Jushi Holdings Inc.
Q3 2020 Earnings Call Transcript

Published: 24 Nov 2020

[Operator:]

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

[Michael Perlman:]

Good morning. Thank you for joining us today for Jushi Holdings' Inc. third quarter 2020 earnings conference call. Joining me on today's call are Jim Cacioppo, Chief Executive Officer, Chairman and Founder, and Kimberly Bambach, Executive Vice President and Chief Financial Officer.

[Jim Cacioppo:]

Thank you, Michael. And thank you everyone for joining our call today. I hope everyone is doing well and staying healthy during this time. This morning, I would like to take a few minutes to review the progress we have made since our last call and provide a broader update on our operational footprint and outlook. I'll then turn it over to Kim to review our financials. Then we'll open it up to questions. Today, I'm very pleased to report we achieved sequential revenue growth of 67% to $24.9 million for the third quarter of 2020. Our revenue growth was primarily driven by a strong performance for BEYOND/HELLO stores in Illinois, and Pennsylvania.

[Kimberly Bambach:]

Thanks, Jim. And good morning everyone. Before starting as a reminder, the results I'll be going over today can be found in our financial statements and MD&A and all our U.S. dollars unless were noted. Third quarter revenue was $24.9 million, a 67% increase compared to $14.9 million in the second quarter of 2020. As Jim mentioned, the growth in our revenue was largely due to strong organic growth at our BEYOND/HELLO stores in Illinois and Pennsylvania. A partial contribution from that recently acquired Pennsylvania Growth-Processor and sprint and approved market conditions in the third quarter for Nevada. On a same store sales basis, our retail revenue increased by approximately 45% as compared to the second quarter of 2020, excluding two stores that were temporarily closed in Philadelphia. Gross profit was $4.3 million for the third quarter compared to $7.5 million in the second quarter of 2020. The 64% increase in gross profit over the prior quarter was primarily due to the afforementioned increases in revenue. Gross profit was 49% in the third quarter and 50% in the second quarter of 2020.

[Jim Cacioppo:]

Thank you, Kim. This was a strong quarter for us. And I'm very proud of the hard work and dedication to execution by our team that has enabled us to achieve record results for our company. We expect to maintain this trajectory of robust operating results for the remainder of the year. And as a result, we have increased our fourth quarter 2020 revenue guidance from $25 million to $30 million to a range of $28 million to $30 million. And we expect fourth quarter adjusted EBITDA to be between $2.5 million and $3 million. For the first quarter of 2021, we expect revenues to be between $37 million and $40 million and adjusted EBITDA to be between $4 million and $5 million. We are also maintaining our 2021 revenue guidance of $205 million to $255 million and our 2021 adjusted EBITDA guidance of approximately $40 million to $50 million. We are incredibly pleased with our year-to-date, financial and operating results.

[Operator:]

Thank you. Our first question is from Graeme Kreindler with Eight Capital. Please proceed

[Graeme Kreindler:]

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

[Jim Cacioppo:]

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

[Graeme Kreindler:]

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

[Jim Cacioppo:]

Kim will answer your question.

[Kimberly Bambach:]

Yes Graeme, you're exactly right. We didn't just Pam's in the middle of August. And part of that was purchase accounting, surviving the inventory in progress and growth stages. The margin was lower because we did take in various initial Business Economics at acquisition. But we've made a significant amount of changes in a very short amount of time, and you're going to see that margin coming back up in all of our future quarters.

[Graeme Kreindler:]

From now, yes, sorry go ahead…

[Jim Cacioppo:]

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

[Graeme Kreindler:]

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

[Jim Cacioppo:]

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

[Operator:]

Our next question is from Russell Stanley with Beacon Securities. Please proceed.

[Russell Stanley:]

Good morning and congrats on the EBITDA positive quarter. Just wondering with, I guess my first question with respect to the same store sales growth quarter-over-quarter. I guess that was both increased traffic and basket size. But are guys want to break that down into those two components and to comment is to the extent versus trends have continued so far in Q4?

[Jim Cacioppo:]

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

[Russell Stanley:]

Right. That's great color. If I can move on to surge…

[Jim Cacioppo:]

Kim just pointed out to me. The same-store sales count could be helped or hindered by the supply. Pennsylvania did short flower. So, as we build our internal supply coming out of Scranton, Pennsylvania at a PAMS facility, that will help us obviously gain market share. So it's a supply constrained market like Pennsylvania, supply is very important to driving sales.

[Russell Stanley:]

Great. Thanks for that edition. That's helpful. Just moving on to Virginia, given the governor's recent statement of support for adult-use utilization. Just wondering if you can provide your latest thoughts? I'm getting greedy here because your first dispensary due to open in basically a little more than a week. Just wondering if you have any thoughts around timelines for the additional five dispensaries that you can open in that market?

[Jim Cacioppo:]

Yes. We have a call this afternoon. We have two that were in Illinois zone and they're in pretty good shape. The timeline for opening a dispensary, in both markets, again, we're not really familiar with the Virginia market opening dispensary, because one that's open is in our cultivation facility. Its great spot, but it's our cultivation facility. So you've learned a lot about the local regulatory requirements and the state requires. The timeline from when you sign and when you say go, the earliest you could do to six or seven months, and shouldn't drag on for more then 12 months certainly. So that's a pretty wide range. But we tried it -- in Virginia, it was supply constraints that will make those decisions. We have things that are our control that push it to six or seven months by quite frankly, spending more money and more resources added. And if we're in supply constrained market, we'll make that judgment when we want to spend excess capital on accelerating store openings. But we have a couple of great spots, I mean, tremendous spot, a picked out and obviously with what's going on with COVID, you're fortunate circumstance, there's a lot of fake in retail. And so, unfortunately, it does work in our favor. But I think the Virginia market will be supply constrained not retail constrain. Remember, we can deliver two asset. So that's a tremendous advantage in that new market.

[Russell Stanley:]

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

[Jim Cacioppo:]

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

[Russell Stanley:]

Excellent. That's great color. Thanks. And congrats again.

[Jim Cacioppo:]

Thank you.

[Operator:]

Our next question is from Jason Zandberg with PI Financial. Please proceed.

[Jason Zandberg:]

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

[Kimberly Bambach:]

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

[Jim Cacioppo:]

Yes. I mean, the important components there is the corporate G&A. We have two largest corporate offices, one Boca Raton, Florida and the other in Denver, Colorado, to Denver is where our cultivation, long history of cultivation and processing and manufacturing comes out up. And then the smaller parts -- very much small parts in Southern California and in New York, that a -- but a substantial portion of our general and administrative expenses built out. As we grow the company, the hires tend to be, right now, the vast majority over the last three to six months, which haven't been that big, they've been in accounting, to be able to have to account for this and financial control. So that's one compliance to be much smaller, human resources is one that we're going to sort of gear up. And again, it's not the senior people, it's start below the most senior person, but human resource may be the one area that we focus on a little bit more on the corporate G&A side. So it's very incremental, and we substantially build out and extend that in a last six months that when we do acquisitions and growth it could be very, very creative , because we don't have to add much corporate G&A. Where Kim is talking about a state level expenses. There's some of those in especially in the growth processes just fall into the gross line. They fall into COGS. And so, you don't see that in the operating expense. But the state level is very much related to opening facilities. So the revenue far exceeds when you're putting it to the state level.

[Jason Zandberg:]

Okay. So that's fantastic. Just wanted to if you have any really read on the Santa Barbara retail location that was opened, I guess, probably just under a month ago. You said, this would be the third store that exists in Santa Barbara. Just wanted to get kind of get an idea of what he had already read up on, either the run rate of that or just how it's been embraced by the community?

[Jim Cacioppo:]

Yes. So the Santa Barbara store, as you said, just opened up, and it's too early for us to really talk about it much. And I will say that we anticipate --before we open that store, you go into the market like California, where there's a robust existing market for cannabis, whether it's just those two stores, where illicit market or stores, people pick up their cannabis when they're in LA, or wherever else they might be. There's robust supply in California, relative to say, like Illinois or Pennsylvania of course. And so, there tends to be a curve that you get on for six to nine months. It's not like -- hopefully, when we open up project too in Illinois, which should happen in December, as long as we have a stock with inventory, we think it'll be this very large sort of uptick. But I would say California is a very -- most of the market and its limited license markets like Illinois, Pennsylvania, that we operate in. The product has tended to go short. And demand has increased because people are using it more for medicinal purposes and adult-use purposes in Illinois. And so demand has been robust and Illinois quite recently more supply constrained, and Pennsylvania did supply constraints still. So that tends to be the governor no state, because there's such a massive unmet demand as a new market. Now in California, COVID is exacerbated that because people are home. We suspect we don't know, but we suspect that they're using it more. Now in terms of California and in a market with robust supply. And it's also a state that is been shut down much, much more and COVID related than if you look at some states like Florida for example. You know, there are a few tourists, Santa Barbara the tourists market, 9 million tourist per annum that typically go in, that's probably closer to zero. And you also have a large University, the University of California, Santa Barbara, they're not in session. So it's a very COVID effective market. So the early returns in that market are COVID-related, I think depressed to some degree. And -- but there is also a half about a natural curve. And we'll get more disillusive on California as we go up that curve, because as we get more comfortable with what's going on there.

[Jason Zandberg:]

Okay, great. That's, great color. Thanks very much.

[Operator:]

Our next question is from Bobby Burleson with Canaccord. Please proceed.

[Bobby Burleson:]

Hey, guys. Thanks for taking my questions. So nicely narrowing that that's in the top end of the range for Q4. So you guys are seeing some healthy momentum? Curious if you can kind of touch on some of the elements of what's driving that upside?

[Jim Cacioppo:]

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

[Bobby Burleson:]

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

[Jim Cacioppo:]

Sure. So on the organic growth, which that may be in some ways the toughest thing to project, because it just kind of happens, it doesn't happen, but we've lot of things on our control. We're opening -- we're increasing hours of operation, for example, we've done that in this quarter. And we're in the state of increasing and analyzing whether it's cost effective, meaning we're making good margins in the off hours, meaning the worst hours that we were close, but we're increasing, we're going through a max hours policy, basically, very rarely where we've not open max hours, as allowed by the regulatory authorities. So we have things like that under control. We have Beyond-Hello.com, which is driving traffic. I think 80% of our customers come in knowing that they're going to buy. We have things in Sauget 1 or first were Sauget where we have lines and lines and lines and we've added PLSs . We've put in the plastic shield so we can service more, we're changing the way the story goes. So we have these things that we've done in our own stores to help drive organic growth. So that's one thing that may be the hardest to predict. Number two is opening stores. I just mentioned, the Sauget store, I'll take a look at how the new one does or new BloomingtonNormal stores, we're very bullish on those doors. And then number three would be the stores in Pennsylvania, April, are we expect to open another store in Arlin, which is a suburb of Pittsburgh, that's a very, very constrained market. I mean, obviously the Pittsburgh area is a very, very big market in Pennsylvania, our second biggest Metropolis, outside of Philadelphia area. So we have Arlin and that we hope to open the one in downtown Pittsburgh, and then we opened to -- we expect to open one that's in University City, in Philadelphia by the June, July time, that one was right in middle our next University of Pennsylvania, Drexel University, very robust traffic there. So we have a tremendous number of great stores. We have one in Easton, which I really love. It's right by this A grade malls, where everybody goes to shop, next door. So we have these great locations that we are opening one after another. So that -- we keep track of that. That's kind of like your supply constrain, these people tend to want to go. They want to go to the closest dispensary. You have competitive products with robust menu, which we believe will have. The third factor would be the growth of PAMS, which is a grower-processor. We have these expansions. And then we have the turnarounds. So two different things. The turnaround is taking something that requires a lot more management to make that and that CapEx dollars and operating expense dollars meaning those different layers of management that required a lot more than was given. So that's the kind of process we're underway doing that. And again, that goes back to organic same-store sales growth. Little hard to predict when that love and care and a little more attention to CapEx and dollar spent on the operating spend side, when does that is that kick in. It kick in, but that's something to follow. And then you have the first phase is expansion. I think those are the big things. On the upside, you have to watch for the new store openings, they have new licenses. It seems to be -- those things become low because of COVID. And some regulatory stuff that's going on that causes it to slow down Beyond COVID. So that may be a positive news source could cause us to slow the growth rates in Illinois, that happens sooner than we thought. And then, listen, Virginia, it's a supply constraint, limited wildcard, it could really surprise us either way, relative to our projections, whatnot we're super aggressive with Virginia. So that's a stuff that on our control. And the third factor is we have acquisitions. We're sitting here with -- we've raised $30 million in the equity offerings that we recently just under $30 million in net proceeds in the equity offering we did in October. And then we have this warrant acceleration, we just open up this morning, which raise over $30 million. We think we won't be determined for 30 more days, but we think $30 million more, so that $60 million. If I take $10 billion aside of that and put it to the side, I think that for rainy day funds, I have a lot of buying power, we're not doing a 100% cash deals, replacing anybody. And so, we have a lot of buying power. And now, do we get into in 2021. We have to sign a deal. We have to close the deal. And we have to get it into the year. And that's the tough part. And I think if we do acquisitions, if I were on your seat, I would ask hey, when do you think that's going to hit your numbers? Is it the third quarter? Is it the fourth quarter. Unlikely the second quarter at this point? That could happen, The small one where that could happen. So there's things like that going on. And so that's the -- I think that's the way off between that wide range. So I hope that helps you out, Bobby.

[Bobby Burleson:]

Yes. That helps. And I appreciate, you mention of the . I haven't heard anybody talking about the...

[Jim Cacioppo:]

Yes. We get that store. They don't had a cite retail at . It's my favorite thing.

[Bobby Burleson:]

And they felt scrapple. Okay.

[Jim Cacioppo:]

Thank you.

[Bobby Burleson:]

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

[Jim Cacioppo:]

Thank you.

[Operator:]

Our next question is by Tom Carroll with Stansberry Research. Please proceed.

[Tom Carroll:]

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

[Jim Cacioppo:]

I'll start and then I'll tune it over to Kim. So yes, it's a really active exercise at our company. Kim is a very experienced CFO. He's done this many, many times. I have the distinction of having been an auditor before I went to business school, it's not something I particularly bragged about. But that was the truth though. And so -- but I'm totally into total control. I don't like surprises. And we sort of have that top down. So the CEO, pushes people and doesn't like surprises and like. So we have a robust program. So the things I've asked for and I'll turn it over Kim, is I want like people shop, its going around in Pennsylvania, our own people - I want people go in to store to see if they're doing that they're supposed to be doing. And so I want to build up an auditing staff for both compliance and financial control. And then, we've a very large accounting department. Kim will give you the numbers. But we have a ton of checks and balances in the accounting department that will prevent any kind of a fraud or anything else. We have a lot of cash on the balance sheet up there close to $100 million I think. So we have to worry about. It’s not close to $100 million, but I'm assuming that it’s close to . So -- but we have a ton of controls around that. And if somebody lies to us, we usually fired employee, whether it was some dishonesty. And so there's a culture of, if you have a mistake, you bring it to us. Its very, very quickly, if it's a significant mistake, and you don't look apart. And that's an important thing. Kim, why don't you talk in more details?

[Kimberly Bambach:]

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

[Jim Cacioppo:]

Yes, And I’ll just end it by saying, listen, I've operated in a highly regulated industry and essential services, running and starting building multibillion dollar hedge funds was at the top of the chain, and to do as opposed to regulators who would love to take down a hedge fund people. So we about we will always begin to culture, and that we fired a bunch of people already associated who had done the wrong thing. So it's nothing that we did. Wow, a lot of laughing what he's talking about firing people. That's excellent.

[Kimberly Bambach:]

Nothing serious that has occurred.

[Jim Cacioppo:]

No, but I mean seriously, if you don't do your job, and could be something like a COVID thing, where you didn't notice to a COVID thing. It could be, it could be little things, you need to alert us when there's a problem. That's the culture, because things happen every day in a retail environment, not hoping every day. But certainly, most months, there is something that's going to happen where you're supposed to do it gives up the food chain, that was legal people comply, people figure out for you to alert the regulators or whatever those little things happen. You got to get to a point where you have to almost 500 employees. You have a culture of zero tolerance for a dishonesty and not putting up the chain of command. Just if you're running a business, this large and highly regulated business, you have no other choice.

[Tom Carroll:]

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

[Jim Cacioppo:]

Thank you.

[Operator:]

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

[Jim Cacioppo:]

Thank you for participating in today's conference call. We would like to invite those of you listening to join, join us at our upcoming conference and events, including Cowen’s 3rd Annual Boston Cannabis Conference on December 1 at Cantor Fitzgerald, Virtual MSO Cannabis Summit on December 16. Have a great day and look forward to speaking to you soon again. Thank you.

[Operator:]

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