Good afternoon, and welcome to Green Thumb's second quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the conclusion of formal remarks. During the question and answer session, we would ask for a limit of one question and one follow-up question per person. As a reminder, a live audio webcast of the call is available on the investor relations section of Green Thumb's website and will be archived for replay. I would like to remind everyone that today's call is being recorded. I will now turn the call over to Jennifer Dooley, Chief Strategy Officer. Please go ahead.
Thanks, Christine. Good afternoon, and welcome to Green Thumb's second quarter 2020 earnings call. I'm here today with Chairman, 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 investor 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, we 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 U.S. dollars unless otherwise indicated. Thanks, everyone, and now here's Ben.
Good afternoon, and thank you for joining our second quarter earnings call. When we spoke in May, we had high hopes that the worst of COVID-19 would be behind us by now. Unfortunately, as a nation, we are far from being out of the woods. This crisis is the ultimate stress test for our community and any business. For Green Thumb, the takeaway from our second quarter is that continued execution and our prudent capital allocation strategy continue to deliver strong top-line and bottom-line growth designed to create long-term shareholder value. I am proud that our team continues to execute on our strategic plan while fulfilling commitments to all stakeholders, especially through this challenging macro environment.
It is a testament to the adaptability and resiliency of our entire team, the flexibility in our capital planning, and the strong fundamentals in consumer demand that we delivered 16% quarter-over-quarter growth to $120 million of revenue, 39% adjusted operating EBITDA improvement, and positive free cash flow from operations. The Green Thumb team is starting to move faster. Our first half 2020 revenue of $220 million and adjusted operating EBITDA of $60 million already outpaces our performance for the full year 2019. These solid results come before capacity expansion projects and investments in infrastructure, which will continue to provide momentum. We remain confident in our business plan and the prospects for the future. Consumer demand for cannabis remains strong, and the COVID crisis has accelerated its acceptance as a consumer staple.
In our home state of Illinois, consumer spending on cannabis continues to increase, absorbing all the supply entering the market. Industry cannabis sales are at an all-time high. July reached $94 million in sales, a run rate of over $1 billion, and we still believe there is major growth ahead. The momentum is building even in the challenging macro environment, and we are well-positioned to capitalize on the opportunity. On our CPG business, we improved standardization and automation in our manufacturing and processing facilities for greater efficiency and product accessibility. These important measures optimize our production capabilities and cost structure, setting us on the path to increased profitability as we scale. Gross sales of our brand portfolio grew 22% quarter-over-quarter, driven by expanded production output in Illinois and Pennsylvania.
In July, we completed our Ohio manufacturing facility and are now producing and distributing our brand portfolio in the state, leading with RYTHM and incredibles. Ohio marks the 10th state in which our brands are produced and sold and demonstrates the consistent execution of our plan to scale distribution. In the third quarter, we will ramp up production and distribution of our brands in Ohio and New Jersey. In Pennsylvania, additional production capacity in our Danville facility will start up toward the end of the year. In Illinois, we are nearing the phase 2 completion of our second production facility in Oglesby. The scale and reliability of our production and operational infrastructure continues to strengthen. At the same time, we remain committed to elevating the fundamentals of our brand portfolio by delivering products that create excitement with consumers. Here are a few highlights.
In June, our RYTHM brand celebrated our second annual Pride campaign with a custom Pride vape pen and partnership to raise awareness and support for the LGBTQ community and the pioneers who were instrumental in cannabis legalization. In July, we introduced a redesign of incredibles, our award-winning edibles brand, which is beginning to roll out across the country. The redesign honors the origin story that created loyal brand fans over a decade ago, and we are excited about the future of the incredible edible. We continue to grow and evolve our brand portfolio based on the feedback from consumers and data from our stores. Our two highly complementary businesses strengthen our understanding of our consumers, what they want, how they want it, and when and where they want it. The more we know, the better we are able to create products that consumers need and love.
We feel very good about what's ahead in our CPG business. There are still significant opportunities to expand the breadth and reach of our brand portfolio. On our retail business, same-store sales exceeded 75% on a base of 16 stores for the quarter. On a sequential basis, comp sales were up 80% on a base of 40 stores. More people are spending more money on legal cannabis, especially in Illinois and Pennsylvania, where we have established strong platforms to support our growth. We continue to optimize our presence in key markets. Even in the face of a pandemic and social unrest, we opened six new stores across Nevada, Ohio, Illinois, and Pennsylvania in the second quarter. That makes nine new stores year-to-date and 48 stores across 10 states.
In response to COVID-19, our retail team quickly ramped up delivery, implemented curbside pickup, launched an e-commerce platform, developed an online payment system, and established a support center to better serve our customers. We will continue to invest in our e-commerce platform to streamline user experience and optimize our digital storefront. Finally, just last week, we embarked on a unique opportunity to partner with Cookies, a leading cannabis lifestyle brand based out of California. We are going to open Cookies on the Strip by rebranding and converting our Essence store. Cookies is a compelling brand with a strong following, and we are excited about the partnership. A brief update on Nevada and Massachusetts. As you may recall, both markets experienced partial closures in the first and second quarter. In May, the temporary adult use ban was lifted in Massachusetts, and Nevada reinstated in-store sales.
Both remain high potential markets, and I am pleased to say are on the rebound to pre-COVID levels. As a final thought, we are very fortunate to be operating in some of the most desirable markets in the country. These unprecedented times test the spirit of an organization, and we have learned a lot. The first is that resilience and adaptability are core strengths of the Green Thumb team. Our financial execution is a direct result of our focus on our strategy to distribute brands at scale while remaining nimble to an ever-changing environment. In turn, we've been able to provide our patients and customers with near uninterrupted access to products that support well-being. Our mission is to promote well-being through cannabis, and we will continue to be focused on building our brands and developing integrated retail shopping experience to support that in this ever-changing environment.
The second key learning is to keep moving forward with purpose. Advocacy for diversity and social justice has always been part of our DNA. While we are heads down executing on our enter-open- scale playbook, we are also actively engaged with our communities to promote fairness and equality. We are building out the corporate social responsibility function to ensure that giving back to our communities is a tangible part of everyday work life at Green Thumb. Efforts focus on four pillars, including corporate social equity, workplace diversity and inclusion, community engagement, and environmental stewardship. Our team is now 1,900 strong. We've hired over 920 new teammates this year, as we continue to grow, our people team is working hard to make certain that our culture of respect and inclusiveness continues to thrive.
We firmly believe that the key to our success is the success of all of our stakeholders. With that, I'll turn the call over to Anthony to review our financial results for the second quarter.
Thanks, Ben. Good afternoon, everyone. As you just heard, we achieved record revenue and profitability in the second quarter, notwithstanding a macro environment that is anything but predictable. I want to thank our team for their relentless focus on execution and delivering strong results for all our stakeholders. Our operational execution, combined with robust consumer demand, once again created a one plus one equals three kind of quarter. Let's dig into some of the stats. On the revenue front, we generated just shy of $120 million in net sales. This is up from approximately $103 million in Q1, representing 16% quarter-over-quarter growth. Year-to-date, we've generated more revenue than all of last year. The key driver? Robust sales across our entire geographic footprint, led by Illinois and Pennsylvania.
When you unpack our quarterly revenue, gross revenue for our consumer packaged goods business, CPG, grew by $10 million or 22%, largely driven by strong performance in the two markets I just mentioned. On a net basis, which accounts for intercompany revenue, our growth approximated $5 million or 20%. On the retail side, revenue increased $12 million or 15%, driven by six new store openings and strong average tickets in Illinois, Pennsylvania, and New Jersey. Regulatory-driven softness in Massachusetts and Nevada adversely impacted this otherwise strong retail performance. When assessing our CPG versus retail revenue, we saw the following. On a gross basis, our revenue split approximated 61% retail, 39% CPG. On a net basis, 73% by 27%. This compares to the 68 by 32 gross and 74 by 26 net retail to CPG percentages reported in Q1.
As a reminder, the difference between gross and net is intercompany revenue, which approximated $24 million in Q2 and $20 million in Q1. While estimating where this relationship is headed continues to be difficult in the short term, we are excited to see the impact our CapEx dollars will have on this split as we get closer to 2021. On the construction front, we continue to make steady progress on our production facility expansions. In July, we completed construction at our Toledo processing facility, and we've already begun producing and shipping RYTHM and incredibles products across Ohio. In Q3, we expect to complete our two Illinois and Pennsylvania expansion projects. All three facilities should become 100% operational in Q4 and will roughly double the company's capacity in both markets. Given the robust demand both states are experiencing, the timing of their completion bodes well for shareholders.
Turning to profitability, the business continues to perform. In Q2, the company generated gross margins in excess of 53 points, a 100-basis point improvement over Q1. As I previously stated, our intrinsic goal is to keep this very important metric above 50%. On the SG&A side, revenue continues to grow faster than expenses. On a gross basis, SG&A increased approximately $4 million to just under $50 million. Of that $50 million, approximately $19 million was D&A, stock-based comp, and transaction and other non-recurring costs. The remaining $31 million is what we refer to internally as normalized operating costs, and it compares favorably to the $30 million of normalized operating costs incurred in Q1. To summarize, Q2 revenue increased $17 million while normalized operating costs increased $1 million. This is textbook operating leverage that shows the true impact scale can have on our business.
Other expenses for the quarter approximated $10 million, which primarily includes interest and warrant expense associated with our senior notes, as well as the net impact of marking our strategic investment portfolio. Accounting for everything above, in Q2, the company generated $35 million in adjusted operating EBITDA with 30% of revenue. Year to date, that figure exceeds $60 million. We continue to keep our heads down and let the scoreboard speak for itself. We acknowledge that this is a big win for our team and something we should all be proud of. Turning to our balance sheet, we continue to like our position. We ended the quarter with approximately $83 million in cash, up $11+ million over Q1. In May, we also exercised our option to extend the maturity date of our senior notes to May of 2023.
The business is generating positive cash flow and all capital projects remain fully funded. As we look ahead to 2021, we anticipate using the same lens to determine which projects warrant the greatest dollars. One thing we haven't touched on lately is our public float. As of today, greater than 70% of our shares are freely traded, representing well over $2 billion in public float. We like our progress here in providing our investor base with enough liquidity to allow market dynamics to function. In conclusion, we are pleased with our Q2 and year-to-date 2020 financial results. During our last call, I indicated that we would continue to invest in markets where we have edge, maintain our prudent approach to capital allocation, and protect our team, customers, and communities from COVID-19. Our story today, both internally and externally, remains the same with one nuance.
Let's not lose sight of our D&A and what got us here. Keep hustling after the loose balls, continue to optimize each situation the best we can, and never stop learning from our mistakes. With now close to 2,000 team members, the Green Thumb family continues to gain momentum at this unique time in U.S. history. Stay tuned, keep that seatbelt on, and keep enjoying the ride. Back to you, Ben.
Thanks, Anthony. I believe the takeaway from our second quarter is that continued execution and our prudent capital allocation strategy delivered a strong top-line and bottom-line growth. Our focus on the fundamentals to build a strong business, execute on our strategic plan to hit our milestones, and our commitment to all stakeholders have put us squarely on the path of creating long-term sustainable value for our shareholders. While we are operating in uncertain times, we remain confident in the potential of our industry. As I mentioned on our last call, our thesis is proving out, and it feels good to continue to do what we say we're going to do. We look forward to updating you all on the progress next quarter. I want to thank our team, our customers, partners, and you, our shareholders, for your continued contribution and support of Green Thumb.
Before heading to questions, I want to take a moment to acknowledge someone who was fundamental in supporting the cannabis industry but is no longer with us. Through his research and coverage of the space, analyst Robert Fagan helped bring mainstream credibility and awareness of the cannabis opportunity. Robert was the first analyst to cover us after we went public over two years ago, and I'd like to take a moment to acknowledge his passing and his contribution. We'll miss you, Robert. Thanks, everyone. With that, I'll turn the call over to the operator for questions.
Thank you. To ask a question, please press star one on your telephone. To withdraw your question, please press the pound or hash key. We ask for a limit of one question and one follow-up question per person. Please stand by while we compile a Q&A roster. Your first question comes from the line of Matt McGinley from Needham & Company. Your line is open.
Thank you. My first question is on the Massachusetts and Nevada. You noted in the prepared remarks that both of those states were headwinds. You didn't express how much of a headwind that was. I guess, the question ultimately is, should we expect any recovery from that into the third quarter, and how much of a lift could that give you?
Thanks, Matt. Yeah, appreciate it. As you mentioned, there was headwinds from regulatory structures from closings and changes to the operations in March and April as that came out in May. You can look at the markets, and we've seen our business has essentially rebounded to pre-COVID levels. We've opened two new stores in Nevada since this has happened, both Essence stores. We like that business and we like those markets. We saw some impact certainly in the second quarter, but we continue to execute.
On the CPG side of the business into the third quarter, I guess if I'm looking at what happened with retail and CPG into the second quarter, looks like about two-thirds of the sequential net revenue growth was driven by retail. You noted higher unit openings and higher productivity, but that would seem to be less of an impact in the third quarter than the second, which would mean that to continue the growth rate, CPG would have to step up the rate of growth. This is kind of a long question, but on the CPG side, I think more of that capacity is coming online later in the quarter. Is there sufficient capacity online now that you would have revenue occurring earlier in the quarter? Or is it more of a later quarter thing?
It'd be a lull in revenue overall, but that picks up again in the fourth.
Yeah. Hey, this is Anthony here. Good question. I think it remains to be seen. Obviously, we should generate some revenue in the third quarter from the expansions that either just completed or that will complete. Toledo is turned on at this point. We have portions of the Illinois expansion that is turned on, and I think we'll get a tiny bit in Pennsylvania. A little early to say, but as we mentioned during prepared remarks, probably the full benefit will be mirrored in the fourth quarter.
Okay, thanks, and congrats on a great quarter.
Thanks, Matt.
Your next question comes from the line of Vivien Azer from Cowen. Your line is open.
Hi, good afternoon. I was hoping to dig in on the gross margin. Last three quarters, it looks like you guys are feeling pretty good about sustainably delivering north of 50%, but the sequential improvement is quite noteworthy in light of the comment that you made earlier, Ben, in your prepared remarks about some of the optimization work that you were doing. I was just wondering if you could elaborate on your manufacturing efforts there. Thanks.
Hey, Vivien, Anthony here. Let's unpack that a little bit. Retail margins are relatively consistent. On the wholesale side, we are seeing greater utilization in Illinois and Pennsylvania in those facilities, even before effectively the expansions that should come through in Q4. That was a big driver of it. Those two markets, the wholesale facilities in those markets, did a good job of preparing the business to generate additional kind of gross margins that flowed through the entire business despite relatively consistency on the retail side.
Thanks for that, Anthony. I appreciate it. Just to follow up on that point exactly, were there particular product lines where you were optimizing your utilization? I'm just wondering whether some of those efforts will then be compounded by positive mix shift. Thanks.
Hey, Vivien, it's Ben. Yeah, I would just say, sort of echoing what Anthony just said, it's really a mix shift to more profitable markets. As we get scale and leverage across in these markets, there is opportunity on the gross margin line. Then if more of the business flows through the high margin sites, and then within those sites, to your question, which lines are producing the highest margin product as we optimize, there's opportunity. I think the driver to your question over the last two, three quarters is really mix to high margin sites versus within site mix.
Perfect. Okay. Clearly there's some runway for more opportunity there. Thanks very much for the time.
Sure. Thanks.
Your next question comes from the line of Eric Des Lauriers from Craig-Hallum Capital. Your line is open.
All right. Thanks for taking my question, guys, and congrats on yet another strong quarter from you.
Sure.
I'm wondering, I first touched on the recently announced Cookies partnership in Nevada. Cookies is one of, if not the best brands out there. Congratulations. Can you give us some color on the genesis of that relationship? What are the shared values that brought you guys together? Was this partnership focused only on Nevada, or is the idea to grow the partnership into additional markets from here?
Yeah. Thanks, Eric. We're very excited about the opportunity to partner with Cookies. As you said, we've been in the business for a long time, so we're watching what people are doing, and we believe that authentic brands develop a real relationship with consumers that they can believe in, that's based in an honest promise to deliver. We see that. I think you see that with the crowds, you see that with the brand, you see it with the following. What better place is it to bring it than Vegas? A destination location. We think, eventually tourism comes back. It's not a call in the macro environment. It's certainly going to take us some time to get to sort. We think the timing works really well. We're excited about the partnership.
It remains our license, our revenue, and we're going to watch and learn. Las Vegas, we're committed to the Nevada market. We see a lot of growth there. I think you'll see the stats as they come out with strength there, and we continue to open stores. We're really excited about it.
Okay, great. Just as a follow-up on the brand side and maybe more so on branded products, I wanted to ask about your longer-term positioning. Biden's recently adopted cannabis policies have really accelerated the federal legalization timeline. I've noticed a shift in investors taking a longer-term view of the industry and even thinking about the potential impact of interstate commerce down the road. Can you talk about how your strategy of distributing brands at scale and your experience prioritizing third-party retail locations and sourcing flower from wholesale markets, how that positions you for success in a post-federal legalization environment?
Sure. Good question. We really believe in the power of the brands and at the core, like you said, distributing brands at scale. Taking a first-mover advantage in building branded distribution networks across these states, say, the entire network east of the Mississippi, and as you look at mini markets within there, and obviously there's other markets, we think it's a compelling advantage through that distribution. We're developing relationships with the consumers that they're going to trust, it feels honest, and continues to deliver that. We think we're set up for a lot of optionality on where the federal, to your question, I think it's really more of a states situation, what's happening within each state and how that's going to unroll. Certainly, there's favorable winds in the federal government, and so we're watching and actively participating with that.
Okay, great. Thanks again, guys, and congrats again on another great quarter.
Sure. Thanks, Eric.
Your next question comes from the line of Pablo Zuanic from Cantor Fitzgerald. Your line is open.
Thank you, Ben. Just one question regarding New Jersey. You have your store in Paterson there. Do you have any visibility in terms of how rec legalization would play out? I mean, how long will it take to really flip the switch and whether you have the right to open more stores? I mean, obviously some incumbent players in New Jersey, the Walmart store from Curaleaf, they benefit from exclusivity in very big regions with no competitors. Do you have any views or thoughts in terms of how the industry opens up in a rec environment? Any color would help. Thanks.
Sure. Thanks, Pablo. Great question. We love New Jersey, a priority market for us in terms of capital. We see nine million people and a multi-billion-dollar adult-use market. Question is when and how, a little bit to your question. It'll be on the ballot in November. We think it'll pass. That's not a non-consensus view. We have a store open in Paterson that does very well. We're working on a satellite location in Paramus. We hope to open that by year-end. Our understanding is that if it passes on the ballot initiative, it'll kick over for rules and details of the program unroll, and I think everybody can learn from other states that have done this in terms of timing, structure, tax, who, how, in order to flip the switch quickly, generate the jobs, generate the tax revenue, and enroll an adult use program.
Certainly, supply is on everybody's mind, and I know all the operators are working hard to bring that supply to market because it's an underserved market on the medical side at the moment.
Okay. Just one follow-up, if I can. It's related to a prior question, but as you get more capacity coming on stream and as, of course, there's more stores, particularly in the case of Pennsylvania, how do you prioritize supplying your own stores versus supplying third-party stores? The argument is that you might want to have some exclusivity, right? If your own brands are everywhere, then why would people necessarily go to your RISE stores? Related to that, and this is more I know anecdotal, but if I think about the Philadelphia metro area, there's like 23 stores on the P.A. side, right? I visited your RISE store in King of Prussia, on a weekend, not much traffic. The Keystone store around the corner, very active with people there. Obviously, you have great numbers, Pennsylvania, nine stores. I'm just interested in two things.
One, what makes a store do so well versus another in the same location? The example of apparently Keystone versus your RISE store in King of Prussia. Also, how do you handle as you get more capacity coming in? Do you supply mostly your own stores? Do you go all out to the 90 Pennsylvania stores and lose exclusivity? Just how do you think about it? Thank you.
Great. A lot to that question. First, at the core is distributing brands at scale. That means getting the product in the hand of the consumer. We want consumers to know the product, and we think about distributing the product. It becomes an issue when supply is really tight, but when supply is not tight, we want to win in the retail environment with selection and service. That includes stocking a full menu, and in order to enable others to have a really successful store, they should have our brands. People should have Dogwalkers, right? They should have incredibles, they should have RYTHM flower. It seems pretty obvious, and essential for us as this thing unrolls. To your question on what makes a store successful or not, anecdotally, on a one-day visit, it's hard for me to comment. We really like Pennsylvania.
We like our stores. We like our position. We got an amazing team really working hard there. We see our products in as many stores as we have capacity for, essentially, which is why we continue to scale, as you heard in the prepared remarks, where we'll see Pennsylvania come on towards the end of this year and into next year with more products. We are bombarded with requests for more RYTHM flower. Give the people what they want. We're working hard to deliver that.
Got it. Thank you.
The next question comes from the line of Michael Lavery from Piper Sandler. Your line is open.
Good afternoon. Thank you. Can you talk a little bit about your appetite for M&A? I know you've proven yourself to be disciplined there, but just some of your latest thinking there and how, if at all, it may change if federal laws do change that influence the ability to go to the capital markets in a more productive way.
We're always looking at what's out there. We've shown a history to be able to execute on deals, announce deals, close deals, and also be really prudent and careful with shareholder capital, whether it's in the form of cash or equity. Really, everything's on the table if it makes sense. We have an amazing business and amazing platform right now that we're sitting on, that deploying the capital within sets a very high bar to do something else, where we control all the variables within the business, and we can understand what the future of that capital deployment is. That said, the environment changes. There's other businesses, there's things that can become accretive, there's the price of the currency, there's the state of mind of sellers and the evolution of the industry.
We are very active, watching all the time, but we really love our business, so it's a pretty high bar as we think about allocating shareholder capital for something like that. Sorry, just to follow up, I think you asked about the capital markets.
Yeah.
We've seen an evolving capital markets world. I think we've been early several times in cycles, and we're watching it. Certainly, people are starting to wake up. It's still the same thing here, right? The U.S. cannabis opportunity is massively misunderstood. We have a decade of 20% annual growth coming from a $15 billion industry going to $80 billion. That's massive. It's going to create a lot of attention, and animal spirits are very real. Then people got a teaser in Canada. That business and that industry has evolved as people understand what the size and opportunity is there. The opportunity is here in the U.S., and so it's not if, it's when on the capital markets. Exactly how is unclear. Which way or not, but the businesses are strong enough. There's enough free cash flow here. We're employing enough people.
States are now waking up to generate the tax revenue. We think it's really only a matter of time for things to continue to open up, which essentially means our cost of capital continues to go down.
No, thank you. That's really helpful color. Just a quick follow-up on automation. I know you expressed the mix lift that's helping gross margins, but you also touched on some automation that you've put in. How extensive could that be? Could you elaborate a little bit? Is it more just like sort of packaging lines? Is there some good upside from that? Is it a little bit more modest benefit? How should we be thinking about that?
It's something we spend a lot of time on. We're looking to build large-scale production of consumer products. As you think about the pricing structure, you think about the gross marginal cost per incremental unit, it becomes interesting. Not something we love talking about, but an area we spend a lot of time on internally.
Okay, great. Thank you very much.
Your next question comes from the line of Andrew Partheniou from Stifel GMP, and your line is open.
Thanks for taking my questions, congratulations on the outstanding quarter, guys. I'd like to maybe see if I can get a little bit of color of what things are happening on the ground. For example, in Illinois, at the beginning of rec, we know that there were a lot of restrictions involved in purchasing limits, online reservations to be able to purchase cannabis. Then has any of that been removed at all? Has there been any relaxation of those purchasing restrictions?
I would say thanks, Andrew. This is Ben. I would say here and there, and broadly, yes. Just look at the numbers, right? December was a $25 million industry in Illinois. I think January was around $70 million, and it's grown to now $94 million. Now you've had new stores open. We've gone from, at the beginning of the year, about 60 to maybe in the mid-70s now. There continues to be tight supply into monster demand that absorbs it, but with more offerings. I would say those restrictions are lifted but not gone. You have many stores. Some days are open for rec, some days aren't. Certainly, the City of Chicago, this summer with COVID-19 and restrictions has limited traffic, I would say.
That's great color and definitely suggests further growth ahead once capacity comes online with you and other players. On a follow-up question, maybe touching a little bit on Nevada. The tax results came out for the month of May, and we saw some very strong rebounding, going from $40 million to $50 million in sales, it seems, on a monthly basis. Just curious if you could give some color on that. What is that really being driven by? Are we seeing that a majority coming from locals, to which I know that you're focused on? Are tourists really coming back? Any color on that, and perhaps what are they buying? Are they focused on the value segment, or have purchasing patterns not really changed all that much?
Sure. Anthony here. I think, Nevada was interesting because what effectively happened overnight is when the governor effectively shut down in-store purchasing and limited to delivery, the capacity in the delivery business was nowhere near ready to handle the demand of even the local consumers in the state. Right? For the first, call it, few weeks, it was pretty challenging. Right? Now, obviously, everyone reacted as quickly as they could. We saw that start to expand. Now that folks can go back in and shop, call it in-store, curbside pickup with a few of the other options, the market came back a bit. I think it's hard to say where the normalized level is without tourism, just because we haven't had enough time to really see that unfold.
We have seen that the Nevada consumers as a whole consume cannabis, and it's a vibrant market even without the tourism business that was there pre-COVID. I think we'll have better insight into that when we get the June numbers and then the July to really see where the normalized level shakes out.
Thanks for taking my questions, and congrats again on the impressive results.
Thanks, Andrew.
Your next question comes from the line of Graeme Kreindler from Eight Capital. Your line is open.
Hi, good afternoon. Thank you for taking my questions here. I wanted to follow up. I appreciate the commentary on all the developments happening in Illinois and Pennsylvania. You discussed New Jersey a bit earlier in the call. I was just wondering what the thoughts are internally. There's speculation about New Jersey's ballot initiative and the potential domino effect it could have regarding states like New York, Connecticut, Pennsylvania, et cetera. As you're monitoring that situation scaling up in New Jersey, how are you thinking about potentially investing further in some of those other markets that I mentioned there? Thank you.
Thanks, Graeme. This is Ben. We know New Jersey is on the ballot in November. We think it's going to pass. We know there's monstrous demand. We have a unique position in the tri-state area of New Jersey, New York and Connecticut. We understand the market in Massachusetts. We're watching what's happening. Again, it's not if, it's when and exactly how. It's always a competition on dollars and capital allocation. We love the New Jersey market, and we know it's going big, and we want to put dollars there and create product and get our brands out to folks. We think the state is set up well for what's ahead. We think the same thing for Connecticut, and we think the same thing for New York, each at a little bit of a different stage.
That's not to mention Pennsylvania or Maryland, or other states in New England, frankly. We're constantly trying to optimize the capital allocation game based on the facts on the board at the moment, knowing where we have first-mover protected market position and everything we've learned from these other states. Oh, by the way, the states are going to learn from what happens in Illinois. Right? It's not lost on people. You have $60+ million of Illinois tax revenue here in the beginning of the year. That's material, and jobs, et cetera. We're excited about it. It's hard to exactly handicap how those dominoes fall. We believe in X years, three to five years, you're going to see hundreds of millions of dollars or $1 billion of tax revenue combined east of the Mississippi, easily.
Okay. That's great. I appreciate the color there. Just as a quick follow-up, lots of detail provided from the CPG side of things, expansion projects into the remainder of the year. You mentioned earlier on the call you're looking to open another retail location in New Jersey in the remainder of the year. I was just wondering if there's any states that you could share with us where you're looking to potentially add a location in the end of 2020. Thanks.
Sure. Was the question where are we opening new stores?
Yes.
Yeah. A little tough to exactly be precise with timing given COVID and given how municipalities and locals are handling approvals and permits and building out. We maintain activity there. Yeah, we hope to open New Jersey by the end of the year. We've been working for a while in California. I think that could be extended a little bit just with some issues. We continue to open Pennsylvania, Florida. We continue to just fill out the portfolio. No change really to the plans as they've been.
Okay. Appreciate it. Thank you very much.
Sure.
Your next question comes from the line of Matt Bottomley from Canaccord Genuity. Your line is open.
Good evening, everyone. Thanks for taking the questions. Congrats on a fantastic quarter here. Just wondering if we can take a bit of a step back and look at a higher level. I know it's hard in this sector given everything state by state. We've seen a number of strong beats now in this Q2 reporting season, and nothing to take away from you guys. You guys are probably the strongest of the lot so far. We've heard anecdotes between stimulus checks and maybe some stockpiling given some states where there's some fear of potential shutdowns, which would seem to be dissipating. Is there any commentary you can give as to why this quarter in particular has been so strong for the sector overall, and then how that's looking into Q3?
Thanks, Matt. I appreciate that. We're working hard every day to continue to deliver. As basic as it sounds, I would say, like I said in the prepared remarks, there continues to be monstrous demand for the product and continued acceptance and availability. We're watching, as you step back, the U.S. legal industry putting up a number in June over a billion and a half. Right? I mean, that's a record coming off of January, that was one one. You're just seeing monstrous demand and execution of legal regulated cannabis across the U.S., and within each market, we see monstrous growth. Pennsylvania is a unique situation. New Jersey, Illinois, even look at Colorado, a quote unquote mature market at same state sales, which same store sales. We look at same state sales, a monstrous growth. You're approaching $200 million a month in a quote mature market.
To us, there's no surprise here. As I said, continued acceptance as a consumer staple. We do not see any stockpiling. In fact, if there is, that's good because the usage rates increase. We see monstrous demand, continued acceptance, obviously higher tickets and different traffic flows based on each state's individual dynamics. At the core, more people are shopping legally for cannabis, and they're spending more money.
Great. Well said. The follow-up just relates to the two markets that there's been sort of an outsized element to the growth here in Illinois and Pennsylvania, which you guys are doing very well. Just a sort of a two-part for each of those markets. For Illinois, can you comment on if there's been any updates on potential the new licenses that are in queue? I know that's been delayed because of COVID-19. If that process has restarted or there's any sort of indication that's restarting. Second, in Pennsylvania, a very supply-constrained market, is there any element to your rollout where you have to kind of pare back new store openings due to supply? Has your cultivation expansion really mitigated that?
Sure. Great questions. Happy to talk about both those markets. Really, the next chapter for Illinois is the issuance of 75 new dispensary licenses, which hopefully and largely should go to social equity applicants. We're excited about that. We think that's happening in September, which is obviously very soon. We've done a lot in the LEAP program. We'll pivot over to an incubation program enabling opportunity really for folks, hopefully, that have been deprived of an opportunity, whether it's through the war on drugs or other things that have happened. I think it's going to be an unbelievable success story for Illinois as we enable new entrepreneurs. I think that comes in September. You've seen current operators continue to open stores. We have eight open stores with two more to go. Really focused on social equity licenses and making sure that that's a successful program.
That includes making sure that there are sites, making sure there's supply, making sure this works well. I think it's going to be a banner for the state and also for other states who are watching this. Your comment on Pennsylvania, I would say it's a little less supply constrained than a market like Illinois. It's just very strong. There's no way around it. I think you can see it from the data, and the state is starting to release a little more data. The supply is not impacting our new store opening schedule there. We continue to go prudently. There's always municipality inspection and construction and supply chain things, whether it's steel or wood or things that are just a little hiccups to the chain. We've opened there, and we'll continue to open there with more stores in the pipeline that are continuing to do well.
Obviously you're invited to visit any of those stores in Pennsylvania.
Are they letting Canadians in yet?
I think so. It's up to you at the border.
Okay.
Once you're in the state, we can handle it.
Okay. Thank you.
Your next question comes from the line of Scott Fortune from ROTH Capital Partners. Your line is open.
Good afternoon. Congrats on a great quarter again. Real quick then, maybe some of the less limited markets than the licensed markets, are you seeing any product shift down to kind of the value side of things versus a premium or kind of mainstream? How's the consumer shifting here in this environment currently?
Sure. Thanks, Scott. We see continued acceptance of the product, of the branded product, people like value-oriented products, right? Especially when there's economic headwinds, whether it's job uncertainty or otherwise, and especially if you can offer a consistent offering at the value line. There's always interest in things that are a little cheaper, it's premature in some of the markets. Each market's a little bit different to really analyze too deeply what's going on in the supply-constrained market that's growing really double digits sometimes monthly. Careful not to overread into that. There are states that can function as a crystal ball, and we can watch in detail what's happening at the register, and see that there is interest in value product that delivers the bang for the buck, and there's interest in premium branded product that delivers the bang for the buck.
That's that consistent relationship that the brand has with the consumer.
Okay. Thanks for that color. Real quick, you haven't mentioned Florida at all. I know you've reallocated away from there a little bit, but kind of just step us through in a sense of growth opportunity in Florida, what you're looking for to kind of continue to accelerate that and timing frames.
Yeah. Florida, we have another store coming here soon. We love the Florida market. Monstrous growth, sophisticated operators, but mass adoption of the product. Look at the patient growth there. Look at the consumption going on even year-to-date, as you've heard recently, these big growth numbers. An attractive place for capital. We continue to put capital in some of the other markets that will leave us a little more first-mover. We think the first-mover advantage gives an edge. You can't get that back. This is a monster growth market of 20 million people where there's mass acceptance, that still doesn't even sell edibles. The Sunshine State is very real, and we're watching it.
Okay, thanks.
Your next question comes from the line of Glenn Mattson from Ladenburg. Your line is open.
Hi. Yeah, thanks for taking the question. Congrats on the quarter. Just curious, you mentioned the leverage in the model, sequentially, you pointed out how efficient you were. I'm just curious how to think about that going forward as far as, going forward, you're going to have more store openings and things like that. Is there some costs that are maybe being pushed out a little bit and there'll be a catch-up period, or is this a pace that which you can continue?
Hey, Glenn, Anthony here. Good question. Look, the business continues to grow at a robust pace. I can tell you right now, our recruiting team is very active. Choking is probably a better term to describe kind of what they're working on in terms of the number of hires that we're trying to ramp up across the business. Look, at the same time, the top line continues to grow at a rapid clip as well. To be totally frank with you, it's really hard to say. It's something we're watching closely, but the reality is, we've got this model down pretty well, particularly on the retail side of the business. We know what the stores cost to build out. We know the working capital associated. We know kind of the expected operational burn before it comes to cash flow breaking even and then positive.
The wholesale side, it's something that we can easily kind of underwrite. The place where we are kind of working aggressively, is continuing to build the infrastructure here in corporate to support the growth. There'll probably be some lumpiness kind of here and there over the next few quarters. We expect if we can continue to drive the top line, we should continue to see nice operating leverage in the business.
Okay, great. Thanks for that color. Most of the questions have been asked, but real quick, just on Massachusetts, I'm trying to remember, is there a status update on, wasn't there a Boston store that you guys were looking to get open? Just an update there.
The update is still working hard to get it open.
Okay. Is there any upcoming regulatory meetings or anything like that you need to get through or anything, or?
Yeah, we're working with the community, as we just engage in dialogue with the local community and then move towards inspection with the CCC.
Okay. All right. Great. Thanks for the questions.
Your next question comes from the line of Russell Stanley from Beacon Securities. Your line is open.
Good afternoon. Congrats on the quarter. My first question, I just wanted to come back to Nevada and understanding your earlier comments. You have, I believe six remaining dispensary licenses there that you can develop, and I'm just wondering how you're thinking about the opening of those stores, given both the pace of reopening of the market and the macro environment in that state.
Sure. Thanks, Russ. Yeah, with two stores open, we're watching the market. If we see a rebound, then we continue to execute on the strategy. That's involved in location and opening and then watching what's changing, I would say, in the environment, and what kinds of locations make the most sense. It's always a game of capital allocation of where the best returns are for shareholders. The market is strong, $50 million-$60+ million a month. We like the footprint now with seven open stores, I believe, and continuing to invest in the market.
Great. Maybe if I could follow up with a question around Toledo. Understanding it's early days, just opening last month, wondering if you can share, I guess, any numbers around how many dispensaries you're selling into on a wholesale basis there now?
Yeah, it's going well. Early deliveries and reorders. We got a great team out there producing the product. Going as planned, as we unroll it here in the back half of the year.
Great. That's all from me. Thanks for the color.
Sure. Thanks, Russ.
Your next question comes from the line of Mike Hickey from Benchmark. Your line is open.
All right. Thanks, guys. Thanks for squeezing me in. Ben, Anthony, congrats on the quarter. Just curious on your retail licensing portfolio, if you're still at 99 or 100 licenses. You obviously ended the quarter with 48, and you opened six stores in an incredibly complex and difficult quarter, I imagine. Congrats there. Are you still comfortable, I guess, with that level of backlog on the licensing front, or are you sort of motivated now to maybe expand that? Obviously, you have some weight in maybe some lower return areas like Florida in terms of total licenses. I have a follow-up.
Hey, Mike, Anthony here. I think one of the tricky parts about that stat you just mentioned is, that includes Florida, which at this point, there's been a sunset on the number of stores that you're allowed to open, so probably less relevant today. We are constantly looking at the number of licenses that we have that we've yet to open, that's really part of the capital allocation discussions that we have on a weekly basis here. I would say we just take it market by market, but that stat kind of had an assumption on Florida, which now effectively has been released.
Interesting. Okay. I guess the other question, you noted overall strength in states, you noted Colorado, which obviously is a very competitive market and also considered mature, but growing strongly. I guess you also have had a lot of success here in terms of creating brands. I'm guessing you want to get those in as many states as possible now that you have some weight to it. Has that changed your view at all, I guess, on how limited the licensing states need to be for you to consider an entry? Thank you.
Sure. This is Ben, Mike. I think the short answer is no. I was talking about Colorado just to show the strength of an accepted, quote, "mature market," which was not that mature with the way it had grown. Our capital is best allocated to limited license markets where we have first mover, can take large market share, get our brands to new consumers, early in medical, and then as it rolls to adult use. Same playbook as always. No change there, but it is unique kinds of numbers that are coming out of big markets. U.S. doing over $1.5 billion in a month at regulated cannabis sales is a big deal. We see that strength around the country.
All right, guys. Thank you. Good luck.
Sure. Thanks, Mike.
Your next question comes from the line of Andrew Semple from Echelon Wealth Partners. Your line is open.
Hi there, and congrats on the quarter.
Thanks, Andrew.
Hi. Just want to focus on Nevada here. Could you potentially comment on how order fulfillment has played out in that state? What has the uptake been for in-store sales once those were allowed to resume? How has that been trending post the quarter?
Sure. I can take it, Andrew. The way the regulatory changes went was there was no more in-store. It was all delivery. The system kind of jammed by trying to move the entire delivery business through the COVID crisis, and then slowly opened up with limited in-store capacity and then socially distanced capacity that really functions. People are coming back in the store. I don't have it in front of me, the delivery business, while it was up, and now we have it running, is not eating a major market share for our business in Nevada. The in-store transactions with the clientele continue to play for us.
Okay, that's helpful. Just switching gears to your recent agreement with Cookies. Looks like a solid brand partner to bring on there. I'm just wondering if you have conducted any small-scale trials or if you had any data points we could grab onto as to the expected uptake of the Cookies brand in Nevada, and what you're looking for there. Do you see more value in the rebranding of the store on the Strip, or in having the Cookies products across your entire portfolio of stores there? Thanks for that.
Sure. We think it's a win-win. I think the best data point is to take a look at what's happened with the other Cookies stores around the country and the loyal following. Now you have a must-visit location in Las Vegas that offers Cookies products at Cookies on the Strip, where you have celebrity attraction, authentic musical roots that appeals to a very specific consumer that is loyal to this brand. I think the best data points are to watch some of the other openings and to watch the crowd enthusiasm, socially distanced lines, and excitement around high-quality products.
Appreciate that. Thanks for your comments there.
Sure. Thanks, Andrew.
The next question comes from the line of Aaron Grey from Alliance Global. Your line is open.
Hi, good evening. Thanks for the questions. Congrats on the quarter. First question for me is around personal trends seen during the quarter. We've seen a number of your peers call out a higher basket count, that you guys did put it in your PR, higher foot traffic and basket. Just wondering if you could quantify that a little bit, in terms of how much of a higher basket you might have seen during the quarter sequentially. That'd be helpful. Thanks.
Thanks, Aaron. This is Ben. I don't think we break down the exact difference between traffic and basket. What we saw was right with COVID-19, as has been widely discussed, is less frequent visits and much bigger baskets. We've seen the bigger basket remain, not as high as before, but higher than pre-pre. Not as high as the peak, but settled down. What dominates between basket and traffic is traffic for us, particularly with the kind of growth in the stores, right? 75%+ same-store sales on a real fleet, and then high mid-single digit sequential growth on a base of 40 stores. Something's going on there. It's really more throughput in each box for us.
All right, great. Thanks for the color there. Just one more, just kind of tagging on those dynamics you talked about in Nevada between delivery, kind of shifting back to brick-and-mortar. Wanted to ask a broader question in terms of, we saw a kind of shift to omni-channel, with kind of pick-up in store as well as delivery, amid COVID-19. What do you think about the long-term potential impacts of an acceleration of omni-channel? Do you feel like things, like you were saying, Nevada, that broadly, across the markets, they're shifting back to brick-and-mortar, as these states open back up? Just kind of the long-term impact of the potential purchasing habits of consumers would be helpful. Thanks.
Sure. I'm not going to tempt fate there. I think you've seen the current macro environment and the COVID-19 crisis evolve quickly consumer habits, trends, and relationships with the product they buy, who they buy it from, and how they buy it. Cannabis isn't immune to that. Developing the relationship with the consumer via digital storefronts and how they interact both with the store and the product, how they build the basket, how they pay for it, where they pick it up, and how they interact with it becomes part of our brand. It's nothing new. I would just say it's continued acceleration. We're really investing in loyalty program, just various kinds of things to understand who the consumer is and meet them where they are. As you mentioned, omni-channel, et cetera.
At the same time, playing in 10 different states and 10 different kinds of rules, and being sure that we follow those carefully.
All right, great. Thanks for the color.
The next question comes from the line of Matt Bottomley from Canaccord Genuity. Your line is open.
Yeah, thanks. Just a quick follow-up from my perspective. There's been a metric over the last number of quarters that you guys have been selling into about 700 stores, and given that your revenues already are exceeding what you did in 2019 and your branded sales grew by about 22% this quarter, are you able to update that metric? Are you over 1,000 yet? Is this just more breadth into existing stores? Just any sort of color on that would be helpful.
Sure, Matt. I would say the latter, more breadth into existing stores. There are new stores in the platform, there are not 500 new stores opening in our distribution network for us to get our products in. If there were, we would get our products there. Frankly, by the time there are, we should have scaled production in order to get our products there. That's not happening at the moment. The growth is through store throughput.
Got it. Thank you.
Sure.
There are no further questions at this time. I turn the call back over to Ben Kovler for closing remarks.
Sure. Thank you all for joining us. Look forward to updating you on our third quarter, which will be in November after what promises to be a very interesting election. Thank you all. Talk soon.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.