22nd Century Group, Inc

Welcome to 22nd Century Group first quarter 2023 conference call and webcast. At this time, all participants have been placed in the listen-only mode. The floor will be open for questions following management's prepared remarks. For our covering research analysts on the call, if you would like to ask a question at that time, simply press a star 1 on your touchstone tone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. We ask that you please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the call over to Matt Krebs, Investor Relations for 22nd Century. Please begin.

Thanks, Brian. And good morning and welcome to 22nd Century's first quarter earnings conference call. Joining me today are Jim Misch, CEO, Hugh Kinsman, CFO, and John Miller, President of our tobacco business. Earlier today, we issued a press release announcing our results for the first quarter of 2023. The release, presentation, and 10Q are available in the investor section of our website at xxiicentury.com. We'll start today's call with prepared remarks from Jim, John, and Hugh before moving into a Q&A session with our analysts. Given the limited time for today's call and Q&A, we will again focus on commercial advancements driving revenue in our VLN tobacco and GBB hemp cannabis business units. If you have questions about our business not addressed on this call, you are welcome to email Investor Relations using my contact information provided in today's press release. On slide two, a few reminders for today's call. Some of the statements made today are forward-looking. Forward-looking statements are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in our annual, quarterly, and other reports filed with the SEC. Also during today's call, we may discuss non-GAAP financial measures, including adjusted EBITDA, which we define as earnings for interest, taxes, depreciation, and amortization as adjusted for certain non-cash and non-operating expenses. For more details on these measures, please refer to our press release issued earlier today. And with that, I'll turn the call over to Jim, beginning from slide three.

Thanks, Matt, and good morning, everyone. We continue to execute our operational plan to grow the tobacco and hemp cannabis business and transform to cash positive in 2024. We recognize that there are many key questions from our shareholders that we will answer today. These include clear guidance on revenues and how and when we get there, VLN distribution, and more important, store count and commercial sales, and hemp cannabis ingredient and distribution ramp up. We also get a lot of questions about cost cutting. I can assure you that this is a constant part of our discipline to focus dollars only where it leads to our goal of operating profit. Just this quarter, for example, my staff has been reduced by 30%. And we have ongoing cost programs across the business. Now, this said, we will not cost cut our way to success. We are a growth company. We're off to a great start this year on revenue in Q1. And once the business interruption insurance for Q1 is received, here in Q2, it will result in a succeeding plan on revenue, gross profit, and operating results for the first quarter. I'm proud of this team and our continued execution of our plan that will drive growth, margin improvement, and operating performance. Recall that we have been consistent that Q2 would be when we gain real traction on commercial sales of VLN based on the flag planning process and timing of our retailers. It's important to understand that the VLN rollout follows a detailed process, but it is happening at twice the speed of a typical tobacco product rollout. John will detail our aggressive commercial rollout of our FDA authorized VLN reduced nicotine cigarettes. This includes a highly anticipated launch covering thousands of stores across California, Texas, and Florida with a number one USC store chain supported by national scale distribution providers. Additional new retail chains are already scheduling product launches planned for 2023 to ensure their position with us. our hemp cannabis business we're focused on growth initiatives to capitalize on our dominant market position and cannabinoid ingredients in our new sales and distribution services we again reported record cannabinoid ingredient volumes and recently signed two transformational cdmo plus d license agreements with industry leaders cookies and old pow combined these agree agreements are worth at least 140 million dollars in sales over their three-year term with very attractive margins and additional deals are well into the pipeline. We're also restoring our capacity lost in the Grass Valley fire, and while business interruption insurance will cover our margin impact in Q1 and Q2, we will see significant margin expansion in the second half of 2023 due to this restored capacity. Combining these facts, our confidence in our growth outlook has us introducing our first revenue guidance, calling for full-year 2023 revenue of $105 million to $110 million. This represents a 69% to 77% increase from the $62 million in 2022. Achieving that goal, plus execution on several cost-cutting and margin improvement initiatives already in progress, provides us a clear pathway to achieve cash-positive operations from both businesses in 2024. Slide 4 provides a snapshot of this path. In tobacco products, we've secured major national scale distribution agreements with the number one and number two distributors that expedite putting VLN into hundreds or even thousands of stores at a time across multiple states. This enables the launch we are working on now with thousands of C-stores in the three largest state markets, and for us to expand our relationship with the number two C-store, and also opens up a massive funnel of more than 100 retail chains interested in VLN. Q2 is where the commercial sales and store count will take traction. And recall that we just need to hit an annualized run rate of 1.2 million BLN cartons of sales to generate positive cash flow in our tobacco business unit. In hemp cannabis, we continue to deliver record ingredient volumes as the dominant leader. We're driving increased demand for our CDMO services and have now secured the first two exclusive, fully verticalized sales and distribution agreements with major brands. Combining with several cost cutting and margin improvement programs, we're tracking to our goal of cash positive in the first half of 2024 in this business. So I say with continued confidence and stay confident that we will deliver on the company's full potential and cash positive operations. With that, let me turn over to John to discuss our tobacco business activities in much more detail.