TerrAscend Corp. (TSX:TSND)

Investor Day 2020

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Aug 6, 2020

Good morning, everyone. Welcome to TerrAscend's twenty twenty Investor and Analyst Day. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward looking statements that are subject to risks and uncertainties relating to TerrAscend's future financial or business performance. Actual results could differ materially from those anticipated in these forward looking statements. The risk factors that may affect results are detailed in TerrAscend's annual information form and other periodic filings and registration statements. These documents may be accessed via the SEDAR database. I'd like to remind everyone that this call is being recorded today, Thursday, 08/06/2020. I would now like to introduce mister Jason Ackerman, chief executive officer of TerrAscend. Please go ahead, mister Ackerman. Thank you, and welcome everyone to TerrAscend Investor Day. To just go through a quick run of show for the day, so we're gonna start off with myself, and our CFO doing a quick business review. We have today Greg Rocklin, CEO of Valera, and Ryan Hudson of who will go a bit more depth into our business. And at the end, we have Jason Wilde and David Klein at Canopy are gonna do a fireside chat discussing The US canopy cannabis market. And then we're gonna open it up for questions. So first off, I wanna say that I'm really excited to be here. I've been with the company now for about nine months, and I'm really having a ton of fun. I thought it'd be helpful to give a little bit on my background. Before joining TerrAscend, I was the founder and CEO of a company called FreshDirect, which is an online fresh food business, which I ran for the past eighteen years. The company is a fresh food player, kind of like a Whole Foods, but 100% of our business transacted over the Internet, delivering products directly to our customers' home. We sold tens of thousands of products, buying products directly from hundreds of farms and producers from around the world. We internally manufactured thousands of our own in house products and distributed it out of a highly automated million square foot facility based out in the Bronx, New York. The business has grown over that time to over 700,000,000 with around 4,000 employees, and we were able to achieve seventy two consecutive quarters of year in year growth, ten of those years competing directly head to head with Amazon, which a ton of fun. I'm really proud of the brand that we built at FreshDirect, but it was also very enormously complex and fast paced business, and it was just an incredibly humbling journey. As an operator of that business, I learned a ton. And, honestly, you know, a lot of it was not being afraid to try new things, moving fast, and reacting quickly to mistakes. Because in any business, you know, you are gonna make mistakes at the speed at which you move and recover. But one of the main philosophies that I had in running that business is I believe that sometimes it's much better to go deep and build scale in places where you can play and win, but it is necessarily to go wide and risk being too thin. And this is what really helped us hold our leadership position in grocery versus Amazon of the Northeast over those ten years, you know, staying very deep and very focused. And it's it's really quite similar to how I see this industry today. You know, planting flags across the state, across the country isn't necessarily the the right way to go than it is being in places that you can win, which I've had a lot of success doing historically. But how I got into this industry, you know, was really a few years back when New York announced that they were interested in legalized legalizing marijuana, you know, I really thought to myself, my gosh. You know, how hard is it to sell fish and produce over the Internet? Wouldn't it be easy to sell cannabis? And so light bulbs went off. And I thought that this industry would be a a perfect candidate to fully digitize the model, which is gonna be an exciting part of TerrAscend's journey over time that I'm particularly excited about. And about a year ago, I met Jason Wilde and got to know the team and quickly got pretty excited about the platform, Loved the people. Thought there was a real huge opportunity. And so I joined as executive chairman November. And in April, I took on the full time role of CEO. We have, since then built a really great team. We've had some great people. With us today is Keith Stauffer, our new CFO, which you'll hear from today. Keith has led finance organizations at several multibillion dollar businesses in the CPG consumer space. Jason Marks, who we've recently added as our new chief legal officer, He joins with a lot of experience in coming out of pharma. He's operating in regulatory you know, regulated industries and has a lot of m and a experience. And with us, we have, two of our core heads of business, Greg Rocklin, who you should probably know was the founder and CEO of the Lair division in Pennsylvania. He's been an amazing operating partner. We have a ton of fun together. And Ryan Hudson, who is the founder of the Apothecarium, who you probably know has been operating in this industry for well over a decade, you know, where the movement started in Northern California. And he really has such a great understanding and depth of the industry and the products. It has a great connection, you know, with our people and our customers. It's it's been great to kinda take his philosophy across across the country. And with us, we also have our chairman and key driver of our strategy, Jason Wilde. In terms of our timeline and history, you know, our company started in 2017 as a Canadian LP, and that's mostly how people know us. You know, the investment at the 2017 by JW Canopy into TerrAscend Canada. But over the course of the last eighteen months, the business has really pivoted from a Canadian LP to mostly a US operator Through a combination of winning licenses in New Jersey and acquiring assets in Pennsylvania and California, the business today, 90% of our revenue comes from The United States. And it was interesting when I arrived, the company also was really not out there telling the story. We had our first ever investor call, in April, and I really feel that we are, you know, one of the best unknown MSO stories, in this industry. And we're excited for people to get to know us. In terms of our financial, backing, our two largest shareholders, which, have the majority, ownership of the business, is the JW Asset and Canopy Growth, and it's really great having them, you know, personally as partners. JW, as you probably know, runs one of the largest investment funds in the cannabis space. He's been a huge source of industry knowledge and has been anticipating and helping out with all of our financings. His group has invested approximately a $115,000,000 in our business and is obviously a really strong backer. But also, he provides huge connections in creating a really strong pipeline for acquisitions. He's pretty much in the flow of all deals that are out there, and that's been super helpful for us and the team. And Canopy, who has invested several times in the business, is a large investor and has been a great partner as well. You know, one of the things that I love about having Canopy as investors, they've really been very open in in letting us tap into the organization as resources, bouncing ideas, and to really get some some game shares share and learning, which has been super helpful for me as I'm getting up to speed in the industry. In terms of strategy for the company, really think about it in just a few simple blocks. First and foremost, in my experience, everything starts with the customer. They're the ones who pay our bills, and we are super focused on making great products and experiences that our customers love. And it's really important for a business to build a strong customer mindset into every part of our culture. And second is, you know, when you look at the industry, not every state is created equal in terms of where the opportunities are, whether they're the the legal environment, the regulatory environments, and how things are structured. But we do believe that some of highest returns will come from being focused on limited license states so we can go deep and build scale and creating operating leverage in our cost structure and also create depth of product. We do believe in being vertically integrated for a lot of reasons. One, we think that the margin structure is stronger. Second is it does create a more tax efficient environment. As you know, you know, two eighty does create some challenges for the industry, and being more vertical does, you know, create stronger cash flows, you know, net of taxes. And it also gives us a lot of control over our own quality rather being dependent fully on other on other parties. And in addition, know, this is a real business and this is a real industry, and we will strive for operational excellence in every facet of our business and maintain operating controls and disciplines. It's, you know, foundation to how I've always thought about the business. And, you know, lastly with my background, you know, we do plan to be an industry leader over time in digital and e commerce capabilities. You know, it's a great way to make customers happy along the touch points, and it's something that I believe is really foundational to running our you know, to running the business in the future in retail. So when we look at our business today, as I said, we're mostly a US operator, and I think about our business in the THC side as two components. We have the East Coast limited license operations and our West Coast. On the East Coast, we currently operate today in two states which we believe are some of the robust robust markets, Pennsylvania and soon we're launching New Jersey. Pennsylvania for those who don't know is really a great medical state. It has a very large population, a very significant growing patient count. And Greg and team were able to go very big, very fast, and to create a stronghold as what I believe is we're the top provider in the marketplace of flower and a large range of manufactured products. And they've also been able to achieve some decent scale, giving us very strong profit margins in that region. New Jersey, which is a license which we won, which is a younger medical market. We do believe that New Jersey will be tracking to Pennsylvania just a few years behind. We have one of the 12 vertical license for growing manufacturing and retailing, and it will be a similar playbook being run by Greg and team. New Jersey, however, which we're super excited about, does have a ballot initiative for rec coming up this November. You know, all the polls show that it's a it has a lot of support, so we're fairly optimistic that that could be an accelerant of that marketplace. You know, I love these two states. And not to give forecasts or timing, but I I truly believe that New Jersey and the Pennsylvania marketplace combined can represent several 100,000,000 revenue opportunity for the company. Heading over to the West Coast, we operate the Apothecarium stores, which was one of the original pioneers in the Northern California market for the last ten years with a a really unique retail experience. We operate today three retail stores out of the San Francisco Bay Area, and we've just opened one, and we'll be adding a second this year getting our count up to five. And you look at the team, they've been very successful in applying for and winning licenses throughout, and we expect the team to continue to to do that and open more stores. But also, you know, taking a playbook out of my FD experience where we had years of producing our own products for shelves, We have just finished building out our our further growing operations and growing gummy manufacturing and chocolate manufacturing, and we've been able to vertically integrate our offering much deeper. And we're gonna do that to continue to really improve the profit margin potential, out in the West Coast. And, also, we've taken the Apothecarium playbook and moved it out to the East Coast with six licensed stores, three of which are open to date and three of which will be open over the coming six months, and get a chance to hear more from Ryan today. So heading over to two other business units, we have a CBD business in addition, Arise Bioscience. Our US CBD business, Arise designs, formulates brands that we sell mostly into vape shops, CBD stores, the pharmacy channels. Our primary brands are Funky Farms, which is a really strong vape shop brand with a full spectrum experience, you know, pretty heavily focused on the vape format of CBD products. And then we have our original hemp product line, which is more for the c d CBD store channel and the pharmacies, which really comprises of tinctures, topicals, roll ons, capsules, with targeting a pretty decent range of of health and patient issues. We have more than a dozen products under development today, and we've got a lot of stuff that's coming out and launching. And I think I'm really proud of what the team has done there. And lastly, as you know, starting out as a Canadian LP, we are in Canada. It is no secret that Canada is a very challenging market to operate in today. It is fairly oversupplied, and, you know, it's fairly understored, which has created a challenging place. We have not been profitable in Canada, but, you know, for those who get to know me, I gotta tell you, I really hate losing money. It makes me crazy. So we've been working really hard to, you know, reverse that trend. You know, recently, we've been working hard to right size the overhead of the business to kinda fit it for what we think the market opportunity is today, having recently significantly reduced expenses. And we've done a full review of the portfolio, and I believe now we're coming to market with the right products that we believe can win. You know, the right flower strains, we've got lines of teas, lines of vapes. And we've also recently are introducing, brought out from our California manufacturing Valhalla, our gummies are gonna be coming to market in Canada in the fourth quarter. And really, at the moment, our goal is to reduce the losses and prepare for upside in Canada over the coming years. I do believe long term Canada will present some opportunities, but I think it's gonna take some time for that to come to fruition. But on a positive side, you know, being a Canadian public company has also enabled us, to create a source of, you know, lower cost capital, which really afforded, Canopy participate in our cap structure. Moving forward, when you look at the growth in our business, I'm really proud of the results our team is posting, and we've got some real significant growth opportunities over the next twelve months. So sales, we moved up from 26 to 35 to $47,000,000 that we're posting this quarter. You know, that's almost a double from we were in the second quarter. And so here here's what's coming down the pike. So in q three, we have two dispensaries, which will open, in fact, Berkeley. One in Berkeley and one in Pennsylvania, which is already open to date. And during the third quarter, the Pennsylvania team has already completed the expansion of an additional 25% capacity, which is coming on to market into the fourth quarter. We also, during this time, have expanded our West Coast cultivation operations, which will also be coming online into the fourth quarter in October. We will be adding two additional dispensaries, one in California and our first one in New Jersey in the fourth quarter. And we will be in market with our very first wholesale product. I think as we announced, we are now planting in our first phase in New Jersey, and we hope to to be wholesaling by the end of this year. And coming into the first half of next year, we'll be in full boat with our New Jersey operation, with both our wholesale cultivation manufacturing as well as the two additional dispensaries, which we have leases for. And it's really interesting. New Jersey, I believe, has got huge potential, but it's fairly undistorted at the moment. And we believe that the opportunity for the retail stores in New Jersey are are quite significant. And, you know, as a reminder, over the last by the first quarter of this year, we will have spent nearly all of our growth CapEx that the current framework of our business requires, you know, which is we're fully funded to today. So that actually puts TerrAscend in quite a unique position in the industry as most of our assets will be in the cash flow mode versus the investment mode and, you know, as we look for more opportunities to expand. So why TerrAscend? And, you know, from an investor's perspective, you know, we are really focused on going deep and achieving scale. And today, TerrAscend, has achieved, and we are among the top five US MSOs as a leader in terms of profitability metrics. Our gross margins this quarter were running at 56%. We've been able to hold the line on our SG and A cost holding at 30%, which has allowed our EBITDA margins to accelerate to 24%, and we're posting an $11,000,000 adjusted EBITDA for this quarter, which is up from $5,000,000 in the previous quarter. And we're getting significant leverage on our revenue. 50% of every dollar now is dropping down to the bottom line. So if you think about measuring revenue, the company is quickly becoming up to scale in terms of revenue and size. You know, we we were ranked seventeenth, and we're, you know, first quarter ranked ninth, and it is our intention to be a top five US MSO player in terms of size. However, while some may say size doesn't matter, I do feel that profitability and cash flow really are the most important metric to focus on. You know, as a business, we do need to eat as we dream, and we will plan to continue to be a financial leader and generate significant cash flow, which will create further acceleration opportunities for us as a business. In closing, before I hand it off, you know, outside of our business strategy, there really are some key foundational elements for me as a leader that I think are really critical for building a lasting organization. You know, five key points. First, customer is king. You have to live and die by it. You know, we will keep the whole organization focused on making customers happy. We're gonna do that. You know, I love plugging in and connecting into the customer and the voice of the customer to make sure we're getting data points and really knowing where that voice stands and making sure that's embedded in every decision we're making as a business. And I also always say that, you know, businesses are easy to buy, but they are hard to run. And building great talent is everything to do that. I like to build the capabilities and strength in my team ahead of our growth. You know, when I first started FreshDirect, the business got ahead of us, and I really learned the lesson of what it's like to try to scale when your management team is falling behind the growth. And, you know, here, we're really focused on continuously upgrading the talent and, you know, building great people, and we will continue to upgrade our pool over time. I also, you know, really do believe in a strong set of core values. It's critical to unify a team and to make sure we're all operating on the same page. You know? And for me, values are a very binary filter when hiring people because you really want everyone to be on the same page. It just makes for stronger performing teams. Financial discipline, you know, for me, this is also a lot about culture and mindset. You know, you have to live it. You have to talk about it. You have to make sure the whole organization is mindful on every dollar we spend to make sure it's adding value to the business. And lastly, you know, I do deeply believe in the value of having really strong data and technology. You know, when I first started FreshDirect, we really didn't have a good underpinning, and I never felt they had good control of the business. And so we really put a strong data foundation and it changed our whole visibility. And I believe that the managers and frontline associates of the business can't be blind to making decisions. We have to have the right data in the right hands at the right time to make critical decisions so we can scale our decision making across the business. So that's us. Again, I wanna thank you for joining us today. And with that, I'm excited to introduce and hand over the presentation to Keith Stauffler, our CFO. Take it away, Keith. Thanks, Jason. Good morning, everyone. Super excited just as Jason was to be here virtually with you all today. Just gonna spend a few short minutes, and I'd like to really cover three things. First, I'd like to provide a bit of background on me and just like Jason did, why I joined TerrAscend. After after that, I'll share a very strong q two results that we just preannounced, earlier this morning. And then finally, I'll finish up sharing with you some of the activities that we have underway to strengthen our foundation and prepare us for continued growth into the future. So I'm three months into my role here at TerrAscend. And why was I attracted here? It's really a few main reasons. First, I think as we all know, the industry is one of the fastest growing industries in the country, and I really wanted to be a part of that. Second, through my research and my discussions with Jason and some of the other key members of the team, I concluded that TerrAscend is extremely well positioned in in this industry to capitalize on that growth. And, hopefully, you're already seeing that come to life here today. Finally, I felt strongly that I could leverage my background and experience to help this company forge its path into the future. As Jason briefly mentioned, I come from a classic consumer goods background where I've spent my entire career, and I built international and global finance teams, processes, strengthened foundations, and partnered strategically with businesses in large and very growth focused environments. And, ultimately, I concluded that I could leverage that background to do the same here for TerrAscend. So after my first three months on the job and everything that I've seen and experienced, even in COVID times and all virtually, I might add, I feel even more confident about all my reasons for joining and excited about the months and the years ahead. Now I'd like to get into the exciting news of the day and share with you our q two results that we just preannounced earlier in the morning. Note that our full results will be announced on August 20. For revenue, when we look at revenue as as we saw just a bit earlier, we posted 47,200,000.0, and that represents 36% sequential growth on top of the 34% growth we saw in Q1. You can also see that this represents 169% growth over Q2 of last year. This strong growth was driven mostly by the full quarter realization in our Pennsylvania cultivation expansion, but also by a new store opening in Lancaster, PA, coincidentally my hometown by the way, which opened in the April. Looking at the adjusted gross margin, adjusted meaning excluding gain on biological assets, they expanded significantly from 45 to 56%. And this significant expansion was driven by the increasing mix of our very profitable Pennsylvania business, but also by ongoing margin enhancements that the teams are driving in Canada and in our West Coast operation. And generally speaking, as we continue to achieve larger scale, this is also driving the profitability improvements. For adjusted EBITDA, we it grew by 131% quarter on quarter to $11,400,000 And note that we turned the corner to adjusted EBITDA profitability last quarter in Q1 and have now further materialized that progress in q two. And it's not on the page here, but we also have been IFRS EBITDA positive, meaning on a non adjusted basis in both q one and now again in q two. And all those full details will again be reported in our results on August 20. And finally, the EBITDA margins, they improved 10 points from 14% to 24% as we realized the full benefit of gross margin dropping to the bottom line and really driven by our continued control and discipline in managing our SG and A costs. And as Jason noted earlier, these key metrics now place us firmly among the top US MSOs in the industry. And as we continue to build scale, we expect for this to continue to to improve from here. And finally, we finished the quarter with a strengthened balance sheet, which included $75,000,000 of cash and which we expect will meet our operating and and investing requirements through to turning free cash flow positive. And just to put that into a little context and reiterate some of what Jason just mentioned earlier, we've been investing significantly to build out our operation, and now we're starting to see those investments being completed in the back half of the year, and we'll be realizing the full benefits of those investments. We'll have minimal CapEx to spend after the end of this year outside of any new future opportunities. So to close on this part, I'd just like to say that these strong results in both q one and q two now are a clear indication that our strategies and our execution are working. Finally, I'd like to touch briefly on what's, the work that's taking place across many of our teams, that we've been initiating over the past several, weeks and few months to strengthen our foundation and to prepare the company for the future growth. The first is FP and A processes. And for those that aren't familiar with the acronym, it's financial planning and analysis. And this area is very core to my background. I've spent many years in such roles across consumer goods companies and really have a lot of energy to put these processes and upgrade these processes for Terra said. We're building robust forward looking short and long term financial planning processes, and they they include things like clear building block approach to planning with clear KPIs. All these things are gonna drive high perform a high performance organization and accountability across all of our teams. The third pillar here is is, systems and tools, and we've already initiated, and we're in the middle of implementing an integrated ERP system, which is well underway. Any company of any significant size and complexity needs such a system to help operationalize the company, And we expect to be fully implemented across all areas of the company by the end of this year. And, of course, that will will realize the benefits of that as one might expect from such a significant project. The third area is really taking that systems and tools and turning it into analytics and insights, and that's the a of FP and A. And it's really about once we get all this automation in place, we'll be able to better access the data, analyze it, and turn it into insights which drive better decisions. And finally, the the final two pillars around controls and also around integration and standardization. So as as Jason outlined earlier, we're still operationalizing this as as one company. Remember, it's been just over a year since these assets and teams have been put together. So we're putting in standard controls and processes as well as integrating the company where it makes sense. And the benefits will be many, but will include improved productivity and efficiency, a better leverage on our costs, which we already are experiencing but will experience more, and better decision making leading to more effective management of the company overall. So to close, all of these initiatives are expected to solidify the foundation for this company and enable us to deliver the profitable growth that we're aspiring to achieve over the coming years. I wanna thank you all for your time this morning, and now I will turn it back over to Jason. Great. Thanks, Keith. And I wanna introduce, today Greg Rocklin, who, has built, the Pennsylvania business. Again, it's been a great partner. Really excited to have him join today. So, Greg, take it away, buddy. Thanks, Jay. I I appreciate it. I'd like to start by saying, again, I'm I'm very proud to be presenting today. I'm extremely proud of what we've accomplished so far in the last three years, with Alera, And, you know, very, very excited to be part of the TerrAscend family and looking forward to the future. The the strength of the team as, Jaya and Keith just commented on, is really impressive and incredible. And with JW's leadership as well, the future is looking great. I'll give you a little background of who we are. So Alera was formed in originally 2016, and then we actually won the license in 2017. We won one of 12 original grower processor licenses in Pennsylvania. And then a week later, we found out that we actually won the dispensary license as well, which made us one of only five growers in Pennsylvania to win the vertical integrated quote unquote super license. We were very proud of that, as you can imagine, especially considering that we were the only, GP to win that did not have a footprint in another state. So that was a that was a very a very exciting time. We, from the start, my partners and I and about half of the original group were in the pharmaceutical business. So we came at this from a very medically centered pharmaceutical approach philosophy. We built our first facility of approximately 67,000 square feet. Recognizing that the state was gonna continue to grow, so we built a back of house, the processing and all the offices and the the vaults, etcetera, to to be able to scale, you know, so larger than was necessary at the time so that we could scale the business. And as J. A. Just alluded to, we just completed in the first quarter, about an 80,000 square foot addition that was primary cultivation space. And, again, we started with the hybrid greenhouse, and then we added the, the indoor double stacked LED grow. And, again, from from day one, our priority was putting the patient first, producing consistent quality products, and making sure that we were using an education driven data driven education platform so that we could scale and continue moving, consistently and, and thoughtfully. You know, I will I will reference this quite a bit in this presentation, but the team is really what makes this. We have a, you know, from from as JA mentioned, we believe that putting together a world class team of professionals who were truly dedicated and, and motivated was gonna be the key. And we've been, we've been very fortunate and very successful with that. We were also very fortunate to start in Pennsylvania. Pennsylvania has proven to be just a highly attractive market. It's a large state, along with 13,000,000 people, and they also started off with an extensive list of medical conditions and then actually quickly increased that list to include anxiety, which has been very, very meaningful to our continued growth within that state. And as you can see from the slide, Pennsylvania has done just an incredible job of of, you know, of increasing awareness. We, as Alara, from you know, it was very funny. I think our fourth or fifth hire way before we had products on the market was a physician education individual. Because we recognized very early on that, you know, making sure that the physicians in the state understood the medicinal benefits of medical cannabis was was crucial. And we've, we've really been a leader in that, and we continue today to do that, you know, day in and day out. As you can see, the patient count today is a little over 350,000. And during COVID, we've actually seen an increase in adoption as patients are now able to get certified virtually. It has really been a tremendous boon to the business in general. The number of dispensaries has grown a little bit more than twice over the over the last year and and still has a long way to go. There'll be 186, allowable, and there's about 88 now. And we're we're currently servicing about 85% of all dispensaries in the state. And, you know, I want to again, I can't I could speak for a long time about the benefits of Pennsylvania, the population, and the adoption has been incredible. But one of the points I want to leave you with is currently the current governor, Governor Federman, estimates that between 6570% of Pennsylvanians support adult use. And we do believe that that will be, you know, Pennsylvania will move in similar to New Jersey to an adult use market in the very near future. So as I stated, we're growing in about 144,000 square feet, and we are currently the number one supplier to the wholesale market in Pennsylvania. We have approximately a 20% market share. We have a very nice library, and our professional growing team has done an incredible job. One of the things, again, I'm truly proud of is we started shipping. We were the third licensed producer in Pennsylvania. We were also the third dispensary open. But when we started shipping on May 4, we have shipped every single week since then consistently to the market. We are the only, you know, MSO or grower in Pennsylvania that has done that consistently. And we believe that the patient should never be without their medication. I never understood people going in and out and having weeks between harvests, just not the way we believe that is best for the patient long term, and we have been patient focused since day one. We are currently at almost full production, as J. A. Mentioned. We actually have two more rooms that are turning on that are actually now are flowering and will be, the product will be in the marketplace in the fourth quarter. But and a couple of things that, again, super proud of the team, what we've been able to accomplish. And we've hired about 100 people in the last six months during COVID. We continue to expand and make sure that we are properly staffed and have the quality of product and medicine on the market that the patients really need. So we're very pleased and proud that we are, you know, that this is what we're accomplishing and the growth rate that we've had. Again, consistent profitable growth is is really, you know, part of our ethos. And the other part is innovation. So we, you know, every single Friday I tell this story a lot, but every Friday, we have innovation calls, which we've had from day one. And we are continually looking to innovate and add products as the market shifts and as the market grows, so that we are continuing to be the, you know, the the the choice supplier within the marketplace. So, so, you know, truly truly proud of that. We, talked a little bit about expansion. So we started in the greenhouse. We then went to increase with indoor grow double stack LED. The yields have been fantastic. Really pleased with the quality of our product increasing. We are now harvesting 6.3 harvests per year per room. And we've seen our yields go up just as far as weight under the LED, but also our TSC percentages continue to increase. And we, you know, I kind of think the sky's the limit. I mean, the head of cultivation, Andy and his team have just done a fantastic job dialing this in, continuing to improve, continuing to look at all of the metrics and how we can, you know, have that growth not only in square footage, but in yield per square foot improve month over month, and they've just done a fantastic job. We as I mentioned, we have another 25% that's going to be, you know, in the marketplace in the fourth quarter, And that is, you know, that should lead us to even larger percent of the market and continual improvement as we move forward. We also are, as I mentioned, on innovation, we have a few product lines that we're adding right now and continuing to do so as we expand. One of the huge benefits that we've had since joining TerrAscend is being able to, adopt the Apothecarium brand of dispensary. I and I wanna give kudos to Ryan and his team. They've done an incredible job. They've been a great partner at, at working with us to really, you know, what I'll call up our game in the quality and customer experience of our dispensaries. We've seen incredible growth at our initial, dispensary in Plymouth meeting. And, as Keith mentioned, we've opened Lancaster and actually Thorndale during COVID. All three dispensaries are well over budget and, and just, you know, been an incredible experience. The the the benefit one of the many benefits of owning a vertically integrated facility, as Jason alluded to, is that we get a tremendous amount of data in real time from from our dispensary, our own dispensary, as well as the dispensary partners. As I mentioned, we're in over 85% of the dispensaries in Pennsylvania. We use this data, which we collect daily, to make sure that we are, you know, we are we are manufacturing products and supplying the marketplace in a way that is what the customer wants today and tomorrow. And we get that that feedback in real time. We take customer surveys from everyone that walks in our our our store. We also get to see what the growth rate looks like, and we currently have a retention rate of higher than 90%. Super, super proud of that as well. So we've seen an increase in sales, an increase in patient count, an increase in new patients in the marketplace at a very high velocity. So we currently have three dispensaries under the apothecarium in Pennsylvania. We have, one that will open in the fourth quarter in New Jersey, and then two more, leases that will open probably in the first quarter of next year. So we're excited to be running these operations. The other thing that we're very, very excited about is with JA's, you know, tremendous experience in in customer service and and technology, we have implemented, during COVID, the the state of Pennsylvania allowed us to implement curbside delivery. We also have a a old bank facility in Plymouth, so we actually have a drive through. So that's worked out very well for us to have the drive through and the curbside. And we do believe long term, there will be a delivery aspect. And arguably, know, Jay has done this better than anybody else in the in the world. So having him as our as our partner and that that experience, you know, should bode very, very well for our future and what and the opportunities we have on the technology side. So we're we're really excited about that as well. We, we run the business. Our our back of house is in King Of Prussia, which is a great location. We have a phenomenal staff there that is, is very experienced. And we're able with the with with joining TerrAscend and our New Jersey assets, we're able to take a world class leadership team and and implement that right away in New Jersey. So we're we're super excited about New Jersey. We're one of only four MSOs in the in Northern New Jersey, one of only 12 in the entire state. And with adult use coming on the, current ballot, we you know, and everything we're understanding, we're very excited for the future there. So New Jersey is a small state by size, but a very large population state, with over with about 9,000,000 residents. It's actually the most densely populated state in the country. So the opportunities, as Jason alluded to, along the dispensary side are just just incredible. We're starting out. We have just got licensed, the very first greenhouse ever in New Jersey, and we have plants on the ground there, which we'll start harvesting in October. And we're, again, very excited about the opportunities there. We, we have the potential to grow to about 240,000 square feet, and we should be able to take the lessons learned in Pennsylvania and really duplicate them in New Jersey. We think it's gonna be an extremely strong market, and we're positioned to really take advantage of this opportunity. So we you know? And we also are pleased with New Jersey that the top qualified medical conditions include anxiety and pain as well. So whether the market moves to adult use or not next year, we're gonna be we're gonna be very well positioned to to to increase revenue for Terizen, increase profitability, and continue our, you know, our our path of growth, which, again, is is what it's all about. So our, you know, our growth strategy in, you know, in the East Coast is to continue our expansions of Pennsylvania and New Jersey, continue to have and and increase the amount of products we have in the market. Again, in in Pennsylvania, our processed products, we're we're extremely proud of. We do a a a variety of products, including including concentrates and and, you know, vaporizables, tinctures, topicals, etcetera. We have quite a few brands under our, you know, under the Alera umbrella. We're excited to take advantage of the the brands that are in the TerrAscend family, Bahala, etcetera. So, you know, that's a very interesting opportunity that we have. The, the e commerce and data platforms, as I mentioned, that JA brings to the table and his experience will be you know, give us a a huge leg up on our competitors and put us in a position to be, you know, one of the strongest players, if not the strongest player, in any of the markets we're in. As Jay mentioned, we believe in going deep first. Before we go wide, we're gonna, you know, make sure that we have the infrastructure in place and move forward in a very methodical, thoughtful manner, which we're, again, excited about. And then we're gonna look at, other limited license states. We're building a world class team in in both Pennsylvania, at headquarters in New York with, with TerrAscend and in New Jersey that can really take advantage of the experience of the of the individuals and the team to, to continue our growth. So I'm, again, I'm very excited, as you probably can tell, to be, to be a part of the TerrAscend family, to work with, JW and JA and and the team that they're building. And the, and, again, I could not be more proud of the team that I work with in Pennsylvania and New Jersey. And the future is looking very bright. Thank you so much for your time. Great. Greg, thanks so much. Appreciate you, giving a review. So with that, I'd like to, introduce, Ryan Hudson, our fearless leader out in the West Coast. As I said, Ryan has been in the industry for a very long time, and, we're really proud to have him part of our leadership team. And with that, I'd like to hand it over, to Ryan. Take it away, Ryan. Thanks, Jay. Thanks, Greg. Good morning, everyone. It's a pleasure to be with you. As Jason said, my name is Ryan Hudson. I'm a cofounder and CEO of the Apothecarium Group here in California. And I live just North Of San Francisco now with my wife and our two boys who are three years old and four months old. And I mentioned that because you're likely to hear my three year old busting my office any minute, but apologies in advance, but that is life in a pandemic. So let me give you some background on our organization. I cofounded the Apothecarium about ten years actually, about eleven years ago now with my two cousins and family friends in San Francisco, which is the birthplace of medical cannabis. And as probably, most of you know, California and the Bay Area have a long history with cannabis. In fact, proposition two fifteen, the first law to legalize medical cannabis, was actually drafted across the street from our first dispensary in the Castro. You know, every day, new patients come in who have just received a diagnosis, they've begun chemotherapy, or they're dealing with a health crisis. They need compassion, personal attention, and information. And this is a responsibility that we take very seriously and that continues to inform every element of our business even in the recreational era. The light bulb moment for the Apothecarium came from my experience as a patient. I became a cannabis patient after my doctor recommended it for pain and the resulting loss of sleep and several injuries I received while playing ice hockey as a young man. At first, I was pretty skeptical, but I was interested in avoiding traditional pain medications and the strong side effects and, of course, the risk of addiction. Unfortunately, the dispensaries that I visited did not provide the patient experience I wanted. The staff simply did not know much about the medicine they were selling at that time. They could help me enhance my Saturday night movie experience, but they couldn't help me select the pain excuse me. Couldn't help me select the products that would help alleviate my pain or my insomnia. I wasn't alone. Every time I was at my local dispensary, I was struck by the number of women, my of my mother's generation and grandmother's generation who were also struggling to find solutions to their medical issues. I was looking for a more professional, health oriented dispensary, and I wasn't able to find one. But it was clear that seniors, working professionals, and people with serious medical issues were all completely underserved by existing dispensaries. We created the the apothecarium to address those customers, and we did this, through several, vectors. First, by creating a beautiful environment, I'm really proud to say that we've been recognized by Architectural Digest for the design of our stores. Our new Berkeley store, opened last week, is the most beautiful one yet. We curate high quality products with producers that we trust, that we know personally, and who conduct business with the same values that we do. We're dedicated to educating our staff and customers on how to use cannabis safely and with intention as a medicine or for pleasure, and this continues to be our calling card even in 2020. All the new competing stores we see opening every day are lovely. They don't resemble the CD clubs of the past by any stretch, but virtually no one has prioritized education and training the way we have. Since our first day in June, we have focused on providing the best patient experience possible. Today, in the middle of a crisis, this means enhanced online ordering options and online customer service to better meet the consumers' needs during this tough time. Online purchasing has more than quadrupled since the crisis began. We offer multiple types of fulfillment and everything as safe and hygienic as possible. We also now offer our famous one on one consultations by telephone and chat. Now the strength of our team is one of the major foundations of our success. We take pride in being a good employer and for attracting and retaining excellent employees. We promote from within and have team members who have been with us since our first year. We also have multiple employees who have risen from entry level positions to leadership roles. This creates a culture where our people truly take responsibility and go the extra mile to ensure we are offering world class customer service. Every employee starts with a comprehensive, highly structured orientation. Employees also receive ongoing training that is constantly evolving to meet the needs of our consumer. Now at the heart of the Apothecary business is our retail operation. Our approach to expanding assets has been marked by operationally sound business decisions, minimizing capital deployment. And on the retail side, we've been focused on winning assets in San Francisco and Northern California to efficiently leverage our management infrastructure and serve the customers we know. As Jason mentioned, we now have four operational dispensaries, and Capitola will be opening in q four of this year. All of our licenses have been acquired through applications, which we're still pursuing in strategically important locations in Northern California. We're targeting limited license markets with strong demand. Even as the competition for new licenses increases, we have made an incredibly high rate of success. In each of our communities, we have fostered deep relationships with our patients and our neighbors, and we have earned a reputation for operational excellence that has won us praise from the regulators. There's almost nothing more valuable than that when it comes time to apply for a new license. Also very proud to be a vertically integrated operation in California with an in house edibles brand and a cultivation brand. And this enables us to do several things. It enables us to provide our customers with a known high quality product, improve our margins, and bring in additional sources of revenue and growth by growing sales or wholesale sales across California. State Flower recently underwent an expansion to quadruple our canopy. We're really excited for the growth of that brand as our cultivators Dan and Jeremy are some of the best growers in the business. With careful attention to genetics and growing practices, they're growing amazing flower that we will sell through our outlets and across the state. Valhalla, our edibles brand, recently moved into a new facility, and we are seeing extremely promising results. We recently launched four new flavors of gummies with more on the way, and we have introduced a chocolate product line that is catching on well with our customer base. We have a couple of other irons in the fire with unique and competitive product formats, and we're excited to launch those into the market soon. Our experience manufacturing and cultivating wholesale products serves our customers and profit margins well, but also has residual benefits across the TerrAscend portfolio. By competing in the most established market in the country, we with our own edibles and flower offerings, we can take our product insights across TerrAscend and drive innovation in Pennsylvania and New Jersey. And that's extremely gratifying be able to help Tarasthen grow by implementing our insights, our scar tissue, etcetera, across the organization and watching our brands get traction in markets outside of California. And across our verticals, we've built a platform of best practices with the best people in the business. We're efficiently leveraging our infrastructure to deliberately expand our operating footprint. We've improved our profitability and revenue streams through our in house wholesale businesses, and we have continued to evolve our channels in a safe and clean way to serve our customers during these challenging times. Now everything that I just touched on informs the basic pillars of our West Coast strategy, and strategy is key. But to my mind, it's a close second behind culture and values. I'm, very pleased to be able to say that after knowing JW for two years now and working closely with JA since he took the reins, that I know our people and our combined culture are in good hands. I truly believe that the future is bright for our California operations and for TerrAscend as a whole. Thank you for your time. Back to you, Jason. Great. Ryan, thanks so much for that. Appreciate your perspective. Okay. So that concludes the management part of our presentation. I'm now excited to move over to the fireside chat. We've got David Klein in house from Canopy Growth, Jason Wilde, as you know, and Tim Seymour, who's a contributor to the CNBC, to discuss, the, US cannabis market. So with that, we're gonna head over to the to the chat. Let's give a little pause for our tech and camera crew to kind of move it over. The growth corporation, Jason Wilde, CIO of JW Asset Management, also the chairman of Great. Is everyone there? Alright. With that Hi. Hi. Thanks. You on? Sorry. This is Jason. Hi. Yes. Thank you, Tim, and thank you, thank you, David Klein, for taking the time this morning, to join us for our Investor Day. I wanted to take a moment to thank the entire leadership team and our staff throughout the organization for the tireless work, they put in day in, day out, that that has brought us to this point. I have personally never been more excited and proud, to be the Chairman of this company. At this point, I'd like to open up the Q and A session to wrap up our twenty twenty Investor Day. Joining us for the Q and A is Jason Ackerman, Keith Staufer, Ryan Hudson, Greg Rocklin and myself. Ladies and gentlemen, we will now begin the Q and A session. Your first question comes from Andrew Parthenon from Stifel GMP. Please go ahead. Thanks for taking my question. I just wanted to dig a little bit into your Q2 results maybe. Really impressive growth here. Congratulations on these results. And kind of super impressed with the cost control, especially on the SG and A line, potentially flat quarter over quarter despite significantly expanding your production in Pennsylvania. And as I understand it, revenues there are continuing to ramp up, potentially even ahead of the slightly increased costs that you have. But my question is, given the fact that the costs haven't really increased that much compared to your production increase, what can we kind of expect going forward? And how exactly did you guys manage that? Hi. Thanks. This is Jason. Well, there's a lot going on inside the business. You know, we talk about, achieving scale. There really is an enormous economies of scale in the GROW operations when you achieve a certain size. So there's a couple of things to unpack inside that. But first of all, as as the team has expanded their operation, the amount of additional labor required relative to the growth is relatively small to the revenue. So for example, you can see a 60% increase in in revenue with only a 20% requirement of additional cost. So there's a huge flow through as we scale, which, again, which is why we believe in achieving those economies. And in addition, I'd say that, you know, across the business, you know, since I come on, we're taking a hard look at our s g and a cost everywhere and making sure that everything is fruitful, and then we have been trying to trim in the right places. So those all combined. But with that, Greg, you want to, you wanna add a few thoughts there? No. Was just gonna add that a lot of this was baked in. When we knew we were expanding, we increased headcount earlier, and we've, and we've also had a tremendous amount of efficiencies. We've we started doing, you know, our own fertigation, our own fertilizers in house versus buying them exterior, for example, is something that that it was really a great efficiency builder. But a lot of it had to do with, as you had mentioned in your initial, comments, Jason, we planned ahead and made sure that we were properly staffed for the expansion prior to the product sitting in the market. So a lot of that overhead was pre built in. Okay. Thanks for that. And also really impressed with your gross margin. I mean, you know, we kind of expected perhaps some additional costs coming in due to managing COVID. And curious actually now that we're well into the third quarter, how can we see that evolve? Do you see maybe some COVID costs coming off on perhaps your gross margin level? Or do you think that could be sustained going forward? While we're not giving any forecast, I do think it's it's rational to assume that that is, sustainable. I think if you look at the effort that we put in across every division in our business, our CBD business, our Canadian business, the work that Greg has done and Ryan, you know, we focus on making sure that we've got strong gross profit margins, and there are initiatives across all of our business lines to challenge and make sure. A very simple question, are we making the right amount of money to sustain our desired profit margins? So, you know, there there is active work going on on that. This isn't about a COVID pop. This is really about, you know, some real basic blocking and tackling on the margin side and continue to, you know, press ourselves to make sure we get our cost down and raise our revenue. Thanks a lot. And, if I could just sneak one more in here, on California. How would you see the environment of of of back to school evolving? Do you have any color there? Well, I think as you know, California has been a little challenged with COVID. You know, none of the schools have announced, but we do think that back to school, will probably be a bit challenged, in that marketplace. So we are a bit cautious. You know, we did open our Berkeley store. There's no announcement yet, but we do think online will be largely how, you know, California on boards in the in the early quarter, at least in Northern California. So, you know, we're cautious as COVID, you know, it's gonna take a time to work its way through, in that market. Thanks a lot for taking my questions, and congrats again. Thank you. Thank you. The next question comes from Noel Atkinson from Clarus Securities. Please go ahead. Hi. Good morning, guys. Thanks so much for taking your questions today, and and well done in in q two. On the q two revenues, and specifically for Pennsylvania, can you give us a sense of, you know, how much of that existing capacity sold through into the market in q two? And it was is there still some potential growth there in sales in q three before that 25 x percent expansion comes on in q four? Sure. Greg, you wanna take that? Sure. So we, we've been very fortunate that we we really sell through everything that we're producing pretty much month in and month out. That being said, there is we are continually improving as we discussed, So we are looking forward to seeing some, you know, some growth in in just efficiencies and yield, during this time frame, with the majority of the, you know, growth happening in the fourth quarter. Okay. Great. On New Jersey front, so I you mentioned in the prepared remarks that I guess there's two additional stores besides Phillipsburg that have been that are leased now. Can you and that they're in Northern New Jersey. So can you give us any more sense of, you know, about their locations, their convenience to major sort of affairs? Are they subject to municipal zoning, all that good stuff? Yeah. Sure. So as you know, we're in the Northern Zone, and the two locations that we have under lease today are situated, what I call kind of in the New York City side of New Jersey. So, running through a lot of the main highways and community towns into New York. So it's really the densest part of New Jersey itself. If you kind of, you know, run our analysis where we look at population within a twenty minute drive of each one of the locations, you'll see well in excess of of 2,000,000 people are a twenty minute drive from both these two locations. So we're we're pretty excited, and we're, you know, midway through the process of municipality approval, and then we've gotta get approval from the state of New Jersey. So, you know, there there's a the process we have to go through, but, you know, the towns have indicated they're very supportive, and we're optimistic that we will be able to, push those through and and and, bring them all the way. Okay. Great. And then on on the New Jersey, production site, your corporate presentation mentions that capacity is, you know, I guess, 30,000 pounds a year or so, and I presume that's at full capacity. Can you tell us a little bit about, you know, what your capacity is in the first phase of 35,000 square feet and as you add this next 140,000 square feet? Sure. Greg, you wanna take that? Sure. So, again, we are we started we're starting in the greenhouse, and then, we'll have our indoor our first indoor operations. We'll we'll be able to start, vegging in there in, you know, in October, which is approximately an additional 70,000 square feet, 76,000 square feet. So we you know, we're we're expecting to have a pretty, robust, production, facility, both flower and, and extractive production, you know, by first quarter of twenty twenty one. K. Great. And then Go ahead, please. Yes. Yeah. No. I was just gonna add that if you kinda look at where Alera has achieved today, we look at what our kind of what I call a real first phase, although it stays in in two steps. The throughput and output of that facility is is just slightly less than where Alera is today prior to the the the expansion that's about to happen in size and opportunity. Okay. Great. And then and then just finally before I go back in the queue, maybe this is for Ryan. What would you like to see the apothecarium scale up to to be in California over the next few years? Is there an opportunity for the apothecarium to be a chain of 10 to 15 stores? And is there a potential for you to expand down into Southern California? Hey. This is Jason. Ryan just sent me a text that he just got attacked by his kids. So I'm gonna I'm gonna answer that on behalf of Ryan because we have we have spoken a lot about this. So so yeah. No. I think we we do believe that the apothecarium chain, in a sense, you pick 10. You know, we do want to get north of that number. If you look at our our footprint, you know, Capitola is heading a little further south of the San Francisco Bay Area. We're really, really focused on making sure we've got operating talent and management leverage around that. We've got a number of applications that, we're working on today in and around the Northern County farming market. I think Southern California is a whole another place. I would say that strategically, we're more focused on building really good density up and around in the in the Central to Northern California than Southern at the moment today. So I would expect us to continue the process of, you know, going through the application process given how well seated the team is and well connected it is within the, you know, the the government bodies, and and that's why I think we're gonna push our growth. K. Great. Alright. Thanks very much for taking our calls. Your next question comes from Glenn Mattson from Ladenburg Thalmann. Please go ahead. Hi. Good morning. Thanks for taking the question. So first, just on the margin, just building on that a little bit. Can you talk about is there any kind of like accordion effect next year when like New Jersey first comes online? I imagine you might not be at scale as quickly or there might be some efficiencies to be worked through. So do you expect kind of the first half, the margins might contract a little bit before expanding back? And then next question, I guess, that would be, do you have an outlook for what you think maybe just when New York I'm sorry, when New Jersey and Pennsylvania are, you know, fully up to scale what the margin profile of the business would look like? Yeah. So it it it wouldn't be uncommon for, obviously, for us to have a ramp up period. In fact, you know, we're already absorbing the the losses of pre revenue today in our in our numbers in New Jersey. And as we come into the fourth quarter, you know, we'll be ramping up our staff on a pre revenue basis, you know, as we're as we're planning and working today. However, I would say that, you know, given that we're gonna see a continued expansion in our Pennsylvania market into the fourth quarter, I I do think that that, you know, will offset any pulls that New Jersey might have on the ramp up side. And we do think that fairly quickly, we can get the margin structure pretty close to where we are today. So it's a little hard to tell how that's gonna move, but I think we feel generally good in and around this range, some plus and minus that we'll we'll be able to hold with some upside over time. Great. And then I'm curious about you talked about having top market share in the wholesale market of Pennsylvania. Can you just talk about your ability to maintain that share? There's a lot of more capacity coming online. And maybe, I don't know, probably likely that some of the success of the products plays into that, but just maybe the puts and takes of how you maintain that share over the next period of time or so. Sure. Greg, you want to take that? Certainly. That's a great question. So a couple of things are at play. One, you're correct, there is more capacity coming online from ourselves as well as others. Fortunately, we're in a position that they, you know, again, within the medicinal market, the growth rate of the marketplace is actually outstriking the increase in supply. So we are still going to be at a supplydemand, a little bit of supplydemand imbalance for the foreseeable future. And then, of course, if adult use comes into the market, we're expecting to see a pretty large increase in demand from that, which puts us in very good stead for, again, the foreseeable future. But currently, we track very heavily the rate of increased participation from the populace, as well as we work very hard to make partnerships with the current dispensaries. And we are, you know, as again, we're in with pretty much everybody, group within the state, and we are, you know, we consider them and they consider us a vital part of their organizations. Great. That's it for me. Thanks for the color. Your next question comes from Kennec Tye from ATB Capital Markets. Please go ahead. Thank you and good morning. Just if I could just add my congrats in terms of strength that first the second quarter results, obviously a big positive surprise and stock reacting accordingly this morning. If I could just build on one of the earlier questions, As I understood it, a lot of the expansion and labor additions in Pennsylvania were ahead of the most recent expansion. If you were to sort of step back or build out that comment on the SG and A, is it reasonable to say that your in year targets and what you think Pennsylvania can and will deliver can be delivered with the current labor count for one to a better view? In other words, did you sort of prebuild in terms of that capacity sufficiently sort of support a full year? Or could we see some sort of further uptick here in the in in the back half on on G and A costs? Just wanna sort of build on that that initial question, make sure I'm fully understanding, you know, how to think about that evolution. The short answer is Yeah. Did. We So that was three people. Okay. And and, yes, they we we we are we are staffed appropriately at this point in time. We do not, foresee additional staffing because of Pennsylvania, coming, you know, come into play. That being said, we are continuing to build up New Jersey. Right. And and I think, from the from the comments there, I mean, the the key takeaway there to my mind is that your current margin profile reflects a lot of those pre revenue costs. So it's not as if on the build of New Jersey, there should be any material step change or rather what you're doing in Pennsylvania should offset some additional or increased drag out of New Jersey. Is that a fair characterization? I believe so. And then Yeah. I mean, like I said, yeah, New Jersey is ramping up, those numbers are are kind of moving in. We do believe the expansion will off depends will off will offset those expenses. I I appreciate that. And if we maybe just sort of sort of switch over here a little in terms of the competitive dynamic, you know, the last question, obviously, dealt with share and maintaining your leadership. But could you speak more broadly beyond supply constraints to the competitive dynamic and perhaps also particularly touch competitive dynamic, competitive intensity, but also perhaps just speak to this whole issue around the clinical registrants, which is a little bit of a side door into that market, how to think about their entry, how to think about the impact that could have on competitive dynamics, and any color you could provide on that? Because that certainly is a discussion that needs to be had around Pennsylvania looking forward. Do you want me to take that, Greg? Yeah. It's funny. And I I actually I I meant to mention this earlier in my remarks, and and I and I I just missed it. But we, we hired a new individual this week who started on Monday, and and and his first week, he's working in Pennsylvania. He comes out of a very large MSO. And his comment to me yesterday, because I I asked for comments from my presentation today, was one of his comments was, Greg, I I've been here now three days, and I will tell you that your you know, Alera's facility, the amount of the product the the company that I worked for prior, this is his words, thought they had an incredible product offering. You guys are, quote, unquote, light years ahead of them, in your product offering, your staffing, your expertise, your, you know, your professionalism, and your and your facility. So you know? And which I was very humbling to me when he said that he said that. But I wanna share that coming from his experience. We, you know, we we we work very hard, and we try to be very thoughtful in our product offerings and our continued innovation. So that is one of the things that I think is very important. It follows right along with the CR. So we've been we've had a CR philosophy since the day we started. Again, we are in the, you know, we're in the pharmaceutical business. We are making medicine. So and the research part of it is something that we you know, was literally built into our DNA. So we're excited to have the CRs, you know, in in Pennsylvania. We think it's good for the program in general. We, you know, we we, you know, we we love the research aspect and that people more and more becoming used to the fact that this is medicine. And there are people who we are out there helping day in and day out live better lives. So the you know, this gives a lot of credence to that. So we're, you know, we're excited about that. Also, all of these CRs are, you know, are able to open six dispensaries, so it increases the dispensary. So, you know, I think it increases physicians' comfortability with medical cannabis. We said it increases patients' comfortability and increases the market in general and gives us another outlet to to, you know, to market our products. So we're, you know, we're really excited about what this, what this opportunity brings. That's great color. Thanks so much. If I could just just squeeze one quick one in here on New Jersey. Yeah. Beyond the ballot initiative, that obviously provides for and assuming it went through, would would provide a bit of a rework of the legislation. And and I understand that in terms of the amendment to the legislation, but there's also a lot of, you know, i's to dot and t's to cross from when that amendment could potentially be voted in favor of and and, you know, getting to it, you know, recreational adult use in that market. How does one think about or handicap that that evolution or or timeline? I mean, it's it's a very different dynamic to what we have in in Arizona where, you know, we we kind of have a in the sand on assuming adult use gets voted on, you know, we they will they will be in market or committed to being in market by, you know, date x in 2021. How do you think about that? And more importantly, how do you position your business around that? Or is is it really a case that that's in the nice to have and we're positioning for, you know, the bogey we can hit today, which is medical? Maybe just some color there from whoever's happy to take that one. Yeah. Yeah. Sure. This is Jason. You know, around the timing, first and foremost, we we view rec as as a as a nice to have, not a need to have for sure. And we're planning and building for the medical, market. You know? Typically, you know, in talking to the regulators, we, you know, we kind of expect it could be plus or minus a nine month period from the day it goes, the vote so the regulators kind of get their their process together for the regs really to be out there. So it it'll take a little bit of time, you know, through, the end of, of next year before that really comes through. But, you know, if you know right now, New Jersey is really in the early phases. Only 12 or 13 stores that have been opened. You've got a lot of the current players who have their licenses. We're gonna get to 24, 25 in the marketplace very quickly. So we think over the next year, you know, rec is is absolutely not needed to kind of quickly build our plan in our marketplace. But, you know, I'd say that as we're designing our dispensaries and thinking about our go to market strategy, obviously, we're prepared to, you know, quickly pivot them to to to rec. But, you know, we don't view that as a necessary part of the success of the marketplace at all. If you look at the registries and the patient reason codes, they're very, very strong, and that in itself, we believe is gonna build, you know, great patient counts. Right. Thanks very much. I appreciate all that, and I'll get back in the queue. Your next question comes from Vivien Azer from Cowen. Please go ahead. Hi. Thanks for the question and great presentation. Just wanted to follow-up on Pennsylvania. Perhaps this is a question for Greg then. Greg, you noted the popular support for for legalization. You noted, obviously, the incrementality that that adult use could bring to your business in Pennsylvania. My understanding, though, was that the governor and lieutenant governor went on a listening tour. I believe it was last summer. They kinda came back with that same conclusion that the the voters in Pennsylvania wanted adult use, and I thought they put it, you know, to the state legislature to to advance that. We haven't really seen any movement there. So I'm just curious how you're thinking about the the various pathways because it seems like kind of the the collective will is there. But in terms of, like, execution, we haven't seen much. Thanks. No. That's a that's a great question. And, yeah, yes, that was last summer. It was it was it was really an interesting tour that they took. The lieutenant governor went to pretty much every small town in Pennsylvania. He spent quite a bit of time on it. And, I was fortunate enough to be able to talk to him afterwards. And he, you know, he had a great experience. He learned a lot. And the overarching theme was that there was a tremendous amount of support for legalization, know, in in Pennsylvania. You know, the the the real answer to this question is the world has changed. COVID has really changed the world dramatically. I think that Pennsylvania, along with most states in the country, you know, all states in the country, are experiencing budget deficits that have, you know, a little greater than what was ever experienced before or budgeted for sure. And that, it's quite possible that that conversation has really, accelerated the the the timelines on some legalization of adult use throughout the country. I think I think it's quite possible that Pennsylvania will fall into that same, mindset, and, and that's what we're, you know, that's what we're we're hearing out there. So we do believe that it will be an accelerated path towards, towards adult use. Okay. That seems reasonable. And, you know, I appreciate your commentary around how healthy Pennsylvania is certainly, you know, for you given your position in in wholesale and your widespread distribution of your own products through the dispensary network. But I think, you know, my team and I find that that Pennsylvania tends to be about the most opaque market, in the country from an analyst perspective. So, you know, without giving any kind of forward forecast, can you can you offer any context on what you think the size of the market was maybe in 2019 and what the run rate, growth rate looks like? Thanks. So from a patient count perspective, you know, we're probably a little bit better than double, you know, where we were in, you know, the average of 19 from a year ago. And, again, we track daily, new patients that are coming into the market within our three dispensaries, which we obviously have, you know, tremendous amount of view on. The you know, since over the last couple of months, since everybody's really you know, since they allowed virtual registrations, we we, you know, we do a tremendous amount of consultations. We have a very professional pharmaceutical staff, within our facilities. And we're doing a a tremendous amount of, you know, comparatively, and it's it's really been on the rise continually over the last six months. So the amount of patients that are coming into the marketplace is really expanding very quickly. So I can't give you, you know, really, you know, solid forward looking numbers, but at the pace that we're in at today, we are seeing approximately a 50% increase in the amount of patients versus where the program currently stands, on an annualized basis. Great. And I'll just sneak one last one in. Do you have a do have a revenue estimate for Pennsylvania in 02/2019? Big. Alright. I'm not gonna try to squeeze water, but thanks for the help. Thank you. Your next question comes from Eric DeLoret from Craig Hallum Capital Group. Please go ahead. Great. Thanks for taking my questions, guys, and I'll offer my congrats on a very strong Q2 as well. Jason, you mentioned at FreshDirect, you felt you didn't have control of the business until you invested in some data and technology. Can you give us a sense of what data and technology capabilities you have now and which capabilities you look forward to incorporating over the next year or two? Yeah. Sure. You know, it it there there's a it's actually quite a a big set of data in terms of operating metrics around the business, but it's it's a couple of things. You know? Think about one product database, two customer database, and three kind of financials and operating KPIs to the business. So, you know, a lot of things if you think about how to run a business, you really want your frontline managers to be having, good information to making decisions. So, you know, how much information do we have, you know, with the growers at their fingertips around yields and what we're doing. And I think that is actually Greg and team have done a good job, and that's getting better and better. I think that where I look holistically across the business is leveraging all the customer knowledge. So we're in the process of building a centralized database across the business. So, you know, what's going on in the dispensaries in Pennsylvania? What's going on in California? What are the retention rates? What are the baskets? What are people doing? What are the behaviors? What are the segmentation? So it's a lot of taking that customer database, putting it together, and deep gaining much greater insights to the business, to kind of help make better decisions for driving growth, throughout the whole business. And lastly, I'd say is that I'm a I'm a massive believer in in insights, and, we're in the process of putting together what I consult just kind of a a daily pulse insights for the business. You know, I've learned a ton from having customer feedback on a daily basis. So if you kinda look at journey points throughout the customer experience, we're in the process of plugging in and identifying when those journeys occur, automating a process to kind of get the right question and the right feedback at the right moment, so that we have a real pulse and sense of satisfaction on a daily basis throughout the business, and we know what levers are driving satisfaction for our customers. It's not just whether someone's happy or not, but how does that happiness or not affect their propensity to wanna shop with us or or shop with their competitors. And it's a lot of that insights, which isn't coming through the data, through the numbers, or through the financials. Those are really around the customer sentiment. And driving pulses of that information to the business and to the manager really helps making decisions. Could be on product. Could be on, you know, is the wait time too long in the store, and do we really know if a patient, you know, feels that they're waiting a little bit longer, and how is that affecting their willingness to come back to us? It's all those type of insights that help us really fine tune different aspects of the business that that allow us to make, you know, incrementally better decisions every day. That's that's very helpful. One more for me. I'm not sure if this is best for you, Jason, or perhaps for Greg. So, you know, with with EYLARA, you guys obviously have very strong wholesale brands, number one wholesaler in Pennsylvania. You know, from from my perspective, it seems like there's a real focus on, you know, precise formulation, different different product formats. And then when you compare that to, you know, state flower, obviously, you know, ultra high premium out in the West Coast, much more competitive environments for for product brands. So my question for you guys is, how should we think about your CPG strategy, you know, over the next few years, you know, as New Jersey and Pennsylvania are expected to to flip to adult use, you know, should we expect more of the, you know, precise formulations that that EYLEA has been very successful in, or, know, should we sort of expect some of those more ultra high end West Coast type products out of you guys post adult use in in on the East Coast? Thanks. Yeah. I'll answer that real quick, and then I'm gonna hand it over to Greg, actually. But I I think if you look at the marketplace, the the market even in Pennsylvania today, while it's medical, there's a lot of just call, quote, unquote, adult use player people coming into the market. We're already seeing that in product development. So our view is you have to be great at both. You know, there are adult use users, and there are medical users in the marketplace, and they have different views of products. And so we are absolutely continually developing products, formulations, excitement, colors, efficacies that address that, and it's a big part of the DNA. And, Greg, maybe you wanna give a little color on kinda how you how you see that evolving. Well, I was wondering if he was listening into your and my constant conversations, Jay, because we we we, Jason and I talk about this quite a bit, as a matter of fact. And and that, you know, it is it is definitely, you know, as Jason pointed out, part of our DNA. So we are you know, we've added quite a bit of new products to the marketplace that are not the the the where we came out on the pharmaceutical formulation perspective. You know, that is definitely in our DNA and how we started, and it's an important part of our business. But if you look at the product offerings that we've offered over the last, I'd say, you know, twelve months, nine months, it really has moved more towards that real high quality, more, you know, adult use user, and we're gonna continue to do that. So Jason hit the nail on the head. We're gonna have a a a variety of products that will meet the consumer where they want to be, whether that be on the everyday product and the mid tier as well as the very high end specialty users. So we're fortunate that we have the facility and the personnel and the expertise to be able to, quote unquote play in, know, across the spectrum on the marketplace. Yeah. And, you know, our California team is very engaged with our East Coast team. You know, one thing that's great about New Jersey is they do allow additional form factors like edibles and and pre rolls that don't exist in the Pennsylvania today, and those conversations around what people love in California is definitely part of our dialogue and and what we talk about. And they're very engaged out in the West Coast with our with our conversations. Thank you. There are no further questions. I will now turn the call back over for closing comments. Great. Thanks, everyone. So that closed out for the day. I really appreciate everyone participating and joining us today, and we'll hopefully speak to a few of again in a few weeks at our earnings call. Again, thanks to my team, everyone involved. I really appreciate, and have a great day. Thanks. Signing off. Ladies and gentlemen, this con concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your line.