today and potentially vertically integrate to support those stores. And that could be purchasing craft grow licenses where you're able to stack or potentially purchasing a cultivation license as well. So the plan for Illinois is to complement the assets that we have today and potentially backward integrate through potential purchasing a grower-processor. The fourth market, I'll highlight Massachusetts. We closed on Nature's Remedy of Massachusetts in September of 2021, fantastic asset, 2 high-performing retail locations, also operate a 50,000 square foot grower-processor facility in Lakeville, Massachusetts. When we first purchased the Nature's Remedy of Massachusetts asset, the 2 stores were doing extremely well. The Nature's Remedy was just in the process of adding additional cultivation capacity to the Lakeville facility. When we completed the acquisition, about 33,000 square feet of canopy had just come online. So the story around Nature's Remedy is continuing to ensure that those stores are still delivering at a very high level, but also to introduce wholesale capacity into 2022 as we look to become a much larger participant on that -- in that part of the market. Those are the 4 largest contributing markets to our portfolio today. The other markets will define as more developing markets. We'll start off with Nevada since we've had some recent announcements around that state. We signed 2 definitive agreements, one for a stand-alone retail location to call the apothecarium just outside of Downtown Las Vegas. And also, we signed a definitive agreement to purchase a single-state operator named NuLeaf that currently operates 2 operational stores, has a license to open up a third store on Las Vegas Strip and operates a grower-processor facility in Sparks and a processing facility in Reno. Those additional assets coming online will allow us to be vertically integrated in the State of Nevada. We only operated a very small grower-processor, which was challenging given that we didn't have the retail shelf space to essentially push our product out. So we think that's going to be a great asset. Nevada is going to be a great contributor for us coming into 2022. The asset itself is expected to close more like in the early second quarter of this year. Jumping over to Ohio. We completed 2 acquisitions in 2021, processing license as well as a grow license. We participated in the lottery for the additional 73 locations that were coming online to supplement the 57 that are operating today. More formal announcements related to the winners about that Ohio Lottery will come out in the near future. So keep an eye on the headlines. But essentially, we are looking to add retail to complement the existing growth and processing facility that we have in the states. We have the opportunity to build out up to 5 locations under the limited license cap within Ohio, and we plan to do so through M&A. The last market I'll highlight is California. Now California, we look at differently than our other markets. California market has been very challenged over the last 12 to 24 months. We currently operate 2 stores, one in Santa Barbara and the other in Palm Springs. The Palm Springs store is actually going through a heavy remodel at this moment in time. So it's actually closed for the time being. It'll open up sometime in the April time frame. And we plan on opening 2 additional stores by the midpoint of 2022. Those 2 stores are in -- one is in Grover Beach and the other one is in Culver City. How we look at California is that we like the market very much from just the fact that it's one of the largest cannabis markets in the world. We think there's a lot of learnings to be obtained within operating in that state given the level of sophistication of a customer given brand development. So we feel that if you're able to operate in a market like California, where it is the most competitive market in the country, ultimately, you can take those learnings back to the East Coast. The markets like Pennsylvania, Illinois, Massachusetts, Virginia, will ultimately become much more competitive down the line. And by being successful in a market like California, we think we can ultimately make sure that we're well positioned to be successful in the future competitive landscape that we think will play out in those East Coast markets. We're going to shift over to the next slide, which is best-in-class M&A track record. I can't say enough about the team that we have here at Jushi. This slide illustrates some of our accomplishments that we've been able to talk about over the last couple of years. In terms of the quality of the assets, in terms of the price at which we pay for the asset. I think it's second to none in the industry. I'll highlight a few of the assets here. For instance, in Pennsylvania, which we mentioned, we're operating at 18 stores. In total, for those 18 stores, we paid $80 million. If you looked at some of the recent announcements from other U.S. MSOs, you can see 3 operational stores going as high as $120 million. The grower-processor facility that we purchased in the summer of 2020 was from a distressed player. We're able to pick up that asset for $37 million. You see assets most recently going for upwards to $93 million, up to $100 million for similar types of licenses/assets in Pennsylvania. So we paid $117 million in total for '18 licenses and an 81,000 square feet grower-processor facility with significant expansion opportunity, which I briefly mentioned earlier. In Virginia, we believe we have the best license in the state. The -- we paid for, in total, is about $33 million. Recently, one of the license turned over. It was approximately without -- the payment was about $83 million plus an earn-out which probably took it to about $125 million, $150 million in total. So we think we got a great deal on that -- with that Virginia asset. Illinois, we purchased at that time was 2 medical stores, early in just as the state was transitioning from medical to adult use. We spent 2.5 million stores. Those 2 medical stores allowed us to convert those 2 stores to adult use as well as add 2 additional adult-use stores for a total of 4. Those 4 stores, I would say -- well, first, I would say those 2 medical stores when we first purchased them were single-digit million dollar stores on an annual basis. When adult use flipped on January 1, 2020, volume tripled at stores, medical stores that were transitioning to adult-use. So you can see the power of how -- what it means from transitioning from a medical program into an adult-use program. And lastly, the Massachusetts acquisition, Nature's Remedy is our most recent acquisition that we completed in September of 2021, essentially $101 million with earn-outs compared to a recent deal that was done about $158 million with earn-outs for 3 dispensaries in a GP. One of the key things within our M&A activity is important to note, not only do we have a great track record. Jushi is extremely well positioned going forward to be a significant player on the M&A front. Many of our U.S. MSO peers or at max cap or near max cap in many of these limited license markets, including Illinois, Ohio, Massachusetts, to name a few. So Jushi is an opportunity given the fact that there will be more sellers than buyers in these markets to pick up some really great assets at very fair prices. So we'll continue to update the public on our M&A activity going forward. But as I mentioned earlier, we are looking at assets in Ohio, adding retail to complement the existing grow and processing facility that we have. We can roll that up to 5 retail assets in Illinois. As I mentioned earlier, we have 5 assets. We can build that out to 10, and we can vertically integrate by adding a grower process -- grow, craft grow license or cultivation facility to that. We also have the opportunity to add one or more adult-use license within the state of Massachusetts to take us to the cap of 3. So significant opportunities within the existing portfolio that we operate today to expand our revenue base on a go-forward basis. Industry-leading online platform. I think one of the more important things that we did during early part of COVID was giving folks the opportunity to go online, have a complete real-time view of inventory on a specific location, get educated, pick out that product and then select the time in which they go and pick up that product at the store for an express pickup experience. The online reservation platform that we built out, we wasn't marketed, essentially grew organically over time. But essentially, what we saw is given COVID and folks trying to limit the amount of person-to-person contact during the early part of the pandemic, we saw a significant gravitation to the online reservation platform. And ultimately, we see anywhere up to 80% of our transactions now originating on beyond-hello.com, and naturesremedyma.com. Ultimately, a lot of these individuals, patients, consumers pick out their product and then where permissible, they do curbside pickup, or they visit one of our express POS stations to allow folks to get in and out within about a 4- or 5-minute time period. So we think it's very valuable from a customer engagement to get people in and out as quickly as possible. Online conversion rate essentially means individuals that are viewing the menus, how many of those individuals ultimately transact with us at near 14% as of the third quarter. Typical best practice and omnichannel experience is closer to 3% or 4%. So you can see the stickiness involved when folks come and view product on our menu, they're ultimately transacting with us. Average cart size is about $122 across the entire portfolio, will certain markets in that range, other markets are much higher. But on average, that's where we are. And then ultimately, in October and November of this past year, and we've eclipsed it a number of times since then, we've had 1 million sales days through the online reservation platform, which is just tremendous for that team, given the lack of marketing efforts around that and just the organic migration of consumers, patients alike moving into the online reservation platform. Next slide reviews our experienced management team. Going across the board, all of our management members have had very successful careers prior to joining Jushi, beginning with our Chairman, CEO and Founder, Jim Cacioppo. Jim had a very successful career, running multiple multibillion-dollar hedge funds prior to founding Jushi. Jon Barack also a very successful hedge fund career, most recently had worked for Jim at his family office and then had joined Jushi early on as a founder. Ed Kremer, our new CFO, has a fantastic financial background in terms of working with some consumer industry products, including Oakley, Beats by Dr. Dre, all of our people to name a few of the companies that he had finance leadership roles at. Leonardo, which goes by Leo Garcia-Berg, our Chief Operations Officer, Leo had spent 5 years as an international consultant at McKinsey and then ultimately 10 years at Anheuser-Busch, helping them integrate the Modelo facility in Mexico. So tremendous procurement, supply chain experience to help us essentially build-out our grower-processor, wholesale capabilities in each of the markets. We have a diverse Board that is quite involved in the business from Peter Adderton, Benjamin Cross, Marina Hahn, and Steve Monroe, all very diverse backgrounds, experiences that are able to help us as we navigate this industry, early focused on environmental, social and governance principles. I would say that we look at a lot of -- whether it be the build-out infrastructure of new stores that we're developing, products, packaging, the way we build out new facilities. We're keeping an eye on just driving sustainable results. An example of this would be our assets or dispensary that we're building out in Culver City. It's a forward-thinking environmentally focused building. We're building out efficient glass walls. We're doing a full-on remediation of the existing site. It's a former site of an ExxonMobil gas station. The facility will have very advanced HVAC charging stations, et cetera, as we look to build out that facility. We're also looking at increasing the use of organic materials in all of our packaging, which is a focus for our creative team. The social, maintained leadership position and workforce diversity. It's important for us that the employees in our store represents the communities in which they serve. We have -- we are significantly engaged in community events, festivals, concerts, ultimately to get the word out about what we do in these local communities given the limited ability to go out and do full-fledged marketing campaigns, you're very limited in what you can do in these medical markets. So we're out there with the local communities doing these events. We're also very much engaged from a legislation perspective about potentially incubating social equity licenses within our respective regions. I think there are more to come of that. You can see some of the legislation being introduced in Virginia, and that hits that point exactly. And lastly, I mentioned before, we have a very diverse board. We just recently eliminated our super-voting and our multivoting class. Now we're down to a single class voting structure. One share, one vote to be much more aligned as we look to potential uplisting down the road when we're allowed to. And we have a compliance hotline, which is a Whistleblower program, which shockingly, a lot of folks don't have in place. And then lastly, I want to touch upon our strong liquidity position that Jushi has. We -- as of the -- if you look at as of December 31, 2021, which in pro forma for the recent private placements, we completed, we have about $108 million in the balance sheet. Total debt was $142 million. We have an acquisition facility in place. Total facility is $100 million. We've taken down $40 million, of which the cash component of the Nature's Remedy in Massachusetts acquisition. We have $60 million of dry powder, and there's a $25 million accordion feature on that facility. Market cap as of close of day yesterday on a support and voting share basis, we're looking at $828 million. And on a fully diluted basis, we're at $1.2 billion. So with that, I'm going to pass it over to our moderator, who is going to open to essentially look at some of the questions that we received either through the presentation today or ones that we had received in advance.

Thanks, Michael. Our first investor question is, what are some of the company's growth drivers for 2022?

So for 2022, we're going to have there's going to be more significant contribution from some of the assets that were just coming online in the latter part of 2021. So we can go asset by asset in Pennsylvania. We ended the year with 18 stores operating. Many of those stores are -- actually were open towards the tail end of 2021. So they're still ramping up. It takes typically anywhere between 9 to 12 months for these medical stores to fully get up to their potential in market. So we're going to continue to see those 18 stores, many of the, I would say, at least 50% of those stores continue to ramp into 2022. Same with Pennsylvania, we -- like I mentioned, we have an 81,000 square foot grower-processor facility. We are building it -- we are building that out in phases from 81,000 to 210,000 square feet. The first phase is expected to be completed by the second quarter of this year. That will bring total square footage up to 125,000 square feet, Canopy up to 45,000 square feet and biomass capacity to about 25,000 pounds per year. So we expect in Pennsylvania to become a much bigger participant on the wholesale market on a go-forward basis. We had been historically very much retail-focused or retail-heavy on the revenue side, and you're going to see that be a larger contributor in 2022. Illinois, which is another one of our top producing markets, those stores, those 4 stores do anywhere between $75 million to $80 million on annual basis. We're going -- we should see continued, I would say those stores will probably be more or less flat going into 2022. We expect to add an additional store on Peoria, however, depending on how the litigation turns out, that store in Peoria may not open. But we have the opportunity, as I mentioned before, to potentially pick up some additional, whether it be vertically integrated, some cultivation assets and ultimately some additional licenses through the program that was recently launched. But we'll see how that plays out during 2022 in terms of when those assets ultimately come online. In Massachusetts, we had a full fourth quarter contribution from the retail assets that we purchased back in September. So that we'll have a full year contribution of the 2 stores that we operate in Massachusetts. And we also, as I mentioned earlier, we'll have incremental -- as this incremental cultivation canopy has come online, we expect to be a much bigger player in the wholesale part of the business in 2022. Virginia will continue to ramp. We expect to open up additional stores. As I mentioned, we have 2 today, will probably hit 5 stores by the end of this year. The sixth store may open maybe fourth quarter, early Q1 of 2023. We're targeting locations like Burlington, Alexandria, Fairfax, Woodbridge, key areas within Northern Virginia that we're going to open up stores. These stores are going to be much actually larger than our typical format, twice the size in fact. There will be anywhere between 7,500 to 10,000 square feet. We'll have about 25 point-of-sale stations within that store to make sure that those stores can turn through as many transactions as possible. Many of those point-of-sale stations will be dedicated to express. These stores will have 50-plus parking bays, so folks can get in and out as quickly as possible. That's what's coming online in Virginia. Also, we'll have a full year of flower part of the program in 2022. And as I mentioned, flower is the main driver. And we'll see how legislation comes along in 2022. There's more to come on that front, and we should know more in the coming weeks whether or not an adult-use program is going to be pulled forward into 2022 from the initially picked date of January 1, 2024. Nevada acquisitions, I mentioned, we should close on them in sometime in the early second quarter. So we'll get probably most likely 3 quarters of contribution from the 3 operating stores and that fourth store in -- on the Las Vegas Strip should open up some time within the next few months. That's the expectation. Those are going to be your main contributors within 2022 results. So I'll tee it up and give you the option to ask another question.

Next question. Can you provide an update on Jushi's M&A pipeline?

Sure. Sure. So I reviewed earlier in terms of what we're looking from each of the states and the opportunity set. So within the existing portfolio, we have the opportunity to vertically integrate in a couple of markets that we're not currently vertically integrated, and that's Illinois and Ohio. As I mentioned earlier, there are a number of MSOs that are at or near the cap within those states. So that provides Jushi a fantastic opportunity to compete for potential assets to go on for sale. We think there are going to be, as I mentioned earlier, more sellers and buyers in many of these markets. And as a result, we think we can add up to the cap of 10 within Illinois that would be adding 5 additional retail stores and vertically integrate by adding cultivation in Ohio, adding essentially bringing up to the cap, which is 5, so getting -- adding 5 stores within that state, becoming vertically integrated in Ohio. I mentioned earlier adult use. We can add one more store in Massachusetts. So within the existing portfolio, we're looking at those -- those are 3 of our core markets that we're looking at. We are also looking at adjacent markets to markets that we operate in today, whether it be Maryland, which is situated between, of course, Pennsylvania and Virginia. That's a market that's of interest for us. Potentially New Jersey, New York, Missouri. Those are all programs that we're keeping a close eye on. But we have all hands on deck approach to M&A in terms of being able to source deals, but we have a fantastic group of individuals in-house. We like to call it like a mini private equity group led by all of our black nerve. And essentially, those guys have decades of experience identifying and executing on distressed assets. All they do is due diligence on these assets, and they only have 1 client and that client is Jushi. So we expect to be active on that front in 2022.

Which markets are you most excited about in the near and distant future?

Yes. So I would say in the near future, I would say, Pennsylvania and Virginia based on the positive regulatory developments that have -- that we're hearing about that we think we think have people in place in the very near future. I think we were setting ourselves up for success in those -- in both of those markets. Much of the CapEx -- much of the capital that we're deploying as a company is in those 2 markets in anticipation of potential adult-use programs in both of those states. So we're doing everything we can do on our side to not only take advantage of the growing medical programs in markets like Pennsylvania and Virginia, but also planning for -- in a scenario where we do see adult-use potentially in the next 12, 24 months, what have you within those 2 states. So we think going big and going big early and positioning ourselves both on a -- from a retail side and also from a capacity on the cultivation side is extremely important. We've seen a lot of U.S. MSOs being very successful in other markets that have positioned themselves ahead of markets transitioning from medical to adult-use and be able to capture that share early. So we see a very similar opportunity in Pennsylvania and Virginia in those markets. And that's why you see much of our CapEx that we're deploying in those 2 markets.

Which states are you not in and why with respect to your strategy?

Yes. So you'll see the -- across our portfolio, the common theme is that we're focused on limited license markets. And that could be at the state level where that could be at the jurisdictional level. Markets like Pennsylvania, whether they limit the amount of retail dispensaries, they limit the amount of grower-processors, same with Virginia. There's only 5 license holders in the entire state, 4 of which are operational. Each one is only allowed to open up 6 locations in their specific region. Illinois has got retail store caps. Ohio, retail store caps. So we feel like we can be most competitive and that's the best return on investment on our dollars as we look to build out our presence in these markets. You won't see us in markets where they have unlimited license structures. There is a high concentration of the illicit market. California is an interesting example because it is an open market on a state level, but it is closed on a jurisdictional level. Actually, 2/3 of the jurisdictions within California actually prohibit the sale of adult-use product. So when in California and how we picked and chosen our spots within California, are these limited license jurisdictions like Santa Barbara, we're 1 of 3, Grover Beach we're 1 of 4; Culver City, we're 1 of 3. So those are the types of markets that we're looking for. So we're very particular in terms of where we're essentially going to look for new assets. We -- there's only so much capital and we only have so much bandwidth as a team. So we're going to be very selective in terms of the markets that we're looking at them.

We're having the best license in Virginia from a geographic standpoint matter as much when adult-use sales commenced in the state.

Yes. So I think at this point in time, being able to build out the retail structure in advance of adult-use sales being able to -- which we've already highlighted delivery and which is now a very integrated part of the sales process within Virginia as well as building out this capacity, which takes years to do in anticipation of our additional licenses coming online, which we are all in 4 as -- because additional retail licenses come online, that will allow us to expand our wholesale business within the state of Virginia, had that many more outlets that we can push our product. So it's important for new licenses to be added in the state, and we look forward to it in Virginia and we are building out in anticipation of additional licenses being added as adult-use legislation, but it's put into place. We have a window of time in which we're operating today where essentially, we are the only ones with a retail presence in Northern Virginia. We'll see how the transition bill plays out ultimately and whether or not the state bridges the gap from a health and safety issue that folks can't legally procure product in states, which is a huge, huge problem. We've seen other states go through this very same issue with the decriminalization and no legal way to procure products. So there is that potential for folks within the State of Virginia to be able to kind of be that stop-gap before full-on adult-use legislation gets enacted. But no, we're looking forward to additional licenses being granted. I think it's going to be a great opportunity to increase access in the state, and we're ramping up our production capabilities in anticipation of that.

What are the company's plans to expand its retail network through 2022?

Yes. So currently, we ended the year with 28 dispensaries open and operating. We have licenses for 39, if you include the Nevada acquisitions that I spoke about earlier. So that will take us to 39. Over and above the 39, we think we can get the -- at least from a visibility perspective, we see out towards potentially adding up to 50 locations. The 50 -- going from 39 to 50 is the additional locations to be added in Illinois, which is another 5. Additional locations in Ohio, which is 5, and the 1 store in Massachusetts. So that's essentially bridges you from 39 to 50. We'll look at other markets as well. We're going to pick and choose our spots. But just from the existing portfolio and how we see filling out up to the license caps within a lot of these markets, we can see up to about 50 stores from a target perspective.

And our final question, why did Jushi raise equity capital?

Yes. So most recently, we did 2 private placements, and I would keep in mind that we weren't running a process to raise capital most recently. The individuals that we ended up doing 2 blocks with had proactively reached out to Jushi. They had been strategic investors with Jushi for going back to 2018, 2019. So they're very early investors, some of our largest investors. Wanted to get back in a big way into the stock, understandably, given the liquidity issues, lack of volume within all of the U.S. MSO names, to be able to acquire 1 million shares plus would move the market significantly. And ultimately, they reached out to us and asked for -- to be able to purchase a block directly. We thought it was a fantastic opportunity to essentially partner up with these individuals. The market reacted very positively because it's an indication you have very sophisticated cannabis investors that are essentially what we believe is calling a bottom in the cannabis space, and they're choosing Jushi as that vehicle. And so I think the headline was very, very positive. Ultimately, what we're doing with that cash is. We think there's plenty of distressed opportunities out there that are M&A group that is going to pick up. So in total, we raised about $13 million. That could be quite meaningful from just picking up a retail license in a market like Ohio or in Illinois. What you'll find with Jushi is that we will never stretch ourselves then from a balance sheet perspective. We raised capital ahead of doing acquisitions. And yes, so we're just very, very thoughtful in terms of capital allocation and making sure that we have more than sufficient capital to go out and pursue our M&A target plans.

And that concludes our questions.

Great. Thank you very much. Well, thank you all for joining me today -- in the group today. Look forward to once again speaking, we'll do more of these teachings in the future. We'll do it on a periodic basis. I would say, if you are not currently signed up for our distribution list, feel free to go to our Investor Relations website and sign up. Alternatively, you can send an e-mail to [email protected] and we can get you signed up. Also, please look out for the second episode of our cannabis investor series. We launched the first episode a couple of weeks back with Jim giving a high-level overview of the company. And we're going to be doing these episodes, introducing key management throughout the company. Tomorrow, we're going to be launching Brendon Lynch, our EVP of Retail. He's going to be reviewing our retail business, our plans within the retail segment, and then we're going to follow that up with Leo Garcia-Berg, who's going to review our production, cultivation, grower-processor facilities and so on and so forth. So keep an eye on that. And yes, thank you very much for joining us and look forward to speaking to you all soon.