Good day, and thank you for standing by. Welcome to the Green Thumb Industries first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to Ms. Jennifer Dooley, Chief Strategy Officer. Please go ahead. Thank you, Lee. Good afternoon, and welcome to Green Thumb's first quarter 2021 earnings call. I'm here today with Founder and Chief Executive Officer, Ben Kovler, and Chief Financial Officer, Anthony Georgiadis. Today's discussion and responses to questions may include forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. These risks and uncertainties are detailed in the company's reports filed with the United States Securities and Exchange Commission and Canadian securities regulators, including our quarterly report on Form 10-Q, which we expect will be filed tomorrow. This report, along with today's earnings press release, can be found under the Investors section of our website. Green Thumb assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. Throughout the discussion, Green Thumb will refer to non-GAAP financial measures, including EBITDA and adjusted operating EBITDA. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in our earnings press release and SEC and SEDAR filings. Please note all financial information is provided in US dollars unless otherwise indicated. Thanks, everyone, and now here's Ben. Thank you, Jennifer. Good afternoon, everyone, and thank you for joining our first quarter 2021 earnings call. Since we were together less than two months ago, I will keep my remarks relatively brief and relevant to what we see ahead in 2021. Strong momentum in our business continued into the first quarter of this fiscal year. Following a solid fourth quarter in 2020, our first quarter revenue grew almost 10% quarter-over-quarter to more than $194 million, or a 90% increase year-over-year. We posted our third consecutive quarter of positive GAAP net income of $10 million, adjusted operating EBITDA of $71 million, and free cash flow from operations of $40 million. We are pleased with the quarter, but we know we are building something for the long term. Today's cash balance is over $300 million as a result of our successful debt raise, which follows the first quarter's equity raise. This puts our balance sheet in excellent position to play offense. We're off to a very strong start in 2021, and we're even more excited about the opportunity ahead for the balance of the year. We have said it many times, but it is worth repeating. We believe cannabis is the next great American growth story. Many of the classic American themes over the last 250 years exist in the story of cannabis in America in this century. We believe things are changing in America, and Green Thumb is well-situated to take advantage of that change for our stakeholders. Rest assured, as large owners of the business ourselves, we are aligned with shareholders. As we look at a map of the U.S., we see a lot of opportunity. Top of everyone's mind is the position in N.Y. and how we will leverage the adult use opportunity. In a full circle moment for the industry, Green Thumb is turning a former federal prison that once incarcerated people for cannabis into our N.Y. cannabis facility. We see this as a self-contained economic stimulus package fueled by the demand for cannabis. When completed, it will create hundreds of jobs, generate a lot of tax revenue, enable wellbeing, and continue to remove people's assumptions on cannabis. In New Jersey, we are expanding production capacity. We have two open stores in Paramus and Paterson, and a third store opening in the coming months. This is in addition to the potential along the East Coast in places like Pennsylvania, Connecticut, Rhode Island, Maryland, and Massachusetts, to name a few. Tourism is coming back to Nevada as Americans crave experience and connection. Our Cookies on the Strip grand opening this Friday is well-positioned and nicely timed. At the end of this week, we'll be on the Las Vegas Strip with Berner and the Cookies team to celebrate, and we anticipate a lot of excitement with this flagship opening. Looking again at the map, while it became common sense in 2020 to say cannabis is essential, there is still a large part of the country that does not have access. This is changing. In April, Virginia became the 16th state to pass adult use, and just over a week ago, Green Thumb announced the acquisition of Dharma Pharmaceuticals. Dharma operates a cultivation facility, one dispensary, and was a first mover in the Virginia market. Following the close, this license gives us the ability to open five additional stores. We are bullish on cannabis demand in the Southeast. Our track record in Illinois serves as a roadmap for how to capture the opportunity ahead. Our business strategy has not changed. We enter highly desirable markets with broader potential, and then open scale through methodical execution and a focus on the consumer at the right time, the right price, and with the right products. That means we open retail stores, cultivation, and production capacity at the pace to support the market, which takes careful planning and capital. Most importantly, we listen to what our consumers want. Our core objective has always been to be a leader in cannabis products that create real relationships and real experiences with the consumer. We believe it is fundamental to our long-term success. It has always been about quality over quantity for us, and this has never been more important than it is today. We are seeking high quality at scale, delivering the best, safest, and most exciting products to people. We are pleased with the momentum in the P&L and the revenue contribution from retail and CPG production, which we expect will continue to accelerate. The beauty of creating high-quality, honest, trusted products is severalfold. First, great brands and products drive people to stores, whether it's our dispensaries or others. RYTHM Brownie Scout flies off the shelves, and Dogwalkers are sought after by name. Second, there are so many ways we continue to grow our portfolio through form factor, flavor, and experience. A recent example is our introduction of Snoozzzieberry under the incredibles brand, which was specifically developed to help consumers looking for a better night's sleep. We have a robust innovation pipeline across the portfolio, and our team is always looking for ways to delight the consumer with new ways to meet their specific well-beings or through creative partnerships. Last quarter, we announced our partnership with Cann, California's number one cannabis beverage. We are excited to expand our beverage offering, and we'll begin to roll out Cann across our markets. We launched Cann in Illinois ahead of 420 to an awesome reception by consumers seeking an alternative to alcohol beverages. We are pleased with the consumer momentum and believe this is a glimpse into the future. For those of you 21 and over and in Illinois, give it a try. You Cann do it. We have a lot of growth in the portfolio by leveraging our current assets. based on market conditions, M&A can be an attractive option. I'm not talking about acquiring trophy assets, but rather opportunities for geographic reach, our brand portfolio, or our infrastructure. At the end of the day, Green Thumb is an execution-driven, consumer-focused, results-oriented team, and that high standard puts guardrails around all of our decisions. As I've said many times before, everything is on the table if it makes sense for our stakeholders. While we're in a fortunate position to have a strong balance sheet, you also know that every $1 we invest must have the potential to deliver strong returns for you, our shareholders. With that, I'll turn the call over to Anthony for his financial review and always engaging commentary. Anthony? Thanks, Ben, and hello, everyone. Welcome to what is now our 12th earnings call as a public company. As Ben just highlighted, our team delivered record first quarter financial results, generating $194 million in top-line revenue and over $71 million in adjusted operating EBITDA. Total net revenue grew 10% quarter-over-quarter, with gross CPG and retail revenue both growing by 8%. As a reminder, the difference between gross and net is intercompany revenue. The key drivers to our continued strong revenue performance. First, strong and growing demand for cannabis. While we are seeing an upward trend in cannabis consumption across the country, there is no doubt that this is particularly true in the markets within which we operate. The strategic bets we placed several years ago appear to be paying dividends. Second, our CPG product portfolio. We are cultivating flower and producing products that people are choosing to buy with their hard-earned dollars. Our efforts on facility design that focuses on quality over quantity, as well as our product strategy that leads with the consumer, is starting to establish true differentiation in the market. Third, execution. This boils down to a few simple concepts we live by here at Green Thumb. Number one, do what you say you're going to do. This holds true in our daily lives, whether that's consulting with patients, consumers, or making an internal commitment to another teammate. Two, let's go the simple route, particularly to start. This business and industry have enough complexity already. Third, embrace the team. We've said it before that our team is our greatest asset. We have passion, a thirst for knowledge, and a competitive spirit that runs through our hearts. Said differently, we like to win. Back to financial speed. In addition to strong top-line performance, the company continues to post robust gross margins with Q1 coming in at 57%. Our intrinsic goal is to keep this metric at or above 50% over the long term. On the SG&A side, excluding D&A stock-based comp, normalized operating costs totaled $42 million, a $4 million increase over the $38 million posted last quarter. A key goal of ours for this year was to build the company's infrastructure. I would anticipate our gross SG&A spend to continue to increase in the coming quarters. Total other expense in Q1 approximated $9 million, largely driven by non-cash charges and interest and warrant expense associated with our senior debt. The company generated over $71 million in adjusted operating EBITDA, close to 37% of revenue. In addition, we generated over $10 million in net income, our third consecutive quarter of positive EPS. On the capital front, we continue to manage our balance sheet in a way that maximizes operational flexibility. For you basketball fans out there, it's our version of a triple threat. With a sizable cash balance and positive cash flow from operations, we have the ability to buy, build, or sometimes our favorite move, do nothing. Net of the $156 million of equity we raised in February, we ended the quarter with over $275 million of cash. As you work your way down our balance sheet, you see the following, low relative accounts receivable, a prudent inventory balance, and a payables number of sub $10 million for the first time since 2019. For you technical accounting folks, that puts our current ratio in the teens. Shortly toward the quarter end, the company completed a $217 million self-conducted debt raise, adding over $100 million of net cash to our balance sheet at an industry-leading interest rate. [inaudible] continue to create substantial value for shareholders, and their fees of 0% if you're not ready is fantastic. On a pro forma basis, the company has in excess of $300 million of cash. [inaudible] regulatory change. While we are proud of our first quarter results, we can't help but focus on the future. As we tell the Q1 umpires, we are still in the very early innings of this industry. Buckle up, hang on tight, and remove all assumptions. In the meantime, for all of our stakeholders, we will continue to run our maps and math and execute our growth plan into an entirely legitimate U.S. cannabis. Back to you, Ben. Thank you, Anthony. We are off to a great start and excited about 2021. We spent the last few years building a strong foundation, brick by brick, and our position today is stronger than ever. As the green wave continues to sweep the country, there is more optimism around state and federal legislation. It is still day one at Green Thumb, so we'll keep taking a hard and fresh look at every opportunity to strengthen our business and to find innovative and new ways to delight our customers on their journey to well-being through cannabis. We are very privileged to participate in this industry. It is one of the fastest-growing industries in America today and has the ability to drive meaningful social impact, which we are firmly committed to. We continue to donate first-day profits to every community where we open a new store. We have expanded our Dogwalkers donation program to include the Bailey's Legacy Funds to support animal rescue organizations. In our home state of Illinois, we have been advocating to get Illinois social equity program started and look forward to the potential lottery for new dispensary licenses soon. The delay in the licensing process has created substantial financial burdens for social equity candidates, many of whom have been hardest hit by the pandemic. Hopefully, this process is beginning to move forward in Illinois. In New York, we believe New York can lead in this respect by starting adult use on January 1st, 2023, not only with incumbent operators, but also by issuing new licenses in a timely manner to new licensees who, per the law, shall be heavily weighted towards social equity entrepreneurs. Finally, we are committed to outstanding corporate governance and are especially pleased to welcome Swati Mylavarapu to our board of directors. Swati is a trustee of the Rhodes Trust, a world-renowned educational charity that supports exceptional students to study at Oxford University. She is also a board member for vote.org, that aims to increase voter turnout and strengthen American democracy. We are clearly aligned on our core principles. In closing, your company is stronger than ever and committed to becoming better every day. With that, we welcome your questions. At this time, if you would like to ask a question, simply press star one on your telephone keypad. Again, to ask a question, simply press star one on your telephone keypad. And in the interest of time, we would like to remind participants to limit their questions to one question and one follow-up question. All right. We're ready. Cue the drum roll. Lee, is that right? Are you there? Are we still on? Yes. Hello, presenters. I'm here. Your first question comes from the line of Vivien Azer. Your line is now open. Please go ahead. Thank you. Good afternoon. My first question, Anthony, is for you. It's a little bit more of a housekeeping item. Thank you very much for the commentary around your expectations for continued growth in SG&A as you invest behind the business. Can you please clarify whether you were talking about SG&A in absolute dollars or as a percentage of sales? Great question. Vivien, hey there. Thanks for the question. I was referring to gross spend in dollars, not percentage. We'll see how much we can grow the top line, but we're interested in, over time, kind of maintaining nice operating leverage in the business. I think the gross SG&A dollars spend, we think it will increase over the coming quarters. Understood. That's very clear. Thank you for that. my follow-up question then is for you, and it's a little bit more of a strategic one. Clearly, on the flower side of your business, Brownie Scout has been a home run. We've been hearing about that for a number of quarters now. I recognize that the U.S. business and the way you guys run your business is very, very different than Canada. one of the kind of unfortunate learnings out of the Canadian marketplace is that the consumer preferences in terms of flower strains can pivot, and pretty quickly, or at least it seems like it caught some of the Canadian operators off guard. I'm just curious, how do you guys keep your finger on the pulse in terms of strain preference? if you could offer any kind of sense of the percentage of your overall flower sales that Brownie Scout accounts for, that would be helpful. Thank you. Sure. Yeah, great question and insightful, and you're right. Tastes evolve and strains evolve and things like that. We're very heavily invested in kind of breeding, evolving the strain portfolio and delivering for consumers, essentially the best strains around. While we don't talk about a lot of the other strains out there, whether it's the sativa portfolio, Jack Herer and L'Orange and Sour Diesel, which right now are just doing great, or the White Durban that we recently released on the East Coast. There's a lot of great things in the portfolio. We just like to talk about [inaudible] since it does so well. In terms of a percentage of revenue, it's not huge. I mean, not a significant piece that I even know it offhand. We certainly want more. Consumers want more. Certainly, the effect for the medical patient and for the relax effect of the indica that it delivers is one of a kind. That's why it stands out. We're not betting the company on any single strain. It's nice that the Canadian markets realize it, but California has been telling us that for the last couple of decades. Strains matter and the genetics matter, and there's a very important nuance in the space. Okay, great. It's great to know you're not materially over-indexed to that one strain. Thank you very much. Sure. Thank you. Thank you. Your next question comes from the line of Matt McGinley. Your line is now open. Thank you. On the CPG business, it looks like the gross value of product you sold in wholesale increased nicely sequentially, but the amount you sold internally decreased modestly. I would hope that you sell the product in your stores that the customer wants and not necessarily what you produce. Is there a geographic factor or something with product mix that has caused that sort of mix shift or slight decline in product that you're selling internally? Hey, Matt, Anthony here. It was relatively flat, actually, kind of quarter-over-quarter. Given kind of the nuance, once you unpack that, there's a lot going on within each of the state markets that we operate in. It's really not a number that we kind of target or manage towards. It's one of these natural evolves within the business. While we didn't kind of see intercompany kind of revenue grow at the same clip that we have historically, we don't read too much into it, just based off of what we're seeing within the state markets themselves. Okay. On the capital raising and cash balances, between the equity raise and the debt, you brought another $250 million year to date, and you've proven you've been able to generate cash, and I would expect that would only improve. Even as you spend more on CapEx and if you did a lot more M&A, almost all the deals we've seen this year, including this Virginia deal of yours, is very heavily weighted to equity consideration. The question then is how much cash do you need to run this business, and are we reaching a point with the company or the industry where you just sit on bigger and bigger balances because you don't know where you may need to pivot next, kind of like a tech company where they just sit on these big balances and you don't know when they may deploy them, but they'll have these larger balances. Just holistically in thinking like what's the right amount of cash that you need to run this business and drive? Sure. Thanks, Matt. It's Ben. It's not an exact science. We sleep really well with a fortress-like balance sheet in cannabis being federally illegal with the lowest cost of capital, even against others in federally legal domicile locations. We think the opportunity is immense. We're seeing annualized numbers crossing $20 billion. We see the number going way over $80 billion, and it would make a lot of sense to have the capital on the balance sheet. We're investing aggressively into the business. I mean, look across the state opportunities Illinois, Ohio, Pennsylvania, Maryland, New Jersey, New York, Connecticut, kind of keeps going. All of them have significant growth based on the size of the market, even if you take your conservative assumption and cut it by 20% or 30%. We're not really managing the business to an amount of capital, the cash equity split. People want to own our stock. We're flattered by that. We're happy with that. We don't want to give it away. Obviously, it's the treasurer here. We're comfortable with the share count we've got. We're managing that carefully, and we believe we can create very significant accretive value on whichever part of the income statement you want to measure and put a multiple on through the M&A. Otherwise, we wouldn't do it. We would double or triple down in the business, which we're doing as well. We like the cash balance. We don't know where the capital markets are going. Sure, one day, listing and SAFE and other things are going to happen, and it will change, but the business is pretty fantastic currently, and we want to continue to invest in that. I haven't thought for a moment that we have too much cash given the current situation. Okay. Thank you very much. No problem. Thank you. Thank you. Moving on. Your next question comes from the line of Eric Des Lauriers from Craig-Hallum. Your line is now open. Congrats on another impressive quarter here. A bit of a follow-up to Matt's question here. You guys done a great job lowering cost of capital through these non-brokered institutional capital raises. Yet at the same time, cannabis stocks in general continue to be negatively impacted by the significant capital and trading restrictions. I'm just wondering if you could provide some color on the type of institutional demand that you're seeing beyond the public markets here, and whether you're seeing any broad changes in compliance risk appetite, whether institutions are shying away or warming up to the idea of taking on U.S. cannabis exposure. Yeah. Listen, Ben, I'll take that. That's a great, insightful question because that's really part of the core issue here. I would say, the folks that are putting their name in press releases, there's more attention. Things are not simple. However, what you've seen Green Thumb do literally in every single way is bring new capital into the space. Matt, you know us and I know that you too, we are literally bringing in the capital of each one of these raises, not out of other cannabis companies, but new high quality, long-term, aligned with management, institutional capital. That's where the supply is going. We're bringing it in, but it's a slow movement. There needs to be more clarity. Things are very gray, whether it's custody, prime broker, different relationships. You still can't buy the stock on Robinhood. CNBC still doesn't cover it properly or talk about it. It's a very tricky situation. I think it continues to be the PMs and the investment analysts are unbelievably excited and cannot those who see it are sort of surprised by the, what did we call it, structural irregularity or market inefficiency that seems to be sort of in slow motion at a time when the business on the ground, bottom up, is in accelerated fast motion. In fact, accelerating. I mean, you've had New York, you've had New Jersey, New Mexico, there's more and more happening. Now you got Georgia hopefully going to issue these licenses, and Virginia just legalized, and maybe Mississippi. There's talk in other places. We see an absolute dichotomy between the capital market inefficiency slowdown and the on the ground acceleration. That's why we run the business with tons of cash, with very aligned shareholders, and we're bringing in new capital. I can't speak to the other companies or the other countries or whatever else is happening, because people are doing it differently. It's not a one-size-fits-all situation. We're building a business for the long term for shareholders, investing capital into a market opportunity in the U.S. that we think is somewhat unprecedented. We're fired up about it, and we're aligned with the shareholders. We're not having a hard time bringing in the right kind of capital. We feel very sort of privileged in the spot we're in. I think broadly, the capital markets are in their nascent stage. Okay, great. That's helpful. Great color there. As a bit of a follow-up, with that cash balance being the largest it's been, and you guys continuing to increase your cash flow generation, could you just provide some insight or some color on sort of how you guys decide whether to increase the scale of your projects or sort of spread that cash around and start to take on new projects, new geographies, maybe some smaller scale projects. Can you sort of help us understand how you guys think about that trade-off there? Thanks. Yeah. We think about it like, I mean, this is the ultimate game, right? The capital allocation and how we put capital, where do we put it in, what kinds of returns for what the business is going to be when and what the board will look like. It really is kind of a multidimensional situation with lots of different states and markets and things. We look at our cards. Fortunately, we can see everybody else's cards. We make the bets based on the most basic principles possible. I can't remember if it was this call or another one where we talked about Fortune's Formula or the Kelly principle about how you make pot odds bets. The way we think of our wagers on behalf of shareholders, that this is our money and these are chips. We're playing against a table where we're trying to take one plus one to make four, or put in $100 to create $500 and t he simple math of, make it up, say, $100 million investment to create $50 million or $75 million of EBITDA. At whatever multiple you think the market's going to trade EBITDA at, $20, make it up. $1.5 billion of market value creation. Where can we put that dollar to work? Well, guess what? There's many places we can put it to work because there's tens of millions, in fact, over 100 million Americans who are really, really interested and want and have demand for the product. it's about as simple of a setup as possible. we just want to play where we have the highest probability of success based on the chips that are out there. Yes, all right. Thank you. Moving on. Your next question comes from Camilo Lyon from BTIG. Your line is now open. Thank you. Very nice quarter, guys. Congrats. Particularly in light of how difficult February was. I'm curious to know, after putting up a, call it a 10% sequential growth in Q1, what was the exit rates coming out of the quarter relative to that 10%? Any color you could share as to the momentum that you've seen thus far into Q2 would be very helpful. Yeah, it's a great question. Insightful. I would say when we sat here, it was literally the same seats in, I think it was March 17th, a Wednesday, St. Patrick's Day. The day the stimulus checks came out. The business you've heard it from others, you've seen it in the data. Things changed in the back half of March as the market woke up. I wouldn't say that it elevated above. It sort of caught up to February, being, well, take the Illinois market data $80 million in the back popping up above. You can see it state by state, and you really track the state data to show it. I think your run rate exit is more a first quarter flat situation, versus some kind of dramatic acceleration. 4th of July is a nice holiday and everything, but under the coverage usually March is a little stronger than April. Not Green Thumb specific, but look at the markets, just every state gives you the data, and you can see that. Kind of see things, which stores are opening, what's happening. Some material change, really, in price. For Green Thumb's purposes, we have more still coming out in the back half of the year. We talked about that. Towards the end of the year, particularly Illinois, on some of the things coming at the beginning of 2022. Thank you, Ben, for that. That actually leads to my second question about your back half expansion plans. If you could just remind us what projects are coming online in the second half in the States, that'd be very helpful. How we should think about the really robust margin that you delivered in this quarter, understanding what you said, Anthony, about maintaining kind of like a 50+ sort of baseline. It really seems to be that as more cultivation and harvesting comes online, particularly in the back half, you have an ability to at least maintain the starting point of this 57% margin rate through the balance of the year. If I'm thinking about that incorrectly, please correct me where I'm wrong. Cam, I think that's right. On the ground, what I would say is, like Anthony mentioned, we're not targeting that 57%. How do we get to 59%, and where do we have to turn? We feel like we're comfortable with where the gross margin is. Instead, we're more like 50%, and we're okay investing into the business to scale this thing. We think there's a lot more production coming simply because there's a lot more demand. If there's a lot more demand, people want a lot more of our products, so we have to be thinking about it in that way. We're very comfortable making investments into the business. If it means the margin goes down, fine. It's not a core focus. trying to build the infrastructure that really hits the SG&A line more with the revenue decelerating and the gross margin, scale's an amazing thing. also, you start to work on yields, and you start to see real details. sometimes we don't talk about the exact details inside the business, and that's not a coincidence, because we're really working on that. We believe we have a national model. We believe we can bring premium indoor flower to consumers across the country who want it. It's as basic as possible. there's more upside to go. The next quarter, I don't know, but in 2023, in 2024, where this business is and the scale we have based on the capital we're putting in, based on the demand we see in. Just think about New York and Virginia and New Jersey. That's as big as Canada alone. I think there's maybe only 30 or 25 licenses there currently. It's only the first mover. We think there's got to be a lot more people in the industry, and there's got to be access to capital, and hopefully D.C. gets around to doing a few things. It sets us up pretty well. Thanks very much. Good luck. Sure. Good questions. Thank you. Your next question comes from the line of Michael Lavery from Piper Sandler. Your line is now open. Thank you. Good afternoon. Michael. Just wanted to follow up a little bit. The industry certainly is at an accelerating point with so much legalization momentum, and your balance sheet obviously sets you up really well. Can you just give us a sense of how you're thinking about CapEx and any ability to quantify what to think about for this year and maybe a range for something for 2022? Hey, Michael, Anthony here. I'll take it. In 2020, kind of the gross spend, [inaudible], which is kind of before the sale lease back reimbursement, we spent about $113 million last year. In Q1, our gross spend was about $32 million. I would anticipate our gross CapEx spend this year to certainly be greater than it was last year. As you know, we're not in a group that likes talking specifics. With the balance sheet that we have and the markets that we have and the regulatory change that's coming, we're going to lean in pretty aggressively, as I said in my standard remarks. Now I would anticipate that in Q2 through to Q4, the CapEx should accelerate from that $32 number. Okay, that's helpful. a somewhat related follow-up, can you touch on, obviously you've got the debt at 7%, which is by far the best cost capital in the industry. can you just give a sense of, is there still improvement from there? Is this kind of where you expect to stay? What would it take for that to move the needle again? How do we just think about what settles into sort of a maybe baseline type of run rate? Yeah, for our purposes, debt's not a thing you can just play around with based on the day where the pricing is. For us, it's more alignment with the debt providers, where we think that cost of capital. Look, on year-end, I talked about 6%, but 7%, if we can get 5%, we're not really looking to rebuy quickly. The way the structure is for us on our balance sheet is three years. We have an option for a fourth year. We think the next time we rebuy is when we're exposed to the sort of more normalized capital markets. We've been told the business performance and the P&L looks investment grade, and if you look at the U.S. investment grade, you're sub four, 3%. If you look at the debt characteristics of the business, the trailing 12 months is like one times EBITDA, plus or minus. Even if you say the taxes are wonky, then it's two times. Pretty under-levered for the growth we see. We sleep really well with it, and we like where we are. Certainly more interest, we can plus it up to 250. We don't need to pay the interest on more cash sitting on a balance sheet. Just doesn't make a lot of sense. We have a year to fill out the rest of it. We have the opportunities. I think I'm hopeful for everybody else in the industry to be able to continue to drive down their cost of capital also. That should happen. The capital markets are thin, as we've all seen. We like our position. There's no need for us. We did the equity, did the debt, now we're going to work. Did the same thing in 2019. People were a little surprised it happened in 2020, and we plan to be back in 2023, talking about where the world is with cannabis. That's a really helpful color. Thanks so much. Sure. Thank you. Your next question comes from the line of Aaron Grey from Alliance Global Partners. Your line is now open. Hi, good evening. Congrats on the quarter and thanks for the questions. Hey. Hey, how's it going? First question for me is a little bit around M&A. Great to see the acquisition in Virginia with adult use coming online there in the next couple of years and flowers starting. Would love to get your perspective in terms of how you think about potential additional M&A, particularly through the lens of the chance of there being some changes to the federal level or your thoughts on that. There's been some peers or others out there who have started to make some moves in anticipation of there might be new changes at the federal level and how you guys think about that in the near term and your acquisitions. Thanks. Sure. [inaudible] I can take that. M&A, look, the high level thesis is everything's on the table if it makes sense. We've said that for a while. We're pretty aggressive in knowing what's going on in the space. We're very U.S.-focused. We think the action is here in the United States. We think this is an American story, and we think that as the U.S. executes as an industry and a country, the world will want what we have. Capital markets and supply demand are pretty efficient here. We're comfortable with that. If you just look at our history, we raised debt, we invested in the business. We're looking at what's happening with the cycle of capital markets. The fun part about cannabis is it's in hyperspeed. We've got peaks and famine and ups and downs, and we're comfortable with that. I would say that you should look for us to do M&A that's accretive to shareholders based on the math thesis we've talked about. whether it's going to be an enter like a Virginia or a scale like whenever the last year we bought a store in Connecticut, it just scales the business, and other strategic plays like that. We've been active for five, six years. Sometimes, like Anthony said, we do our favorite, which is do nothing, and sometimes we do a lot. We think we're following what's going on in U.S. cannabis pretty carefully, and we think we understand what's going on on the ground and therefore, gives us a little bit of an edge with information by which we make decisions, whether that's data-driven or personality-driven or legislatively driven, whatever. that's the recipe by which we choose. On your point, that's all part of the board that we see about how to bet and where it's going. The business is very good under the current situation, I'm not likely to put a lot of capital into something that might happen later. We like where it is right now. We think there's opportunity with change, not threat, we're excited about that. We want to play a lot of offense, at the moment, we feel tens of millions of Americans want cannabis and don't have it, we need to make it really fast and really good, that's what we're up to. Oh, great. Thanks. That's a super helpful color. Then second question for me. Just given your strength in balance sheet, we've talked about Florida a couple of times more recently. Obviously, there's been some action there in terms of acquisitions this year. Hasn't been a ton allocated down there for you guys where you had some other high priority states. Just given your strength in balance sheet, you've often talked about you like the market longer term. Does that kind of give you some capital to maybe put towards that market and look to grow there, especially with the potential of adult use being on the ballot there in 2022? Thanks. Yeah, I think that's insightful. Yeah, as we have more cash, exactly right. We looked at it through that lens and that would lead you to think that conclusion. Yeah, we're not going to just sit with a lot of cash for a long period of time. We see 20 million Americans who have a high interest in a very nice market. People have done a very good job down there. It's an interesting market and we're studying it. All right, great. Thanks. I'll jump back in the queue. Sure. Thank you. Your next question comes from the line of Pablo Zuanic from Cantor Fitzgerald. Your line is now open. Ben, can I ask about, I understand this is a growing industry and you have a lot of levers, but the 2% same-store sales growth sequentially, can you help give some context around that number? I could interpret that Pennsylvania may be too many stores. I know that market is growing, can go rec eventually, or other states, Illinois, new stores have opened only recently. I'm surprised about the 2% same-store sales number. Can you give some context around it, please? Thanks. Sure. Pablo, it's Ben. I can start. We don't see any issues in the business. There hasn't been any major new turn-ons or things like that, whether it's adult use or new store openings or conversions that sometimes [inaudible]. The thing I would do is look at state over state, what's happened fourth quarter over first quarter, or first quarter over fourth quarter by state. We don't see ourselves giving up a lot of market share. These are the ebbs and flows of the market. First quarter was pretty slow until March 17th, like no doubt about it. February was pretty rough in the country. There was four days of snow, and I think like Ohio, Pennsylvania, and New Jersey had multiple feet of snow, and nobody wanted to go out, and the store wasn't open every day, and it's a 28-day month. I don't see any real read-through there. March came strong, but 83% on 48 stores. The other big thing is it's a big base. The numbers, you now have a comp base over a year of 40 and a sequential of 48. You're now moving the needle of 48 stores, 30% across 10 states. That's tough. The business is much bigger than it was before in terms of the amount of retail business we're doing on a daily, monthly, quarterly basis. It's a big barge and big market share, yet the market's going to quadruple in front of all of us. Right. Thank you. Just to follow up on New York, are you thinking about the potential there to have eight medical stores? Do you have a view on that, the timing, and your views in terms of when the state starts selling flower, if you have some insights on that? Thank you. On the medical side. I can take that also. It's Ben. We think New York is an awesome market. We think the structure of the market sets up well. It now is about execution. We've seen a good intent law stumble in execution for Illinois, yet still has a chance to emerge successful. We believe, to just put a dart out there, that 01/01/2023, January 1st, 2023, would be a date that New York could open adult use. They could do so where it's not the current incumbents, of which GTI is one of them, only. No grandfathering. Instead, based on the timeline and based on the laws and the commission and all the things that New York's doing, and they're pretty focused on and doing a nice job, they could get new licenses and applications, and those licenses would have a focus on social equity. Day one, you could have new people enter the industry, new entrepreneurs with a chance to generate new wealth. We think that's a big part of it. There's no real product rules yet in terms of the market. The law, I think he said, yes to flower. You've heard others who are really carrying the load, and we're appreciative of that, pushing this forward because obviously the medical patients shouldn't have access to flower for well-being. It's common sense, yet rules are tough. Regulators are new to the space. There's a lot of education and hard work that has to go on to bring that about. In any way, it's likely that New York can be a great market. There should be plenty of demand. We'll go for our eight stores, three of which can be dual, and really execute and do it. Okay. Thank you. Sure. Thank you. Your next question comes from the line of Graeme Kreindler from Eight Capital. Your line is now open. Hi, good afternoon. Thank you very much for taking my question. I wanted to follow up on some of the earlier comments you made, Ben, with respect to the potential set up in the event the market has an interstate commerce element to it. The early days of the GTI story really talked about branded distribution at scale. I'm wondering if you could elaborate a little bit more. There's been significant adds and diversification across the brand portfolio at GTI over the last little while. When you talk about the distribution at scale, how does your potential war chest or your existing asset base factor into a situation where you're looking at distribution coast to coast? The existing cultivation coming online, that's very much served to expand on the existing state markets and the demand coming on there. Do you see opportunities to leverage any of that infrastructure from a regional basis, or would this really require some large greenfield type of investment or potentially using more third parties in the supply chain? Thank you very much. Sure. Hey, Graeme. Yeah. It's the same story. The truth is there's huge demand within the markets. Like we talked about on the last call, and we said on this call, the business is very good under the current situation. We think there's an opportunity more than a threat with interstate. Certainly going to need more, but you got to think about the supply chain becoming more fragmented, and there's more opportunities there. We think our brands win with the consumers. Exactly what the supply chain looks like today is not something that we lose a lot of sleep over. We know what the products are. We'll be able to make them at scale, but making them at scale in markets that have 12 million people, 13 million people, 20 million people, 40 million people out in California. Those are huge markets, and obviously there's regionality and there's other things. There's other models of consumer products that have built these sorts of things. We don't think we're behind in any way, shape, or form. We feel like we're in a pretty good spot and like where we are. I think what's also really crucial is the consistency of the product. You can't just make it everywhere and ship it, and then you're good to go, especially as you get closer to the flower. As you move further away into the refined products, [inaudible] it's a little easier, but the consistency of the product is very important. Understood. Appreciate that insight. Thank you very much. Just as a quick follow-up here, with respect to the acquisition of Dharma in Virginia, there's been some chatter about the potential timing of the start of adult use being brought forward. How does that relate to your capital allocation decisions and the CapEx expectations that were outlined earlier in the call? How much of that might get directed to Virginia? How quickly could you start deploying capital based on what Dharma has built or potential plans that they've drawn up for significant expansion? Thank you very much. Sure. This is Ben, Anthony. Don't be shy. What was happening with the legislation, like I've said many times, we think the legislation in state or federal, federally more so, is a trailing indicator. We see 8.5 million people that have a huge amount of demand, so we're putting in the pieces in place to serve that demand. We understand it's medical, we understand it's going direct. There's a lot of nuances for how that works, but it really doesn't impact the capital decision. If we saw a do not enter sign and a no chance for adult use, we might change the plan. The plan is 8.5 million people, billion-dollar- plus market. What's the multi-phase approach? We've done this in many states. We know that consumers are going to want the brand and product, and now we know how to make it at scale. it's scale enough for eight and a half million people. We're also thinking what states are around, how does this look, and what happens regionality to your question. Virginia's a great market, and it's a pleasure to see cannabis coming to an area of the country that really does not have it. We think that's a big deal. Got it. Understood. Thank you very much. Sure. Thank you. Your next question comes from the line of Andrew Partheniou from Stifel GMP. Your line is now open. Hi, thanks for taking my questions, and congrats on the good quarter, guys. Maybe if I can come back to the discussion of dynamics in March and into Q2. Could you talk a little bit about the pricing or promotional environment? People receiving stimulus checks was highly anticipated, and wondering if there was a higher than normal promotion to capture that strong traffic after a tough January and February. What does April look like, and now what does May look like after the 4/20 and the stimulus check period? Andrew, Anthony here, I'll take that. I think that, I'm trying to read into your question a little bit, you're essentially asking if we ran promotions in March to kind of combat the softness that we saw in the early part of the quarter. That is really not the case. We continue to just kind of run the business. I'll remind you that one of the benefits to our business is that we still operate in a number of supply-constrained environments. Even though our operators don't have a huge appetite to do a lot of promotional activity, some of the markets are getting more competitive, but that's just natural evolution. Obviously we're kind of studying that and watching that, but there was nothing kind of abnormal or anything that we did, where we had a discussion, as we sat around the table saying, "Hey, we need to do something about this." We ran the business, ran the playbook, and the stimulus checks came in and people did exactly what Ben mentioned during the last call. They purchased more product. I think we probably were the only beneficiary of that. Thanks for that. Maybe just talking about New York a little bit more. The regulations haven't been out yet. Within the law, it gives the regulator a lot of power to place any kind of caps or restrictions. Yet you've already secured your platform for production there. Just curious if you could give us a little bit more color on your thoughts on how you think the regulations will play out, whether you think there will be any production caps, and how your strategy with your production footprint that you've already acquired plays into that. Sure. This is Ben, I can take it. We've talked about it. I'm not sure how much new news there is. I think there's going to be an immense amount of demand. We want to build the high-quality products we know we can make. We have an aggressive capital spend plan. The state has not issued the rule yet. The committee, we're pretty early on. You can go to the website. I think that's a strong sign. There's a lot of intent to make this work and make it work well, and we're here as a partner to help. Like I mentioned, some of the current ROs are working pretty hard on getting flower out, and we're all kind of in it together. Along with the new entrants. Similar to what we did in Illinois with the LEAP program, which is an application assistance program. It's hard to apply for a license. As we can educate folks on coming into the space, we're going to make the product, we're going to have our stores, we hope others can have stores. Like I mentioned, we're throwing the dart on 01/01/23. That's not based on any exact science or zero lobbying. It's just based on what we think would set up well for the industry, for everybody who's invested in this going really, really well. If it's three to six months earlier or three to six months later, you can make it work. Why not set someone with a pretty lofty goal, like bring others in day one? We're going to aggressively build what we know how to make. We think that we've had version one, two, three, and four and made a lot of mistakes, and hopefully we can not make the same mistakes in New York. Thanks for that. Congrats again. I'll get back in the queue. Sure. Thank you. Your next question comes from Scott Fortune. Your line is now open. I'll be brief. Real quick thoughts on California, Ben. You opened up the Pasadena store. I know it took a while, but you're there. Any color on kind of trends there, momentum, and thoughts around building out California at all? Thanks, Scott. Yeah. Pasadena opened. We see a lot of COVID restrictions still going on in California, but that's opening up. The store's off to a nice start. Pretty good momentum, up and to the right, as we say. We'll continue to refine menu selection, build loyalty in the state. We're aggressively looking at what's going on in California. I think it would be foolish not to, but we're not aggressively spending. If things will make sense, they'll make sense, and then we'll go there. The places that we mentioned for aggressive spend are like in the now. California, we're watching, we're studying. We like our position, which is not a lot of capital at risk. Got it. two other states you mentioned, I'd say is Nevada and Massachusetts. As things open up here, are you seeing favorable trends from that standpoint in these two states that the Cann investment makes sense to move forward into other states? That's why Illinois, I think you'll launch some other states going forward. Yeah. Let me see. It's a little different between Nevada and Massachusetts. Massachusetts, we're in strong and get really transparency into that market. We plan to scale production. We need more of our product there. We plan to expand retail. Not in this quarter, we're sitting with one. Look for action to come in Massachusetts. In Nevada, our business has not been heavily leveraged to tourism. It didn't soften the way it did. Now you're seeing surge with 60 going to 80 on a monthly basis. A lot of tourism. Obviously, that's a heavy play of what we're doing with Cookies and Berner, which we think is great. We'll plan to play that. Both those states, we get pretty good transparency on a monthly basis to see them come back. Pricing's firm in both states. There's a lot of momentum for our products and others, as there's just good growth in both those markets. We have a couple more stores we can open in Nevada. We should have this year, one in Reno and one more in the Vegas area, which are in the pipeline. Great. Appreciate the color. Thanks. Sure. Thank you. Your next question comes from the line of Andrew Semple from Echelon Capital Markets. Your line is now open. Hi, good afternoon, everyone, and congrats on another solid quarter. Ben, I think a couple of months ago, you gave us your kind of priority list in terms of capital allocation and certain markets where you're looking to prioritize capital spend. Just given the developments in New York and Virginia since that update, could you kind of slot those in and kind of give us a sense of where those fits in terms of priorities? Do you think New York's kind of at the top of that list and maybe a little bit more clarity on Virginia? Yeah, I mean, both of them come in strong tier 1 capital allocation opportunities. I mean, it's a pretty basic math problem. 20 million people and 8.5 million people, both the current market size in New York and California. You've seen the movie before. It's called Illinois or Pennsylvania. It's just literally, it is not about anything that fancy. It's about how much product the consumers want. There's no major red flags in legislation, meaning some structural irregularity or like vertical force or no product or potency. There's something wonky. Most of these markets have a pretty set structure for how they're going to operate. New Jersey's right there as well, right? 9 million people are waiting on rules and waiting for this thing to get going. Huge amount of demand. That's great. Just to follow up, I wanted to ask on the gross margin profile. There's been a very nice trend. The gross margin has been ticking up every quarter since Q1 of 2020. Just wondering on your thoughts on where we start to find the kind of normalized gross margin profile going forward. Do you think we're kind of approaching that level yet, kind of in the Q1 period? Do you continue to see waiting room for that to move higher as you scale your production and cultivation activities? Yes. Look, it's a great question. It's a really hard question to answer. Part of the reason is because given the growth of the business, what we have going on is we're obviously investing heavily on the CPG side of the business. Over time, that should become a greater percentage of the overall business. When you unpack kind of the gross margin, the gross margin of retail is relatively static, right? CPG is where you can get kind of real kind of gross margin leverage within the business. However. These sites take a while to kind of turn on and get to scale. What you have is, if you unpack the portfolio and you lay them out, you have a number of facilities right now that are achieving scale or call it operating at scale and continuing to refine and get more efficient. In the same breath, you also have a number of facilities that are just now turning on that are not terribly efficient, right? They're going to be a drag, I guess, on that gross margin line. I think it's difficult for me to sit here and tell you where I think it's going or where I think the true potential is in that line item. One of the benefits of the business is that with solid cash flow from operations and a healthy cash balance, we don't have to sit here and name gross margin to a specific number. We can make bets that may not only pay off in two to three years from now, and we've got the luxury of doing that, but we have these other states that are operating at scale. That puts us in a really nice position and puts the shareholders in an even better position. I think you'll continue to see us just lean in on the CPG side of the business where we know that over time we can get more kind of gross margin leverage. That's great color, Anthony, appreciate that, and congrats again. Thanks. Your next question comes from the line of Mike Hickey from Benchmark Company. Your line is now open. Nice. Hey, Ben, Anthony, Jennifer, Andy, congrats on the quarter, guys. Two quick ones from me. Just curious how you think about investment or development of cannabis lifestyle or cannabis media assets as sort of an ancillary growth opportunity for you. then secondly, with your Cann beverage product line launching in Illinois, obviously, it sounds exciting, but just curious, double-click maybe on the learnings there in terms of manufacturing, maybe initial demand in the category potential outside of California. Thanks, guys. Sure. I'll take the second one first. Cann, we're excited about the launch. We continue to see, like everybody, that beverages are not a big part of the category. We talked about off-prem versus on-prem, where all cannabis is off-prem, and we think that's changing slowly. We want to be a part of that. We've made some plays for that. We think it'll launch well. We don't have any major news to share except for the product is fantastic. For those of you that haven't tried it, you should, because it's socially dosed. This is a light 2 mg. You're not going to accidentally drink 10 Canns, which would be the equivalent of two gummies. You might accidentally eat two gummies, and that might be over-serving, whereas one cann is not going to be over, even at a half. bringing in people that don't smoke pot, they're not really familiar with that, they don't want to get too messed up or whatever, it ends up a very, very attractive entry. it's an instant situation where people love the flavor. The guys have done an excellent job formulating the product, the brand. It works. As you know, that's what attracted us to it. I'll come to your first question. On media assets, well, I don't know. I would say everything's on the table if it makes sense. We're open. There's a lot more conversations happening broadly. It seems like everybody's interested in cannabis. Here we are with a series of unique assets and perspectives on what's going on. we're open to lots of conversations. Thank you. Sure. Thanks for the question. Thank you. There are no further questions at this time. Presenters, you may continue. Great. Thank you, everybody, for dialing in. We'll be back in a few months. We'll see you in Vegas, and enjoy the ride over the next 90 days. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.