Good afternoon, welcome to the Curaleaf second quarter 2021 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Carlos Madrazo, Head of Investor Relations. Please go ahead. Good afternoon, everyone, and welcome to Curaleaf Holdings second quarter 2021 conference call. Today, we're joined by Boris Jordan, Executive Chairman, Joe Lusardi, Executive Vice Chairman, Joe Bayern, Chief Executive Officer, Neil Davidson, Chief Operating Officer, and Ranjan Kalia, Chief Financial Officer. Before we begin, I would like to remind you that the comments on today's call will include forward-looking statements within the meaning of Canadian and U.S. security laws, which by their nature involve estimates, projections, plans, goals, forecasts, and assumptions, including the successful integration of acquisitions on are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements on certain material factors or assumptions that were applied in drawing a conclusion or making a forecast in such statements. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Additional information about the material factors and assumptions forming the basis of the forward-looking statements and risk factors can be found in the company's filings and press releases on SEDAR on the Canadian Securities Exchange. During today's conference call, Curaleaf will refer to non-IFRS measures that do not have any standardized meaning prescribed by IFRS, such as adjusted EBITDA, the definitions of which may be found in our earnings press release. Please note that all financial information is provided in US dollars, unless otherwise indicated. With that, I'd like now to turn the call over to Executive Chairman, Boris Jordan. Good afternoon, everyone. Thank you for joining us today for our second quarter earnings results call. Before I begin, I want to welcome Ranjan Kalia, our new Chief Financial Officer. Having held multiple financial positions at CPG and technology companies, Ranjan brings a breadth of experience to the team. We are very happy to have him join the company. I also would like to thank Michael Carlotti, our former CFO, for all of his contributions. We wish him a prompt and speedy recovery. Our record second quarter results reflect the continued success of Curaleaf's strategy of unrivaled reach, scale, and strategic positioning in the U.S. cannabis market, as we once again delivered all-time high levels of sales and adjusted EBITDA profitability. We also acquired an unmatched presence in Europe, which provides us another major long-term growth lever for our business and establishes Curaleaf as the global pure-play cannabis market leader by revenue and geographic reach. During the second quarter, we delivered on our guidance with total revenue rising to $312 million, equivalent to sequential growth of 20% and year-on-year growth of 166%. Excluding our new Curaleaf International business, which we started consolidating for the first time this quarter, our revenue increased to $307 million. In terms of driving profitability, we posted record results here as well. Our group adjusted EBITDA margin reached 27%, increasing approximately 300 basis points sequentially. In our core U.S. business, our adjusted EBITDA margin expanded to 28%, up 400 basis points sequentially, as we benefited from our leading scale and captured operating efficiencies. Not only are we delivering impressive margin gains, but we remain focused on growth and the major opportunities that lie ahead. Executing on our national strategy, we have built a deep operational capability on the ground in all the key U.S. state cannabis markets, and we are early entrants into many more that will become relevant contributors to revenue and profitability over time. Today, we operate in five states that contribute at least $100 million in annualized revenue, and two more will be joining this group in the next several months. The other 16 states are markets with tremendous potential, where we have established a solid presence and where medical and adult use cannabis programs continue to evolve. To further strengthen our U.S. business, in May, we agreed to acquire Los Sueños, a 66-acre outdoor grow operation in Colorado to help us better serve the +$2 billion annual medical and adult use cannabis market in Colorado, the second-largest market in the U.S. today. Upon closing this transaction, we'll significantly expand our cultivation capacity, boost our profitability in the state, as well as integrate vertically and position us as a leading low-cost producer in the U.S. We expect this transaction to close soon. At the federal level last month, Senator Schumer introduced the long-awaited comprehensive federal cannabis bill. Curaleaf has led industry efforts to push for secular reform, including expanded access to banking, stock exchange uplisting, sensible taxation and regulation, and social equity initiatives. There is unprecedented support for cannabis reform across the political spectrum and by multiple industry and minority groups. This should provide strong motivation for Democrats and Republicans to negotiate and agree to a final version of the bill. We expect plenty of debate around the details in the coming months and believe some level of reform, which will minimally include banking and investor safeguards, will be passed before the midterm elections. The wide scope of the bill underlines the importance of having a long-term flexible strategy in place, taking into account the various potential outcomes. Our long-term strategy and multiple planning horizons have very much taken this into consideration. For example, our investment in Las Vegas cultivation facility provides us with very low cost, efficient, high-quality supply of biomass for both our needs and those of wholesale customers in the state today. It's ultimately capable of supplying biomass on a regional scale in the event of full interstate commerce. Also, at the federal level, last month, Congress approved the removal of roadblocks to scientific research into cannabis, noting the potential therapeutic effects of the plant, and maintained an existing provision that shields state and medical marijuana laws from intervention by the Justice Department. Just as importantly for near-term growth, state-level regulatory liberalization trends are accelerating. In New Jersey, we anticipate that adult use sales will begin in late 2021 and to fully ramp up into early 2022. We look forward to seeing the draft regulations for adult use sales this month and have been preparing to address this market with a full suite of products. Our new cultivation and processing facility is harvesting regularly, and we intend to maintain our leadership position in the state. We also look forward to opening our third dispensary in Bordentown, just south of Trenton, this month. In Connecticut, we anticipate adult use sales will begin in the second quarter of 2022. We have commissioned a significant expansion of our cultivation manufacturing facilities, are in process to secure additional retail sites in advance of the adult use program commencement. We look forward to addressing a new customer set and maintaining our leading position. In N. Y., we expect adult use sales to begin by early 2023. We are waiting for the Senate to confirm appointees to begin working on the regulations. Whole flower, long demanded by N. Y. patients and expected by future consumers, is on the governor's desk awaiting approval. It's codified into law, so it's not a matter of if, but when. We have commissioned another 110,000 sq ft to our cultivation complex and will ramp up additional capacity as we get a clear view on the regulations and timing. The combined tri-state region, where we have a leading market presence, has a population of 32 million, receives hundreds of millions of tourists every year, and has a potential estimated annual market opportunity of around $8 billion. Given our robust capacity, retail network, and strong brand identity, we're uniquely positioned to address this combined market. The potential in the Northeast also extends beyond these three states. By 2023, it is estimated that Pennsylvania and Maryland, where Curaleaf has a strong presence, will likely be among the next major states in the region to approve adult-use cannabis, with a combined population of around 19 million. Once these additional states become adult use, they are estimated to represent another incremental $3 billion annual market opportunity. In the six largest Northeast markets, according to forecast data from BDSA, Curaleaf has today the number one market share and will be one of the main beneficiaries of these markets ramp up. Looking beyond our market-leading U.S. presence, another major milestone during the second quarter was Curaleaf's entry into the global cannabis market with the successful completion in April of our acquisition of EMMAC, the largest vertically integrated independent cannabis company in Europe, which has now been rebranded and consolidated as Curaleaf International. We remain very positive on developments in Europe and its growth potential. Overall, we have never been more optimistic on the near and long-term outlooks for the business. Based on the trends we see today, we are on track to hit the midpoint of our full-year IFRS revenue guidance of $1.2 billion-$1.3 billion for our U.S. operations. Overall, Curaleaf is still in the early innings of an industry that has tremendous potential for growth, and we have high confidence that our national strategy and solid execution will seize the opportunity and create significant value for shareholders. With that, let me turn the call over to our CEO, Joe Bayern. Thank you, Boris. Good afternoon, everyone. What can I say? It was a great quarter for Curaleaf and the cannabis industry as a whole. We are extremely happy with our record results for the quarter as it is definitive proof that our strategy is working. I am also incredibly excited about the significant advances we are continuing to make in product commercialization and research and development. Our capabilities in these areas are unmatched in the industry and will continue to act as one of our pillars of long-term competitive advantage. I'll provide more detail on some of our most exciting initiatives later in the call. Let me start my walkthrough at the retail level. We continue selectively expanding our market-leading U.S. footprint. As we move into our next phase of retail expansion, we continue to focus on quality over quantity and are only adding premium and flagship stores in the right locations. We opened five new dispensaries in the quarter, including two in Pennsylvania, one in Illinois, a second location in New Jersey, and our first adult-use store in Maine, followed by another opening in Wells, Maine on July 23rd, bringing our total U.S. dispensary count to 108 as of today. During the remainder of 2021, we expect to open an additional eight new Curaleaf retail dispensaries across Arizona, Florida, New Jersey, and Pennsylvania. We have steadily gained market share in Florida, and we plan to build on this with new store openings and expect to have a total of 60 dispensaries in the state by the end of 2022. As we've mentioned in the past, we are also in the process of rebranding all of our dispensaries to reflect a more contemporary but welcoming look, which we believe is relevant to our legacy medical patients, as well as adult- use consumers. We expect the rebranding to be complete by the end of September. Our operating and financial metrics on the retail side were very positive, with second quarter retail revenue growing 18% sequentially. Including both adult use and medical use, the total number of transactions was up 17% during the second quarter. On the medical side of the business, the total number of patients continue to grow, expanding during the month of June by 7% from March, while maintaining average order value. At the wholesale level, we grew the number of U.S. wholesale accounts by 9% during the second quarter to surpass 2,000 active accounts, which helped drive sequential revenue growth of approximately 24%. Our wholesale distribution platform is another of our pillars of sustainable competitive advantage. As a CPG-focused company, we continue to believe in the power of brands, and we continue to invest in a portfolio that reaches the widest array of cannabis consumers. This quarter, we introduced the Rolling Stone, Select partnership in Nevada, and we launched the B NOBLE brand in Massachusetts and Maryland, leveraging strategic partnerships and relationships to drive Select and Curaleaf visibility and preference to new demographics. In terms of cultivation capacity, we began harvesting from our new cultivation centers in Florida, Arizona, Pennsylvania, Maine, and New Jersey. With these expansions, we have now brought online nearly 250,000 sq ft of our expected annual expansion of 275,000 sq ft of flower canopy during the first half of the year. We expect to commission an additional 40,000 sq ft in the second half. This additional capacity will not only serve as a catalyst for accelerated growth, but will also help improve our operating margins in the second half of the year. We are also in the process of building additional capacity that will be commissioned in 2022 in a number of key states, including N. Y., New Jersey, Connecticut, Florida, and Pennsylvania. We are excited about our prospects for the balance of the year. For example, in Florida, we expect to continue gaining market share, driven by the continued expansion of our cultivation and new store openings in the second half of the year. In New Jersey, our third dispensary will open imminently. Our new cultivation site will help ramp up our wholesale business in this state. In Massachusetts, we expect that our wholesale business will continue to drive growth. In Maryland, we are in the process of moving our dispensaries to superior locations and should benefit from a full quarter of a larger cultivation and processing site in the state. Moving on to product commercialization and research and development, we have a number of exciting initiatives underway. As we said in previous calls to investors, we are in the final stages of pilot testing a proprietary new extraction technology, which should substantially bring down our cost of production, which we expect to roll out in early 2022. This quarter, we will launch our improved Classic gummy and Nano gummy, utilizing innovative technology to provide consumers the ultimate choice and control over the way they enjoy their experience. Also, we continue to bring fresh innovation to the Squeeze line, including our latest proprietary nanotechnology, which is even faster acting than our current nanotechnology, along with new flavors to add variety to the line. We have also been working on developing innovation formulations and unique delivery technologies and exploring the potential benefits of other cannabinoids such as CBN, THCV, and CBG through multiple clinical studies. We expect to bring products to market that incorporate these cannabinoids in the second half of 2021. In addition, we are actively developing many innovative products within the vape, concentrate, oral, ready-to-drink beverage, and topical categories that will be launched in 2022. When we think of innovation, we think of terms of little innovation and big innovation. We've launched over 187 new products over the past 18 months, the majority of which were Little I. Little I are products that fill out our portfolio assortment across our footprint, improving flavor, texture, and so forth. Squeeze was our first example of a Big Eye, where we develop proprietary technology and packaging to bring a new product to the market. Now that we have ramped up our research and development capabilities, our innovation funnel is full of exciting new technologies and form factors that will provide a steady stream of new products over the next 18 months. Moving on to our European operation, Curaleaf International. While still a small contributor to revenue, it continues making important strides. In the U. K., we launched our second strain of medical cannabis flower to meet the significant growth in patient demand. We have witnessed a 250% increase in patient numbers in the U.K. since the launch of our first medical cannabis flower product in March of this year. Also, as announced in June, we entered into a strategic partnership in Germany with a pharmaceutical company called Zambon, a leader in the treatment of Parkinson's disease. We launched Euvigo, a co-branded medical cannabis product manufactured by Curaleaf International in Spain and distributed throughout Germany. The product was recently adopted by three specialized pain clinics. In Spain, our pharma lab, Medalchemy, received additional EU- GMP certification for the processing of medical cannabis flower. It can now manufacture and distribute medical cannabis products for commercialization and investigational purposes. Beyond Europe, we exported 1.1 tons of medical cannabis flower to Israel, only the second company to do so under the new regulation. The product has been very well-received and is on track to being sold out by the end of August. Israel has over 100,000 patients currently and is adding a further 3,000 each month. Finally, Portugal and Malta are moving forward with their respective political processes around possible legalization of adult- use cannabis. Spain is moving forward with the discussion on the medical cannabis program, and the French Supreme Court gave a very important judgment establishing the legality of CBD wellness products in France. I'd like to close with some important updates on other things we're doing as the industry leader in matters of social responsibility. In our initiative to do business with cannabis brands, ancillary suppliers, and advocacy organizations from underrepresented communities, we ended the quarter with 63 partners. In addition, we launched our B NOBLE pre-rolls in July in Massachusetts and Maryland with a portion of sales dedicated to funding local organizations dedicated to advancing social equity and providing opportunities to those directly impacted by the war on drugs. On the environmental front, I'm pleased to share that Curaleaf has hired Map-Collective, a female-funded green tech startup, to complete an audit of our carbon footprint, and we have assembled a task force to evaluate strategies for becoming carbon neutral. Now, let me turn the call over to Ranjan. Thank you, Joe, and thank you, Boris, for a warm welcome, and good afternoon to everyone. As Boris and Joe mentioned, during the quarter, we achieved many financial milestones. Revenue reached a record $312 million, which represented sequential growth of 20% and year-over-year growth of 166%. We recorded retail revenue of $222 million, sequential growth of 18.4%, and year-over-year growth of 235%. Retail revenue represented 71% of total revenue. Our strong sequential growth was primarily driven by new customer acquisition and increase in repeat customers. Additionally, we benefited from the opening of five new stores in selective locations and from increased e-commerce penetration. Wholesale revenue grew 23.7% sequentially and 168% year-over-year to $89 million and represented 29% of total revenue. This growth was driven by the addition of new accounts and an increase in sales productivity. Gross margin increased to approximately 50%, increasing 669 basis points year-on-year. On a sequential basis, gross margin increased 34 basis points. This was possible due to an increase in yields of the existing cultivation facilities and new state-of-art facilities coming online during the quarter. We expect to continue benefiting from these trends in the second half of the year. SG&A expense was $88 million, or 28.2% of consolidated revenue, a 259 basis points reduction versus 30.8% in the first quarter. Looking solely at our U.S. business, SG&A was $81 million, or 26.4% of revenue, an even greater sequential reduction in SG&A of 435 basis points as we work diligently to capture operating efficiencies across all business processes. Adjusted EBITDA reached $84.4 million, up 34.7% sequentially and 201% year-over-year, primarily driven by strong revenue growth and increased operating leverage. On a consolidated basis, adjusted EBITDA margin reached 27%, up 297 basis points sequentially. Our core U.S. business saw an even greater gain, reaching an adjusted EBITDA margin of 28.1%, up 400 basis points sequentially. With regard to full-year adjusted EBITDA margin for our U.S. business, we expect it to be in line with our prior guidance. In addition, Curaleaf International margins are expected to have a slightly diluted impact on consolidated margins, but we expect this impact to significantly decline in the fourth quarter. Provision for taxes in the second quarter was $42.6 million, as compared to $30.7 million in the first quarter, primarily due to higher gross profit. Consolidated second quarter net loss allocated to Curaleaf was $7 million, which includes closing expenses and one-time charges related to the EMMAC transaction. The U.S. business second quarter net loss significantly decreased from $17 million in the first quarter to $1.8 million. We continue to maintain a strong balance sheet with cash and cash equivalents of $334 million, up from $315 million in the prior quarter. At the end of the second quarter, our outstanding debt net of unamortized debt discounts was $338 million. We plan to explore opportunities to refinance our debt facilities at the first opportunity in January 2022. We expect to bring down the cost of our debt. Net capital expenditures during the quarter were $41.9 million. Investments were focused on expanding cultivation and processing capacity, as well as selectively increasing our retail presence in strategic markets. Capital expenditures for full year 2021 are expected to be approximately $140 million as we continue to invest in cultivation, processing, and our retail footprint in order to prepare for continued strong revenue growth in 2022 and beyond. In closing, we are pleased with our financial performance this quarter. On an organic basis, we delivered 18% sequential revenue growth and 400 basis points of adjusted EBITDA margin improvement. We expect this trend to continue in the coming quarters, which will help us drive operating cash flow in the second quarter of the year. Now let me turn the call back to Joe. Thank you, Ranjan. In closing, I would like to thank the entire Curaleaf team for their continued focus on execution. We remain committed to growing our top line, expanding profitability, adding cultivation capacity, and developing innovative new formulations and form factors backed by science. As always, with a focus on creating shareholder value. With that, I'll turn the call back to the operator to open the line for questions. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using speakerphone, please pick up your handset before pressing the key. To withdraw your qestion, please press star then two. Our first question today comes from Pablo Zuanic with Cantor Fitzgerald. Thank you. Boris, I guess just one question first. You have spoken in the past of trying to get ready for interstate trade, you made an acquisition in Colorado. At the same time, you are expanding capacity aggressively at the state level in the East. I think in the past you've said that in the long term, cultivation east of the Mississippi may not be so economical in a market of interstate trade. I'm just trying to put the two things together, right? You believe that by the midterms, we have a federal-level reform, I'm guessing you don't expect interstate trade there to happen, right? Which will still be four or five years out, hence you are expanding the East. Can you just reconcile the two things? Thank you. Yeah. Yeah, I think, Pablo, you have it exactly right. We do anticipate to have significant reform by April of next year. However, we believe that's going to be more around safe banking, tax reform, and social justice issues. We don't believe the federal government at this point in time is ready for full interstate commerce. I mean, it could happen. There's always a risk, but we don't believe that that's what's going to happen given that we're pretty close to the process and involved in it pretty intimately. That's where our thinking is at the moment. Given that, we have incredible demand that's about to come up on the East Coast. I mean, N.Y., as we said in our report, N.Y., New Jersey, Connecticut, what we think will be soon Pennsylvania and Maryland, all of whom represent about $11 billion-$12 billion of potential market demand. We need to be prepared for that. We are expanding in New Jersey. We have already expanded. We're expanding a bit more. We're expanding in N. Y. We're expanding in Connecticut. But, you know, the margins coming from those businesses are so great that we expect the payback on those growth facilities to be reasonably quickly. We are preparing for those markets. We have to be able to supply those markets. We want to maintain our market share. We also believe that the interstate commerce reform is unlikely to come in this next package. If I can just squeeze one quick one, just an update in terms of the competitive landscape in Florida and Pennsylvania. In the case of Florida, we are hearing about some operators doing buy one, get one free type of promotions for more than a week. In the case of Pennsylvania, some of the retailers there are telling me that they've been able to buy in mainstream and lower end of the flower market, at lower prices, right? Which means that there's some pressure there, in terms of supply increasing faster than demand. Just quick color in terms of Florida and Pennsylvania competitive landscape. Thank you. Yeah. Both of those markets are different in that they're similar in that they're both medical. They're different in that Florida has more cultivation capacity, at this point, and is more developed than Pennsylvania. We have not seen pricing pressures in Pennsylvania at this point in time. We feel that market continues to grow and continues to expand. However, even though Florida is growing, first of all, the summer months tend to be slower in Florida because a lot of people do leave the state, and they do come back in the fall. We have seen some pricing pressures in Florida. However, we continue to see very robust EBITDA margins out of our Florida business, so it hasn't affected our margin at this point in time, but there's definitely competition for market share in Florida at this point in time. The three main operators, Trulieve, Curaleaf, and AltMed, and Surterra seem to be competing for the top spot. I do think that isn't going to get out of hand in any way, and again, I want to reiterate, the margins are still very strong. Got it. Thank you. Our next question comes from Vivien Azer with Cowen. Hi. Thank you. As you guys work on optimizing your cultivation, and putting these new processes in place, can you just give us an update on how you're thinking about your gross margin progression from here? Obviously, very nice improvement in the gross margin in the quarter, but relative to some peers, there is an opportunity, and in particular, given kind of the novel approach to a more low-cost focused methodology. I mean, any cup of color over the medium term would be helpful. Thank you. Sure. Vivien, hi. We are continuing to expand our gross margin. We anticipate meeting the targets that we outlined in the beginning of the year, which is a 30% EBITDA margin, and about a 52%-54% eventually, gross margin. Right now, we're just at 50%. One needs to remember that Curaleaf, unlike some of our competitors, has a much wider footprint. Now we have the European business, and so it's just taking us a little bit longer to get there, but the sheer size and growth of the business really compensates for that. In the end of the day, I've always stipulated that for me, growth is a priority. I believe that getting our brands out there on a both national and global basis is very important. We are very, very comfortable that we will be operating at a 30%+ EBITDA margin next year throughout the year. Understood. Thank you. Joe, my follow-up is for you, please. I believe I heard you say you're targeting 60 dispensaries in Florida by the end of 2022. You also commented on new door additions in the back half of 2021. Can you just offer any more color on kind of the phasing of bridging the gap? I believe you have 37 doors in Florida today. Thank you. Yeah. I think, you know, as I mentioned on my prerecorded comments, you know, we've really started to focus on quality as well as quantity of new store openings in Florida. As we've already alluded to on this call, it's getting more competitive. We want to make sure that we're preparing ourselves to compete as effectively as possible. That includes, you know, higher quality products, greater volume of product, but also our locations of our retail stores. We expect to open somewhere between four and six new stores this year in Florida. Then the balance of those would be in 2022. Perfect. Thank you. Our next question comes from Camilo Lyon with BTIG. Thank you. Good afternoon. Boris, it's great to see the 20% quarter, very strong indeed. You kept the full year revenue guidance intact. Anything you can help us, any color you can give us to help us understand the cadence between Q3 and Q4, how that should unfold, and how your cultivation projects will come online to kind of catalyze the differences between Q3 and Q4? Yeah. We anticipate continued strong growth into Q3 and Q4. Historically, everybody knows that Q4 is Croptober. There's always pressure on the cannabis market with illicit cannabis coming out of mainly California and Oregon. We're always a little bit careful to make sure that we don't overestimate what we can do. Also, there's one more factor, and that is the issue of N. Y. We just don't know when the whole flower's gonna drop, whether it's gonna drop in September, whether it's gonna drop in the fourth quarter. We did think that it would get signed. We were told by N. Y. authorities that it would get signed in early August, late July. It didn't. Obviously, I think we all understand why. It's on the governor's desk, but the governor has got other issues to deal with at the moment, so cannabis is probably not number one. As we said on the call earlier, it's not a question of if, it's a question of when, because it is codified in law. We will get whole flower, and whole flower obviously is going to be a big number for Curaleaf, given that we're the largest supplier of flower in N. Y. on the wholesale market, as well as to our own stores. We're just trying to be a little bit careful on how the fourth quarter, third quarters and fourth quarters work out. We're very confident in the organic growth, which is why we, you know, we guided in the beginning of the year between $1.2 billion and $1.3 billion of revenue, and we're very comfortable to say that we believe that we'll definitely meet the midpoint on our base U.S. business, obviously with our European business being on top of that. We're, you know, just trying to be conservative regarding where we come out on, you know, some of the factors that I raised. Otherwise, we still continue to see it. In terms of cultivation, we've got a lot of new cultivation coming online, some of which is coming online, to be honest, in the third quarter, which really doesn't really start harvesting, you know, properly until December. There's question about how much of that cultivation will actually hit the market in fourth quarter versus first quarter of 2022. You know, obviously, we've all recognized the fact that the supply chain has got some stress in it globally. Some of the cultivation projects are obviously slightly held back, although I have to say the team at Curaleaf have done a great job, and none of them are delayed more than sort of a month. That one month does, you know, change the picture in terms of the amount of flower that would come out of those facilities this year versus January of next year. That's why we guided in the middle of the range. We're just trying to be cautious to make sure that we understand, you know, that we definitely can meet the numbers that we're outlining. That's why we came in there. Yep. That's perfect. Thanks for the color. Then going back to the question that was asked earlier, around your margins. I think last quarter, you kind of gave high-level margins progression for your more established markets and the more nascent markets. Has anything changed on the established market grouping in terms of those margins that you're seeing? It seems like it's the younger, more nascent markets are the ones that are starting to catch up. I just wanted to make sure that there wasn't anything that we were missing. No, we haven't seen any kind of pressure in our more established markets. We still could see robust growth. As a matter of fact, we had margin expansion in states like N. Y. and New Jersey, which are, you know, markets that we've had for some time. You know, the smaller markets, as we bring on the cultivation, we just brought on a major cultivation facility in Arizona. That's going to obviously expand our margin as we start to sell our own flower through our stores rather than, you know, keystoning in flower from other growers. That's how, you know, that's going to help margins as well. As I think Joe said, we just brought on a large facility, two facilities this year, two 50,000 sq ft canopy facilities in Florida, one that's already harvesting now, and one that will be harvesting in the late fourth quarter. All of those things will continue to add to margin. We have a new facility coming online in Pennsylvania and in Illinois, also in the third quarter, that will be harvesting sometime in the fourth quarter. All of these facilities should add to margin expansion into late fourth quarter, early first quarter of 2022. Our next question comes from Andrew Partheniou with Stifel GMP. Hi. Thank you for taking my questions, and congrats on the great quarter. You know, you guys have a pretty unique footprint being, you know, the only one with a real national presence in so many different states. You know, one of the plenty of advantages is some interesting insights on the consumer level. I'm wondering, you know, with COVID coming back, or rather restrictions easing and life coming back to normal, you know, could you talk a little bit about what you're seeing in terms of consumer behavior, whether it's consumption or purchasing behavior? You know, any high level comments could be useful to kind of understand, you know, the trends. You know, going into COVID, there was increased consumption and people were, you know, devoting more of their wallet share to cannabis and kind of looking forward, what do you expect? Listen, I think that COVID was obviously very good for cannabis. It widened the customer base, both on the wellness side as well as on the adult- use side. You definitely had some increased demand during the peak of the original COVID flare-up that we had in 2020. We definitely saw, and I think the BDS Analytics shows that, we definitely saw, you know, 10 top states that BDS covers have a slowdown in May and June. If you look at the most recent numbers that have come out, you'll see that 10 of their states showed a slight decrease in sales. We don't think that that's a demand issue, a long-term demand trend, or too much competition. We think that was a share of wallet. People were cooped up in their homes for over a year, and they started to venture out. They were going on vacations. They were traveling abroad. People were moving around between states, so they couldn't use their cards on vacations. We definitely saw a little bit of a change in habit, but nothing dramatic. Just a little bit of softness. We think, you know, we've seen some green shoots in July. You know, Illinois reported early numbers that showed a substantial increase in July. We'd like to see some of the other numbers before we can make a definitive view. Curaleaf's view is that going into September and the fourth quarter, we should, as people start to come back home and go back to work, assuming the Delta variant doesn't flare up beyond, you know, sort of what happened in Europe, we think that demand should start to pick up again for cannabis products and normalize into late third, into the fourth quarter. Obviously, if we get hit by a substantial COVID, or God forbid, another lockdown, that potentially could actually reflect very, very positively because we could get the same kind of reaction that we got in 2020. Overall, we remain very positive. You know, back in May when I mentioned publicly that we saw a slowdown, we just felt that it's important to be transparent with the market, and we were proved to be right because the official statistics did show a slowdown in demand in all the key states around the country, and Curaleaf being the only operator that can actually reflect and see 23 states across the country, was, you know, an early barometer of what then BDS was able to confirm. As you can see, it did not reflect in our numbers. We were still able to meet our guidance in the second quarter. We continue to feel that we're going to meet our guidance for the year. Thanks for that very detailed answer. Maybe switching gears, you know, on the call, you guys mentioned about potentially refinancing your debt, you know, in early 2022. Could you remind us where you're at now with that in terms of a cost of debt and, you know, where you might be targeting? What kind of, you know, color are you seeing in the debt markets now? Could we see any potential traditional mortgages, or are, you know, all of your substantial amount of your real estate already in locked in sale leasebacks? Just a little bit of extra color there because I thought that was an interesting comment. Yeah, listen, we've always been very transparent about our debt position. We were the first to issue a four-year, two-year non-call note without any warrants back in January of 2020. We added another $50 million to that note at a substantially reduced rate. Our initial note was issued at 13%. This one was issued at 10.25% back in January of this year. We've since seen even a further contraction in rates in the cannabis market, where there's a couple of deals in the market right now at 9%, and they're companies that are much smaller than Curaleaf. Given the substantial cash flow generation that we expect to see in the second half of this year, we think we'll be in a very strong position in January when we go to refinance our notes. I don't want to predict exactly what rate we're going to get, but obviously we anticipate, you know, being in the single digits and more competitive than some of the other deals in the market today, given our size, scale, and credit worthiness. That will obviously add a tremendous amount of cash flow to the bottom line because, you know, it's going to reduce the cost of our financing substantially. On the REIT side, some of our REIT financing, some we do have the ability at a certain point in time to refinance. I don't have that information exactly here. Some of them are long-term notes that we can't refinance. For the most part, Curaleaf's refinancings were done at a lower level than most of our competition, so we're not too fussed about it. We feel it's pretty good, and those that we can refinance, we certainly will do that when the time is up. Again, if you have a question, you can press star then one, and we'd like to remind you to limit yourself to one question and one follow-up. Our next question comes from Eric Des Lauriers with Craig-Hallum Capital Group. Great. Thanks for taking my questions. Congrats on the strong growth in the quarter. You know, you've talked a lot about your innovation pipeline. Appreciate the color there and your focus on derivative products with brands like Select. While flower remains king in most markets and you guys are continuing to build out capacity, flower coming online in N.Y., et cetera, can you help us understand where you guys look to compete with flower? Are you guys focusing on sort of premium quality, premium pricing? Is it, you know, good quality at a great price? Just any color on just kind of reminding us of your flower strategy would be helpful. Thanks. Hey, Joe, will you take that? Yeah. I think we are certainly continuing to not only improve the quality of our flower, but the quantity and the yields of our flower. As a large cultivator, you know, we don't see ourselves as a niche grower who's focused on very boutique, high-end flower. We're really targeting, you know, great flower at a very reasonable price, and I think we achieve that in most of our markets today. In the markets that we haven't yet, we're on the way to achieving that. I think that's really the cornerstone of our pricing strategy, is that we want to just produce a great value proposition to our consumers, whether it's in flower or candidly any other product format we're delivering. We see ourselves as somebody who's got the ability to produce great products at a reasonable price with high quality and high consistency, and that's the cornerstone of our strategy. Okay, great. That's helpful. Appreciate that. Then my follow-up here, I guess a bit of a follow-up on the previous question, Boris. You mentioned you expect some significant cash flow generation in the back half of the year here. Year- to- date, you guys have generated an impressive $147 million in EBITDA. But cash flow from operations seems elusive. You guys are at a loss of $79 million. Can you just help us understand the difference there and what it's going to take to get you guys to cash flow positive? Thanks. Ranjan, do you want to cover that? Sure. Thanks. You're right. I mean, for Q2, we did have a negative cash flow from ops, but as the margins continue to increase in Q3 and Q4, where we are expecting our adjusted EBITDA margins to really cross the 30% mark for Q4, that's really going to drop down into the cash flows and also the CapEx needs is also going to continue to go down. We did build a lot of inventory in Q2 to really support the demand coming in the back half. That's not going to be that much needed for new CapEx investments, that's also going to help from cash flow from ops. We believe in the back half, especially in Q4, we will start to be a positive cash flow too. Our next question comes from Matt McGinley with Needham. Great. Thank you. My question is in regard to CapEx. You said in the prepared remarks that you expect new capacity in N. Y., New Jersey, Connecticut, Florida, I think it was P.A., in 2022. I doubt you're in a spot to guide CapEx dollars today, but as you look at your asset base and your planned expansion, do you think we're at peak CapEx with $140 million this year? Or do you think that you're going to have continued projects, or you're going to have big amounts of CapEx you'll need to deploy to further the growth in 2023 and beyond? Are we at kind of a, like I said, a peak CapEx number this year? I think I'll start, and then I'll let Joe also continue in. On this year, you know, the big CapEx number for us this year was N. Y. You know, we have made a decision at this point in time to just expand to that limit that we at least now know that N. Y. will definitely allow us to have, rather than go out and spend a tremendous amount of capital building, you know, further expansion facilities in N. Y. Given that we don't think N. Y. is going to get going really until January of 2023, if we hear from the state over the next several months as they put the commission in place that they will allow us to have more than, call it 150,000 sq ft of canopy, then we'll go out and build it. We've secured the sites. We have all the locations. We have drawings. We're ready to go. We've just decided that at this point in time, why go out and build, as well as the fact that, you know, the state has been frowning upon people announcing that they're going to build capacity over and above what the state has indicated to everybody that they're going to probably award at this point in time. In order not to upset the regulator and to stay in good standing with them, we're building what we know that at the moment is the discussion around 150,000 sq ft of canopy for the existing ROs. If that changes, we've got plenty of time, and we've got the location set up to build that. That number was around $50 million, which has taken our CapEx down to the level where we are now. Okay. Great. Yeah, I would just say maybe to reinforce. [crosstalk] Oh, sorry, to reinforce what Boris said, I think the $150 million is a good proxy for our steady-state capital programs. If we see accelerated growth opportunities in the marketplace, we're prepared to spend behind those opportunities. If N. Y. allows additional cultivation capacity, we're going to build it. I think you'll also see qualitatively a shift, as we've talked about. You know, we really look at our capital program across three time horizons. We continue to build out our existing footprint in key markets like N. Y. and New Jersey, even Arizona. We also are spending for the eventual nationality of the business, right? We'll start seeing a qualitative shift in shorter-term capital projects, hopefully to longer-term capital projects as those projects become more feasible in the marketplace. I think, yeah, the $150 million is a good proxy, you know, for an annual spend. Great. Thank you. Maybe a big picture question on the production footprint and cost into 2022 and beyond that I think Boris alluded to, but what are you hoping to achieve or learn from this Los Sueños that can be immediately applied to your other production facilities? I don't think you have anything that's like this facility today. I guess on top of that, how much more of an opportunity is there to harmonize your purchasing costs across the national footprint to drive those unit costs down? Is it more of an opportunity on driving cultivation costs down in these individual facilities where you get more of the upside over the long term? Go ahead, Joe. Yeah, Boris, I'm assuming you want me to start with that one. Then I'll actually defer to Neil Davidson, who is also on the call. Yeah. I think what we're hoping to do with projects like Los Sueños, as we've talked about, is accomplish two goals. The first goal is we are going to provide capacity, much needed capacity, in a market like Colorado, which is a big market, and we're under-shared in. We're providing existing biomass for our formulated products in a market that we think is very attractive, and we're under-shared. On a longer-term basis, we're trying to blend our overall cost of cultivation to get to the lowest total delivered cost. That includes where we have facilities, primarily indoor, capable of producing, you know, high-end, high-THC flower with greenhouse, which is primarily used as feedstock for certain types of products and biomass, and then, of course, outdoor, which is primarily biomass for formulated products. By creating the right blend of those technologies, we're hoping to get to the, you know, lowest total delivered cost in the marketplace. We will do that in Colorado by providing our current needs. We'll use that technology of outdoor scale and cultivation to be able to lower our total cost of delivery. We also perfecting genetics that could potentially then be used, you know, on an outdoor basis across the U.S. For us, it's a very strategic opportunity to take a step change in our business, and we're very excited about the ability to work with Los Sueños to do that. Our final question today comes from Matt Bottomley with Canaccord Genuity. Good evening, congrats on the continued success and all. Just wanted to pivot back to some of your commentary on what Chuck Schumer had put out there as draft discussion. I know it's not fundamental to the business, and you guys have more important things to focus on, you know, day over day, but I'm just curious on maybe, Boris, if you wanted to comment on what you think potentially needs to be put into that bill or taken out of that bill in order to pass, and also any thoughts on the taxation there. That's a lot of the feedback I've been getting from investors, is the impact of a potential 25% federal tax net of the removal of 280E, and if that were to stay as is, how that looks, in your view too, to the fundamentals on the tax line. I think it's very early to discuss what this law is going to look like, right? There was a wish list that was put down on paper from the three senators, and it was discussed internally quite extensively, and I think it's got all the right pieces in it. I think it's going to go into negotiation now. You know, obviously, a federal tax rate of, you know, 23%- 25% would be very, very good for the industry. More importantly, just the fact that we can write off, you know, our expenses will be very, very helpful. I mean, today, the average company's paying, you know, well over 50% in taxes, you know, 55%-60%, call it, because of the 280E status. It's going to bring down the cost dramatically. I think the bigger question is, what is the excise tax going to look like, and how is it going to be structured? That's something that's going to be up for discussion, negotiation. I suspect it'll look a lot like, you know, alcohol, where higher alcohol content is taxed at a higher rate, lower alcohol levels are taxed at a lower rate, which is very similar to cannabis. I think that that's going to be the discussion that's going to be had. Outside of that, as I said, I think that the law is more going to be focused on. You know, I think the interstate commerce issue is going to be the biggest problem. At this point in time, I just don't think that a lot of the Republicans are ready for that at this point in time. I do know that we're very, very good with votes in the Senate for a safe banking law. You know, there is bipartisan support basically now. I don't want to say it's 100%, but I would say it's the closest we've ever been to an approval if that law came to the floor to get passed. I think that's a huge, huge accomplishment that's been done by the whole industry and its lobbying as well as Senator Schumer, Wyden, and Booker that submitted this law. It really put a lot of pressure. Basically, a lot of Republicans are saying, "Hey, you know, we're really comfortable with the safe banking. We're not quite yet ready for interstate commerce." I think the Democrats can get comfortable with a law that allows the state to determine what laws they want, and we've seen that in gambling. That's the structure under which gambling operates in the United States. I don't see why that couldn't be the same for cannabis. I just think it's a matter of negotiations as everything is. The good news is, I don't know if everybody's noticed this, but we're starting to see some bipartisan work in D.C. You know, we're seeing it on infrastructure. I think we're going to see it on the debt ceiling and on the budget. It's good. We're going into a nice environment where once we're through infrastructure and the budget and the debt ceiling, the next big issue is cannabis. You know, the bipartisan work that's being done on those laws, I think, is going to benefit the work on cannabis. Understood. Appreciate that. Just to follow up more on the core fundamentals here, two markets in particular, just Arizona and N. Y. Arizona, any commentary on how that ramp is going? Seems to be pretty healthy with respect to the onboarding of recreational use, just given the fact that the existing medical market seems very friendly to those types of product forms. The other just being N. Y., so you mentioned flower, hoping to come online there, and I'm just curious on what your expectations are on potential magnitude there, maybe relative to Florida or other markets where you've experienced that. Just given that the locations, at least the ones I've been to in N. Y., they feel more like clinics. They're not really your typical dispensaries. Clearly, not that many in the state overall. Just wondering if you think the addition of flower will be a material driver to new customers coming into the legal channels? Yeah, there's no question that flower will change the picture. It has in every state where whole flower's been approved. It's very consistent throughout the country when flower is introduced in a bud and whole flower form, you know, demand really picks up quite dramatically. People still rather buy, let's be honest, in a store than on the street for the most part because they know what they're getting and that they're getting a safe product that isn't laced with something or something like that. From a safety perspective, it does help. Obviously, a direct legalization would help it even more because it would increase the amount of stores throughout the state. You know, the biggest problem right now is you've got 10 operators each with four stores, that's quite limiting in terms of access. We do expect a substantial pickup in demand. To be honest, for the most part, it would be, you know, Curaleaf because Curaleaf has the largest cultivation operations in the state. As Ranjan had mentioned earlier, one of the cash flow issues is that we have been building product in N. Y. and in New Jersey and other states getting ready for what's going to be a big change, right? In New Jersey, of course, it's going to be rec in November, and in N. Y., it's going to be whole flower as soon as the governor signs it. The good news is that if Cuomo is either impeached or resigns, it is our understanding that the lieutenant governor who will be taking his place is very favorable towards cannabis and is very likely to sign the law pretty quickly after coming into office. We're pretty comfortable that this is going to happen. We're unfortunately stuck in what is becoming a regular routine in the country, and that is, you know, scandals around governors and congressmen and senators, and that's what we're in the middle of with Cuomo right now. It's quite understandable that he doesn't really have time to focus on the cannabis issue. That's one of the things that we think is probably going to get pushed out into the fourth quarter over September, but it could happen much faster if he resigns. This concludes our question- and answer- session. I'd like to hand the call back over to Carlos Madrazo for some closing remarks. Thank you all for joining us today. I'd like to note that we will be participating in a number of upcoming virtual conferences and events, including our fireside chat with Boris through Canaccord's Virtual Cannabis Conference tomorrow at 9:00 A.M. Eastern Time, which will be webcast live. Please visit our investor relations website for access. We look forward to updating you all further on our progress at these events, as well as on our third quarter 2021 financial results call. In the meantime, make sure to follow our dedicated Curaleaf Investor Relations Twitter account, which launched today. Stay well and safe. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.