Green Thumb Industries Inc. (GTBIF) CEO Ben Kovler on Q1 2019 Results - Earnings Call Transcript

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About: Green Thumb Industries Inc. (GTBIF)
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Earning Call Audio

Green Thumb Industries Inc. (OTCQX:GTBIF) Q1 2019 Earnings Conference Call May 30, 2019 5:00 PM ET

Company Participants

Jennifer Dooley - Chief Strategy Officer

Ben Kovler - Founder & Chief Executive Officer

Anthony Georgiadis - Chief Financial Officer

Conference Call Participants

Robert Fagan - GMP Securities

Graeme Kreindler - Eight Capital

Matthew Pallotta - Echelon Wealth Partners

Brett Hundley - Seaport Global

Mike Hickey - Benchmark

Jim Young - West Family Investments

Scott Fortune - Roth Capital Partners

Operator

Good afternoon and welcome to GTI's First Quarter 2019 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. As a reminder, a live audio webcast of the call is available on the Investor Relations section of GTI’s website and will be archived for replay. I would like to remind everyone that today’s call is being recorded.

I'd now turn the call over to Jennifer Dooley, Chief Strategy Officer. Please go ahead.

Jennifer Dooley

Thanks, Duffy. Good afternoon and welcome to GTI's first quarter 2019 earnings call. I'm here today with Founder and CEO, Ben Kovler; and Chief Financial Officer, Anthony Georgiadis.

Today's discussion and responses to questions may include forward-looking statements based on management's assumptions. Actual results could differ materially from those anticipated and stated here today. Please refer to the earnings release in GTI's SEDAR filings for risk factors, which may impact forward-looking statements made on this call. Throughout the discussion, GTI will refer to non-IFRS measures that do not have any standardized meaning prescribed by IFRS such as EBITDA adjusted EBITDA and adjusted operating EBITDA, which is defined in the press release issued earlier today. Please note all financial information is provided in US dollars unless otherwise indicated.

Thanks everyone and now here's Ben.

Ben Kovler

Good afternoon and thank you for joining us. GTI's strong results to kick off the year reflect the continued execution of our strategy to distribute brands at scale. This included expanded distribution of our brand portfolio, robust comp store sales driven by accelerated foot traffic in our retail stores and the closing of several acquisitions that broadened the depth and reach of our national infrastructure.

Our focus is on limited license distribution and exceptional brands with moats around their business. We're having lots of conversations and we say no a lot. We are disciplined capital allocators creating long-term value. GTI is looking to be the best not the biggest. It's about shareholder value not size. And this quarter you are seeing that show up with improved margins, EBITDA close to breakeven, and execution on announced M&A.

To summarize the headlines, year-over-year revenue grew 155% to $28 million with revenue coming from 9 of our 12 markets. We are seeing tremendous organic revenue growth across our business. The other metric on the income statement we believe is most meaningful is adjusted operating EBITDA, which is approaching breakeven and demonstrating positive momentum.

Anthony is going to walk you through more details around the fixed cost leverage in the business in a moment. This momentum enabled us to close $105 million of debt financing last week and puts us in a very strong position to continue to execute with speed, diligence and focus. Our industry is rapidly evolving on many fronts, and therefore, it's crucial to have the capital to move quickly and decisively. That's why our recently closed debt financing was a huge win.

GTI continues to be first mover this time in the capital markets with a debt offering that drives down our cost to finance the business. This capital puts us in a solid position to execute on our business plan, while minimizing dilution for our shareholders, an all-around win. All of this gives us confidence in the foundation and economics of our business as we move into the scale chapter of our "Enter, Open, Scale" strategy.

Regarding our recent M&A activity, we had two successful closings in the first quarter, AGL in Connecticut on February 12th; and For Success Holdings, the owner of the Beboe brand on February 21st and both contributed to our consolidated results for the quarter. Subsequent to the quarter, we acquired and closed on a fifth retail store in Illinois, located in Central Illinois near Peoria. This acquisition maxes out our five retail store cap in Illinois and positions us extremely well across our home state.

We're also on track to close on our previously announced acquisition of Integral Associates, Nevada’s top operator with award-winning products and fantastic stores based in Las Vegas. Firmly in line with our strategy to distribute brands at scale, Integral Associates will allow us to significantly expand our presence in the Western United States by bolstering our wholesale capacity and deepening our branding and retail reach in two of the most vibrant tourism markets in the world, Las Vegas and Los Angeles.

Overall, we're very pleased with the high-quality assets and invaluable talent that we will gain from AGL, Beboe, Salvio [ph] and Integral Associates. On a combined basis, these transactions had 14 retail licenses to GTI, bringing our total retail licenses to 88, and adds three new markets: Connecticut, California and Colorado, bringing our total market research to 12 states. More important is the long-term value that will be created from our solid and expanding platform.

Moving to our consumer products business, our core brands Rythm, Dogwalkers, The Feel Collection and Beboe, are experiencing great quarter-over-quarter growth, driven by new distribution across the country. Rythm has new distribution in Florida and Nevada; Dogwalkers has begun selling in Nevada and Massachusetts; and The Feel Collection is gaining great traction in Florida.

We've expanded the Beboe brand with the launch of Beboe Therapies, a premium CBD-infused skincare line, which began selling online and in select high-end retailers including Barneys New York and Neiman Marcus. We believe the mainstream visibility will reinforce the core TCH product line as we launch it across the country. We continue to invest in our core brands and believe that our branding will be further elevated as we explore new distribution channels in both existing and new markets. Of course, we need a strong infrastructure to take advantage of the opportunities ahead of us. Right now we have several standardization and automation initiatives underway at our facilities across the country.

The goal is to significantly enhance manufacturing and processing efficiencies as we scale, while delivering quality controls that ensure our brands deliver consistent product experiences for our consumers. Brand promise is built on making certain that a customer in Florida can count on the same high-quality rhythm pen as one would in Nevada, Ohio or any other state in which we operate in. These projects are a high priority for us, and while they take time to complete are progressing nicely as planned.

Capacity expansion projects continued across Pennsylvania, Illinois, Maryland, Florida, Massachusetts and Nevada at a healthy pace during the quarter. Our goal is to stay ahead of the demand curve, which is being driven by regulatory catalyst, such as simplified access to medical cannabis in Illinois and the expansion of flour in Pennsylvania and Florida. So we're investing not only for today's demand, but also to meet future expectations.

To set the table on what we mean, in Illinois new patient adoption is happening at a faster clip than ever and an adult use bill that is on the horizon will further accelerate the pace. In Massachusetts, March revenue for the state was $30 million for the month, which is roughly $1 million a day with less than 15 adult new stores opened, serving adult news market of seven million people.

Pennsylvania has well exceeded 100,000 registered patients in its first year and continues to grow month-over-month. In fact it is our fastest-growing market. Our PA business has its one-year anniversary tomorrow and we're excited to celebrate the big wins.

On top of this incredible organic growth, at the same time we're working to operationalize new facilities in New Jersey and Ohio, which we expect will be completed in the fourth quarter to begin generating revenue in early 2020.

The momentum continues in our Rise retail business. Sales continue to grow at a healthy clip with strong first quarter same-store sales growth well over 30% on a comp store base of eight stores versus a year ago. The ongoing theme of our retail business is growth. Growth happening in our current stores, such as Rise Amherst converting to adult new sales in May, accelerated new store openings such as three-floor stores this quarter and growth through M&A such as the Illinois store I mentioned.

A big component of revenue growth comes from new stores and we're pleased to be making progress on our new store roll out. In January, we opened our first store in Florida in Deerfield Beach in the Miami area, the first of up to 35 we are licensed to open in the state.

Subsequent to the quarter, we opened our second Florida location in Pinellas Park in the densely populated Tampa St. Pete corridor. We have several more openings in the next few weeks and are excited about the opportunity in Florida as these stores ramp up revenues, especially with flower now being legal in the state. They’re opening in Bonita Springs tomorrow and Hallandale soon after. We are hearing tremendous feedback on our brand portfolio and strong word-of-mouth referral continue to drive new store traffic.

In Florida, you can only sell products you make, so the strong momentum we are seeing in our 40 stores is a true testament for a differentiated product quality. Subsequent to the quarter, GTI also become the first company to open retail stores in Toledo and Lorain, Ohio. These are the first of the five stores that we plan to open in the state. Toledo is the fourth largest city in the state with a population of almost 300,000 people. Future stores include a Rise store in Cleveland and two in Lakewood giving us a nice presence in three of the state's top 10 populated cities.

In total, we've opened four stores year-to-date and have made significant progress on the pipeline heading into the second half of the year. We are on track to open 15 to 20 more stores, which would mean 19 to 24 new stores for the year and slightly ahead of our initial plan.

Now, I'd like to touch on a few exciting developments on the corporate side of our business. In April, we further strengthened our corporate governance with the addition of the independent director William Gruver as chair of the Audit Committee. A decorated veteran Bill brings invaluable financial expertise to GTI with his over 20 years of experience at Goldman Sachs where he served as the Chief Administrative Officer for the firm's Equities Division.

I'm also very proud to highlight a few of our Inspire Impact events, which are a series of community events held across our markets throughout the year. Recently our team supported the Special Olympics in Chicago, built houses in Habitat for Humanity in Pennsylvania and worked together for a beach cleanup in Florida. This is just a sampling of the great things happening every day that inspire our over 800 team members.

Another important pillar of community involvement is the work we do in communities that have been heavily affected by the war on drugs. This Saturday in our own backyard of Chicago, GTI attorneys will be participating at the Second Chance Expungement Summit presented by the Honorable Brown, Clerk of the Circuit Court of Cook County. The summit in Chicago's intercity provides participants an opportunity to receive free legal consultation regarding criminal records relief and petitions for expungement. A job information seminar will also be available to anyone who attends. This is a solid program that will provide many people access to free legal help and we're greatly be working with Cook County to Inspire Impact.

With that, I'll turn the call over to Anthony to review our financial results for the first quarter.

Anthony Georgiadis

Thanks Ben. I will start-off by reviewing the financial highlights of the quarter, then address our recent debt financing, and current liquidity position. Please note that all numbers explained in U.S. dollars unless otherwise noted.

The company generated $28 million in first quarter revenue, representing a 34% quarter-over-quarter increase and 155% increase over 2018. Revenue was generated from nine of our 12 license markets including new revenue streams from the company's wholesale operations in Nevada and Connecticut as well as the opening of our 30th Rise retail store in Florida.

Strong sales were driven by both our wholesale and retail businesses which contributed 42% and 58% to net revenue respectively. While contributions will vary from quarter-to-quarter, the spilt in Q1 was impacted by wholesale revenue growth in Illinois, Maryland, Pennsylvania, and Massachusetts as well as the mid-February closing of the company's AGL acquisition.

Turning to Rise, our retail business, we continue to experience strong unit economics across our entire store base, especially noteworthy with Illinois, where patients begun receiving simplified access to medical cannabis under Governor Pritzker’s administration.

Before biological adjustments, the company generated $13.1 million of gross profit and 46.9% of gross margin. This compares favorably with the 46.5% of gross margin generated in Q4 and a 43.1% we generated a year ago. We anticipate healthy gross margin throughout the remainder of the year, particularly as we expect the wholesale capacity expansions currently underway.

Total operating expenses were $26.6 million and included $2.4 million in transaction-related expenses and $6.5 million in non-cash stock-based comp. Excluding these, normalized operating expenses totaled $17.7 million. This represents a nominal increase to the $16.9 million of normalized expense incurred in Q4. That $7 million of topline growth was less than $1 million of incremental operating expense. But we are still building out our administrative infrastructure and anticipate gross operating expenses to continue to grow. This type of operating leverage is important to our continued success.

Below the SG&A line, other non-operating income totaled $5.3 million, primarily reflecting the net increase in asset value of our strategic investment portfolio. As a reminder, this portfolio consists of investments that supplement and/or reinforce our core consumer products and retail business. Including other income as well as adjustments for non-controlling interest, the company posted a net loss of $9.7 million and a EBITDA loss of $4 million.

On an adjusted basis after backing out non-controlling interest, stock-based comp, and transaction costs, the company generated $4.9 million of EBITDA as we continue to report out one core metric that you'll consistently hear about as adjusted operating EBITDA.

Given the stock-based nature of our compensation structure along with our sizable strategic investment portfolio, we feel this metric provides the best visibility into the company's operating performance.

During the quarter, our adjusted operating EBITDA was approximately negative $400,000 and we continue to be encouraged by the progress we're seeing in this figure. Separately of note, on January 1st, the company adopted a new standard under IFRS 16 which required us to capitalized long-term operating leases and amortizing over time.

Moving on to financing activities, last week we strengthened our balance sheet by completing a $105 million non-brokered private placement of debt financing. The $105 million carries a 12% cash coupon as well as $1.8 million warrants that strike at just under CAD20.

We self-conducted the rates and as a result did not incur transaction fees. Essentially, the gross amount that we raised equal the net amount that hit our bank account. Just the kind of math we like for our shareholders.

The proceeds will be used for general working capital purposes, strategic growth initiatives, as well as to retire the company's existing debt. The notes mature in May 2022 and allow the company to extend them for an additional 12 months. Last, the terms of the financing also allows us to raise an additional $45 million over the next six months at the same terms as we above describe financing.

Turning to liquidity and balance sheet, we ended the quarter with approximately $170 million in cash and just under $7 million in debt. Including our latest debt financing, the company has over $200 million of cash and $105 million in debt. This cash combined with the management team that embraces fiscal discipline along with an operating business starting to turn to EBITDA positive provides a set up for the one plus one equals three that we strive for each day.

On our last call, we talked about a flow and the fact that we have approximately 80 million shares freely trading. This represents approximately $1 billion of flow something that differentiates GTI. We continue to believe that liquidity breeds confidence.

On a final note, we're continuing to hear the same buzzwords from us throughout the remainder of the year. We've already had a tremendous amount of work to do across many markets. Our simple strategy of inter-open scale continues to act as a North Star. We've been consistent in our approach and our excessive focus on limited license markets and we have no intention on deviating from our strategic plan.

We thank our team and our shareholders for their trust and confidence and we'll continue to do everything we can to create value for all of our stakeholders.

With that, I'll turn the call back to Ben.

Ben Kovler

Thank you, Anthony. We're off to a great start in 2019 but remain laser focused on execution for the balance of the year. We spent much of 2018 focused on entering and operationalizing in new markets. Now we are gradually scaling our business vertically and horizontally to optimize our strategy to distribute our brands at scale.

For our consumer products business that means investing in capacity expansion, operational efficiencies, our products and branding. For our retail business that means a methodical rollout of Rise retail stores across the nation in the best locations and continuing to invest in the retail experience.

And most importantly, we will continue to invest in our biggest asset, the engine that drives all of this forward our people. While we are still in the early innings of developing GTI's potential, we will continue to proceed with discipline and precision to build a capital efficient business for the long-term.

With that, I'll turn the call over to the operator for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Your first question comes from Robert Fagan with GMP Securities. Your line is open.

Robert Fagan

Hey, guys thanks for taking my questions, and congrats on the nice quarterly results.

Ben Kovler

Hey, Robert thanks.

Robert Fagan

For sure. So first question I had is, it's great for the update on the timeline for closing Essence, and I remember when you guys announced that it was generating somewhere in the area of $70 million of revenue and having some very nice EBITDA margin. I'm wondering if you can give us any update on the metrics that Essence is achieving recently. And in that sense, can you give us an updated look on your pro forma revenues now?

Ben Kovler

Yeah, sure. Thanks, Robert. What I can tell you is we're really excited about this deal, we're on track to close on the same timing we've been guiding the whole time, which would be in the second quarter of this year. I can update you that we have received state approval and HSR has been cleared. So we've begun the integration and we're excited to close the deal here.

Following closing, I can give you a lot more color on what's going on inside the businesses and some of your question on margin and other trends. I think at a high level stepping back deals in the cannabis industry are really hard, and I think talking only pro forma revenue, does not give a great picture on the current business. If you only talk pro forma revenue, you're not talking pro forma cap table, pro forma balance sheet and pro forma shares outstanding; I think it's a little bit of an unfair picture.

That said, I’m confident of giving where the deal is and how we’re heading into closing that our first quarter pro forma revenue would have been between $45 million and $50 million and we're excited about that business.

Robert Fagan

Excellent. Thanks for that color, Benefit. Next question is --we got to ask about that because it's so topical, but with the Illinois Recreational Legislation passing through the Senate, what's your view of the likelihood of it getting done in time for this legislative session? Is there a significantly higher hurdle to get through the house than the Senate? And in the case that it doesn't make it through by Friday, is there a chance in November to pass something as well?

Ben Kovler

Yeah, very timely questions. There is unbelievably strong momentum in Illinois to pass the governors tax and regulate bill. As you mentioned it passed the Senate yesterday with bipartisan support. This afternoon it's in the committee in the house and from everything I understand, we expect to vote tomorrow before Friday, really kudos to Kelly Cassidy and Heather Steans for putting this together.

I think it's an unbelievable opportunity for Illinois to again lead the cannabis nation really as Illinois lead with medical cannabis. I think Illinois is in a leadership position for tax and regulate across the country here.

It's unbelievably bullish for our business. We're in a poll position as the adult use program unrolls and just so everybody understands the rules, the way it's currently written, each store operator and we operate in five stores gets an additional license in order to satisfy that demand coming.

So we're bullish on that. It's harder for me to look into the crystal ball and make a prediction, but we think it's going to be a big 24 hours in Illinois. And in the off chance it does not pass the answer to your question in the fall what’s known as veto session there could certainly be more discussion.

Robert Fagan

Great. We like the confidence on your side there. The next thing I wanted to ask about, I know it's early days for your rack store opening in Massachusetts and it’s been about I guess two weeks or a little bit somewhat in that area. Is there a way you can give us a progress update, what kind of growth you're seeing there? And is that ahead of your expectations or in line or below?

Ben Kovler

Things are going great. I would say it's in line with our expectations, the business has more than doubled -- dramatically more than doubled. And we're excited to be in that community. As you know, Amherst is a highly dense college town and everybody's away for the summer. So we're excited for everything coming and we expect significant growth.

Robert Fagan

Great. Thanks. Thanks again. Last one, if I could sneak it in. Any M&A interesting areas for your $100 million debt raise maybe just either on a state basis or deeper in your current platform?

Ben Kovler

There's lots of exciting things out there. Like I mentioned, we're having lots of conversations. It's a competition for dollars, and how we allocate those dollars, looking at what generates the best returns for shareholders. We look through GTI lens, and you've seen prices in the private sector changed quite a bit over the last year, as we've been doing deals. But it's incredibly exciting. The market is very fragmented. There is lots of opportunities. And at the moment, we're really focused on integration, on closing these deals, and continued conversations.

Robert Fagan

Great. Thanks so much and congrats again guys.

Ben Kovler

Thank you.

Operator

Your next question comes from Graeme Kreindler with Eight Capital. Your line is open.

Graeme Kreindler

Hi. Good evening, guys. And thanks for taking my questions here. The first one, I just wanted to follow-up and get a little bit more color with respect to the Illinois market, specifically on the wholesale operation building out an anticipation of wreck. Can you give a bit more detail in terms of what's being done at the facility level, the type of expansion and when certain expansions will come online?

Ben Kovler

Sure. So, obviously, we're working with Anthony here – and thanks for the question. We're working hard to kind of prepare our facility for what's coming. We actually have two licenses, two cultivation processing licenses in Illinois. We have a substantial expansion taking place at one of them currently. We're not really providing any specific details, due to competitive reasons. But I can tell you that, we're running all the math on our end, to make sure that we have enough capacity to satisfy demand and working hard to hit – whatever day – gets –gets passed, hopefully in the next 24 hours.

Graeme Kreindler

Okay. Understood. Thanks. The other thing, I wanted to touch on was – with respect to the 15 to 20 stores and now that's incremental to what's been opened to-date. Have the priorities for the states that you're going to be focusing on and I think the last conference call discussed Ohio, Pennsylvania and Florida being priorities has that remain the same? Has that changed at all considering the progress to date?

Ben Kovler

Yeah. I would say it remains the same. We continue to focus on exactly those states. Obviously, with the Essence deal closing, we're looking at some of those new licenses in which there is a eight in Nevada, and one in Los Angeles which we're very active on. And in the – we just mention about, if the Illinois bill passes, there's a potential for five new adult new stores in Illinois. But at the moment, we're pretty head down. Florida, Ohio, Pennsylvania are right in the pipeline. We've got rapid new store openings going on, early this quarter, next quarter and the quarter after that.

Graeme Kreindler

Okay. Great. I appreciate that color. And the last one for me here. Just wanted to get the company's thoughts on acquisition of brand companies specifically, I mean, you outlined the brand portfolio earlier in the call. And you made the acquisition of Beboe to-date. Is that something, where you continue to actively look? Or you – will you want to continue to develop the existing portfolio to-date before looking any further?

Ben Kovler

Yeah. I'd say candidly, it's both. We will look at anything and do what makes the most sense for us, but it's got to be incremental to the business. We're building a portfolio of focused brands. So we're targeting high-growth products in consumer segments. And we're really in touch with the best operators around the country. We think we're following the data as closely as anybody both out of our stores and in third-party data metrics. And we're looking for superstars out there. At the same time, investing our portfolio, we think builds those focused brands for differentiated consumers and use cases. So it's an exciting time to be out there, but there's a lot of change in the space. And so we're pretty cautious.

Graeme Kreindler

Okay. Appreciate that. Thank you very much.

Ben Kovler

Sure.

Operator

Your next question comes from Matthew Pallotta with Echelon Wealth Partners. Your line is open.

Matthew Pallotta

Hi, guys. Thanks for taking my call. I was wondering, if you could provide some data on how many – on the wholesale side of the business? How many doors you guys are in nationally right now with your products?

Ben Kovler

Yeah. That's a good question. I don't have the exact number off the top of my head, but it's in the hundreds and we can continue to update that as we go.

Matthew Pallotta

Okay. And then with respect to California, can you speak to the plans with expansion there? I know, obviously after the Essence transaction closed you guys have the license for the consumption lounge in West Hollywood. But any other plans – what's rolling out the franchise? Obviously, Beboe is there, but with the other brands as well, can you speak to the expansion plans in that state?

Anthony Georgiadis

Yeah. This is Anthony here. I think what you'll see is a crawl walk around approach. I think it would be very strategic. The first of which – the first move will be opening the West Hollywood flagship store, and then looking at other kind of retail opportunities in that going forward. So I think what you’ll see is we kind of lag into that market a bit. It's not a market that we really have a lot of history with and so, what we’ll do is we’ll study it and make sure that we make the best decisions before we start to really allocate tremendous amount of capital there.

Matthew Pallotta

All right, that’s it for me. Thanks a lot guys.

Operator

Your next question comes from Brett Hundley with Seaport Global. Your line is open.

Brett Hundley

Hey, thank you. Good afternoon guys and congrats on the results and the debt funding. Maybe related to that and I'll follow-on to the M&A question before, Ben can you just discuss size of deals? It's our understanding that maybe a number of smaller players out there are looking for quality and so far as strategic tie-ups, do you feel like the opportunity on the deal set is getting any smaller? How would you describe it?

Ben Kovler

Thanks for the question. No I'm not exactly sure what you're referring to, but the opportunity set is only growing. Certainly there's transformation in the further deals available and we think there's new entrants to the space. And we actually think the quality of operators entering the space and getting into the business is increasing. Doing deals is all about the people you partner with. It's not about history or establishment in the space for things to be on autopilot.

So on any kind of deal you do it has to be about the people and like I said we're really pleased with the quality of people that are in the space which I think is an improvement over where we were 12 months ago or 36 months ago.

Brett Hundley

Yes. Just to clarify I wasn't talking about quantity of deals. But maybe the size of the deals themselves whether you're looking at smaller acquisitions or larger ones?

Ben Kovler

All of the above, you've seen us do small deals like we mentioned retail deal and big deals like the Essence deal. And if you step back and you look at the space, so $50 billion to $80 billion eventually legalize cannabis sales in the U.S. only, currently regulated size of call it $18 billion. It's only one or two companies that have 1%, 2%, 3% of that market. I mean there's 97% of the market that's totally fragmented. And I think using a very filtered lens to build out the right time of acquisitions for shareholder value over time is the right way.

So we're seeing big, we're seeing small. We're having conversations, we think it gets very interesting. The M&A team is very busy. We are just being very disciplined on how we do it.

Brett Hundley

Okay. And can we go to Pennsylvania summarize and just talk about the growth that you’re seeing there? Can you color that a little bit more for me? And kind of contextualize that for me against maybe some other markets? And then separately just on the wholesale side are you largely feeding your own retail network at this point or how does that break down across third-parties?

Ben Kovler

So the Pennsylvania market which is what some context around it. Some 12.5 million people really under 13 about the same population size as Illinois. We are a little over a year since the program started and you have over 100,000 patients. Illinois has 65,000 patients 4.5 years in. So that kind of growth is dramatic. It's almost double the size of Illinois in a 1/4 amount of time.

So that's really showing up in our stores use economics. We are rapidly expanding our facility in Annville. Actually we’re out there tomorrow with the team we're really excited about it. But as we complete the capacity expansion to fully build out the facility, we'll able to hit the targeted 30% to 40% of the product being ours in the stores. And currently right now we have four open stores, a couple of opening this quarter and that was for the pipeline for the 12 wins, we had in December.

Brett Hundley

And then Anthony just lastly for me, how would you guide us on the OpEx line for 2019? I appreciate you touching on the leverage in Q1 here. But as we look at our models and try and think about that line growing next to what we have for revenue growth, anything you can put in place for us there?

Anthony Georgiadis

Yes that's tough to answer. I'll tell you that you know we anticipate that number to continue to grow. The goal is to grow it at much lower clip than the topline does. I'll tell you that we still have to build out our administrative team here to support kind of the growth that we’re seeing, you know particularly as we kind of guide and integrate the individual transactions, but we're not providing specific guidance as far as kind of numbers. But I would anticipate the gross number to continue to increase and hopefully we can continue to see the same operating leverage that we did in the first quarter and see that translate through the P&L over the balance of the year.

Brett Hundley

Okay. Thanks guys.

Operator

The next question comes from Mike Hickey with Benchmark. Your line is open.

Mike Hickey

Hey Ben, Anthony, Jennifer congrats on the quarter guys. Thanks for taking my question, just three maybe here. I guess Ben you said in the beginning in your prepared remarks...

Ben Kovler

Sorry Mike do you mind of speaking up? I'm having a really hard time hearing you.

Mike Hickey

Yes. Hold on. Is that better?

Ben Kovler

Yes. Thank you.

Mike Hickey

Okay, good. So in your prepared remarks Ben you mentioned that you do sort of want to be the biggest, I think you wanted to be the best operator that sort of way, what I took away from the comments. So I was sort of curious, not that it’s necessarily tied your view on the Canopy Acreage deal? And if you were approached by Canopy, I guess sort of how you think about linking up with the community up here otherwise versus sort of continue to grind away independent -- [indiscernible] 36:04 your success?

Ben Kovler

Yes, sure. Thanks, Mike. I think fundamentally the Canopy Acreage deal points out, you know, how U.S. assets and U.S. operators fundamentally across the border undervalued. The value arbitrage of the way the Canadian businesses are trading versus the U.S. compared to the opportunity is staggering. It’s been in our debts since we went public. We continue to believe it to be true. In terms of per GTI, we're looking at everything through the shareholder lens and what creates the most amount of value. We think we're in the early innings here and we have tremendous upside as we execute on our current portfolio. And that's really all we're about.

So we're looking at lots of deals, having lots of conversations asking literally the same question every time, how can we create the most amount of value per GTI? We talked about the one plus one equals three. We have lots of other ways in which we can use that lens. But there must really be industrial logic. We must be able to grow faster together. It must make our job and our mission faster, better, leaner, more efficient for us to think about saying yes to things. So I do think the deal is incredibly interesting. I'm not sure if there will be more the same honestly but I think it points out how undervalued U.S. assets are versus the opportunity. And I think we will continue to see that as these markets grow.

Mike Hickey

Okay. Thanks for that. The next question I guess on Beboe. Is that at the end of June that you are closed curious contribution in the quarter and how immigration has been Ben? And then on the Beboe therapies, sort of, wondering if we get some more color on how you think about the marketing retail strategy for that product category what you see in terms of consumer demand and if you think that there obviously in international opportunity.

Ben Kovler

Yes, sure. Just to your last one there is definitely international opportunity. We've received a lot of inbound calls both from other U.S. retail and also international Europe Australia et cetera. I'd say overall Beboe is performing consistently with expectations. We think it's a great brand with mainstream visibility. Like we said the day we did the deal we think this is a product and a brand for tomorrow's cannabis consumer and we were investing this in order to execute and bring this product across the U.S. -- across our portfolio.

Mike Hickey

Okay. Last question from me, this one might be at the deep end here because I know it's still early innings you guys are focused on limited licensed markets you touched on California it sounds like you're going to be cautious there. But as you sort of think about building a national retail brand would it make sense at the time sort of -- operate a flagship store or roll out strategy more competitive cannabis markets like Colorado and other states?

Ben Kovler

Yes, we agree. We think the law change in Colorado changes the game a little bit. We think retail locations where consumers are going to experience cannabis makes a lot of sense. And we're looking at lots of different markets. But we have to understand the competitive edge. We have to understand the dynamics in the markets the regulatory landscape and various other details. And all markets are in play. For us where we have -- the retails acquisitions in markets where we are positioned wholesale products are incredibly accretive to shareholders. It's an easy win and we're really focused on that. That said acquiring retail properties across the country from owners that we can develop a good relationship makes a lot of sense and we're very active on that.

Mike Hickey

All right, guys. Best of luck. Thank you.

Ben Kovler

Thank you.

Operator

Your next question comes from Jim Young with West Family Investments. Your line is open.

Jim Young

Yeah. Hi, Ben can you just give us a sense of what are you describe the like how forecast the cannabis legislation, then we think it’s would be half by tomorrow? And then secondly, are there any other notable regulatory flash regulatory flash legislation issues in other states that are important for your -- in your markets? And lastly, anything happening at all at the federal level which would be you worry about? Thank you.

Ben Kovler

Sure. Thanks, Jim. The only in reverse order, the federal level the two biggest federal pieces of legislation being talked about is the SAFEs Act which is a banking act, and the STATES Act which is recognized, States rights to open up capital markets.

Both are very active. Our crystal ball is no better than anybody else. So we think the SAFEs Act passes first and the STATES Act after that. We're not planning for the STATES Act to happen this year. But we're watching and following these very closely and active internal dialogues there.

In terms of other states, there's a wave going across the country right now. And I believe Illinois will be a leader in how to do this from a taxing regulate, legalize adult use of cannabis right?

It generates massive tax revenue, it provides huge amount of jobs. And I think you'll see Illinois be the leader. But there are active conversations literally in Pennsylvania, New Jersey, New York, Connecticut, Maryland several others of our markets.

And finally, I guess on the Illinois piece I mean what percentage would that put on it? Yeah. There is massive momentum going. Governors made this one of his top priorities. It is a very large social equity component of this bill, which we are really excited about.

I think it's the first of its kind in the country. The passive bipartisan support in the Senate I think rise right now in the House committee. And I think you'll see a call for a vote tomorrow. It's tough to say anything better than 50-50, when you're in Illinois. But we are really excited about what's going on.

Jim Young

Okay. Thank you.

Ben Kovler

Sure.

Operator

[Operator Instructions] Your next question comes from Scott Fortune with Roth Capital Partners. Your line is open.

Scott Fortune

Hi. Congratulations on a good quarter and executing on the full year.

Ben Kovler

Thanks, Scott.

Scott Fortune

Real quick a little bit, can you provide a little more color on the Florida market and kind of the stores opened? I know you have two do you have real estate kind of located in opportunities already going forward and kind of talk to us about, how Florida kind of holds up for the year? And then the production side on that side for Florida for your wholesale?

Ben Kovler

Yeah. Florida market continues to be incredibly strong. We had two stores open today. I think we've said we have five to 10, by year-end. We've got more than 10 leases signed in the prime retail real estate locations and we're excited about that. The product is doing really well. Patient feedback is strong. We're seeing loyalty from consumers as our product is really differentiated on the market there.

So tomorrow we opened in Bonita Springs outside Naples. In June, we'll open in Hallandale; it should be a great location in the Miami area. And we've got another handful of stores coming this year.

Scott Fortune

Great. Can you provide any guidance on CapEx to open these stores in Florida in general?

Ben Kovler

Sure. What me said is about between $200 and $300 of foot of CapEx built in, so call it $250 on 3000 feet, so about $750,000 to $1 million on CapEx plus operational startup cost to get the store open. And they ran pretty quickly. So they're not a cash burn for very long.

Scott Fortune

Perfect, okay. And then one last follow-up on the Beboe brand, how many doors -- retail doors are you in of your own Rise stores? And then how do you see it kind of rolling out onto the Rise stores or potential new retail doors going forward here?

Ben Kovler

Yeah. Like we said, I think recently it's in 125 dispensaries in both California and Colorado. We have not launched a product outside of those regional states, but we will see some markets particularly in Nevada and Massachusetts with adult use. Both at Rise stores, but the firm and core to our strategy is getting into the right retail stores to find the right consumers and they may or may not be our stores. And that's part of what's core to us in brand distribution and that's what distributing brand at scale means and we're excited to do that.

Scott Fortune

And then lastly, do you -- on the CBD initiative, do you see that going into different distribution and retail stores outside of your own here?

Ben Kovler

Yes for sure. The Beboe Therapies in Barneys and Neiman we've received inquiries from others, and I think we'll see some of our other brands show up in the CBD category as we go. We want to be in the channels where we really have a competitive and differentiated strategy where we can maintain a moat around that business.

Scott Fortune

Okay, great. Thanks. Congrats again.

Ben Kovler

Thanks, Scott.

Operator

There are no further questions. I turn the call back to Ben Kovler for any closing remarks.

Ben Kovler

All right. Well, thank all for tuning in today. We look forward to updating you on our second quarter results in August. Have a great summer.

Operator

This concludes today’s conference call. You may now disconnect.