Ascend Wellness Holdings, Inc.

Good evening and thank you for standing by. Welcome to AWH's fourth quarter and full year 2021 investor call. I'd now like to hand over the conference to your first speaker today, Rebecca Kaur, VP of Investor Relations. Please go ahead.

Thank you. Good evening and welcome to AWH's fourth quarter and full year 2021 investor call. The presentation that accompanies this call can be found on our website. www.awholdings.com slash investors. I'd encourage you to go to the website and download the slides if you're having any trouble. Before we proceed, I would like to remind you that there are several risk factors and other cautionary statements contained in our SEC and CDAR filings, including our registration statement on Form S-1 and our 10-K, which we expect to file within the next week. We will not review those risk factors and other cautionary statements on this call. However, we encourage you to read them carefully. Various remarks that we make on this call concerning expectations, predictions, plans, and prospects constitute forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward-looking statements reflect management's current view only, and we undertake no obligation to revise or update such statements or make additional forward-looking statements in the future. During today's call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials in the appendix. These non-GAAP measures, as defined by AWH, may not be comparable to measures with similar titles used by other companies. On today's call, we have Abner Curtin, Chairman, Founder, and CEO, Frank Perullo, president and co-founder, and Daniel Neville, our CFO. With that, let's turn the call over to Abner.

Thanks, Rebecca. Good evening, everyone, and welcome to our Q4 and full year 21 earnings call. I appreciate the continued support from all of our stakeholders as we fulfill our mission of bettering one's life with cannabis. Some of you have been with us from the beginning when we acquired our first cultivation license and facility in Barry, Illinois. We've come a long way in just over three years, And in 2021 was an exceptional year where we more than doubled revenue and delivered strong EVTA margins. I am proud of the team for everything we accomplished in 2021. It was a sensational year for Ascend, marked by several significant milestones. Earlier in the year, we completed our initial public offering, making AWH the first US MSO to go public by filing an S-1 with the SEC rather than by a SPAC or RTO. We commenced trading on the CSE and OTC on May 4th. During the year, we released all lockup restrictions on the stock. 100% of the stock is now freely trading. We added 100,000 feet of canopy across our portfolio, more than doubling our cultivation capacity. We opened six new stores and completed the acquisitions of two new additional dispensers, bringing our total store count to 20. We entered the promising Ohio market through three separate acquisitions this year. We launched a delivery program in Massachusetts and Michigan and are excited to eventually bring delivery to all of our states in the future. We strengthened our balance sheet, raising $210 million of senior debt financing and ended the year with over $155 million of cash and equivalents with no maturities in the near term. This represents one of the strongest balance sheets in the industry. 21 was a year marked by tremendous growth and geographical expansion. As we enter 22, we will continue growing our footprint and scaling our asset base, but we will also focus on continued margin expansion through economies of scale and operational improvements. Before I discuss the company's performance for 21, I want to highlight the impressive growth and traction that the cannabis industry has generated. Today, over 70% of the states have adult use or medical programs. In 21, the U.S. cannabis industry grew by over 30%, putting the sector on track to reach over 46 billion in legal sales in 2025. We also want to comment on the current state of cannabis public markets. Industry participants appear to be caught off guard by the current price competition in the market. This competition is entirely expected, albeit a little sooner than anticipated, as the industry becomes more mature. In addition, growth has been stalled in some key states. For instance, in Illinois, growth has been delayed as the state awaits the second tranche of 185 licenses to hit the market. We always knew that because of our reliance on regulatory approvals, growth in the industry would be uneven and choppy. That doesn't reflect the considerable long-term growth opportunities for Ascend and other US MSOs. Notwithstanding the growth opportunity, the industry trades at a massive discount to any comparable industry. The sector has declined about 60% since a year ago today and now trades at about nine times analyst estimates for 2002 adjusted EBITDA and about six times analyst estimates for 23 adjusted EBITDA, despite EBITDA growth of over 150% in 2021. This is cheap on an absolute and relative basis, and in our opinion, provides an opportunity for investors entering the space. Further to that, AWH trades at a 35% discount, it appears, based on 23 multiples of analyst estimates. We are hopeful that some of that value will be realized in the medium term. A large reason for the industry discount is because only a small percentage of institutional investors can participate in the industry. This will change as we continue to grow and legalize state by state. According to Leafly, almost half a million people now work in the cannabis industry. Cannabis workers outnumber insurance salespeople. There are more people employed in the cannabis industry than there are hairstylists, barbers, and cosmetologists combined. This industry isn't going anywhere, and it's only a matter of time before more institutional investors enter the space. I also want to address one valuation hurdle that we faced in the recent past, our liquidity. I am happy to report that we recently pre-released the remaining stock from lockup restrictions imposed at the IPO. 100% of our pre-IPOs are now free from these restrictions and have been added to our float. We are hopeful that without this hanging over our heads, we will begin to see liquidity improve. In 2021, Ascend's growth far surpassed the industry's growth, solidifying our position as a formidable player. Net revenue was $332 million for the full year. This represents 131% growth over 2020. Retail growth was driven by increased traffic at existing stores and the opening of six stores in the year. Adjusted EBITDA for the year was $79 million. We are pleased to be among the more profitable MSOs, achieving full-year adjusted EBITDA margins of 24%, even before a number of our assets come online. Let's turn to slide five to review our key priorities. In 22, we will continue to scale our asset base of premier retail locations and state-of-the-art cultivation facilities while increasing our focus on optimizing our existing assets. In Q4, we began to see high single-digit year-over-year wholesale price declines across the United States and have seen this trend persist into Q1. With more competitive pricing and slower than expected growth, we will need to focus on margin and cost reductions. Improving operations will be a crucial lever that will allow us to expand margins despite competitive conditions. We continue to execute on the ongoing cultivation expansion in New Jersey to scale our operations in these primary markets. Building out these facilities' manufacturing capabilities is also a key priority as it will help us broaden our offering with a full suite of form factors. Branding will come into focus this year as markets get more competitive. We remain committed to providing a good, better, best brand portfolio to provide options to all customer segments. I often say that this industry represents stair-step growth as new assets come in online and new markets open. Due to competitive market conditions and our lack of new assets coming online in the first half of this year, we do not anticipate any revenue growth or margin expansion. Rather, the next stair step in our business will be in the second half of the year when we will benefit from harvesting our newly expanded canopy and the start of adult use sales in New Jersey. Solidifying our position as a top player in this emerging market is critical and will be among our top priorities for the year. To offset the delays in New Jersey and competitive market conditions, we are implementing a robust cost-cutting program. Although we have a strong cash position, I have also elected to take all of my 22 comp as stock to preserve cash in this dynamic environment. Dan will provide more detail on the cost-cutting program. While key area of focus will be the start of New Jersey recreational sales, we will also look to expansion in our existing markets. We have the ability to acquire three more dispensaries in Ohio and two more dispensaries in Illinois before reaching state caps. Let's review slide six to review our current footprint. We believe the markets in which we operate are better positioned to succeed in an increasingly competitive industry. Our thesis remains to deploy capital in highly popular states that are already or expected to be adult use with license cap restrictions imposed by state regulators. We are very happy with our current footprint and still see opportunities to grow into strong contiguous limited license markets. While it's difficult to do acquisitions given public MSO multiples, we are still actively pursuing strategic acquisitions. Before moving on, I want to address our pending New York transaction and ongoing litigation related to the license we are under contract to purchase from MedMen New York. As you likely know, we are in litigation with MedMen regarding what we contend was their invalid termination of our investment agreement. The case is plain and simple. The lawsuit is just a desperate attempt to throw everything but the kitchen sink at us to make a quick buck. It's a case of seller's remorse. You can't back out of a home sale once you realize you could have gotten a better deal. This is no different. In January, after we filed our lawsuit against MedMen, the parties agreed to maintain the status quo until the trial. Today, MedMen dropped at least two false and disparaging allegations regarding a meeting and a fundraiser between representatives of the governor's office and a send that MedMen included without any basis in their original counterclaims. This is just further proof that MedMen will say anything, including make false accusations, to try to get more money from us. At the beginning of the action, together with MedMen, we agreed to an accelerated trial schedule. Just yesterday, we filed a cease and desist letter to stop MedMen from marketing the asset, which is a brazen attempt to violate the status quo. We are very confident in our position, and we have no doubt that the lawsuit will end in our favor, with MedMen obligated to proceed with the transaction and pay our legal fees. Once the dispute is resolved, we intend to proceed with our canopy expansion plans and ready the assets for the start of adult use sales in New York. It is time for MedMen to honor its obligations under the agreement so we can proceed building the business for the benefit of medical patients in New York that MedMen has failed to do while owning the license. Now let's move on to slide seven to discuss updates relating to the New Jersey market. 2022 will be the year of long-awaited adult use market in New Jersey. New Jersey has over 9 million people and a projected market size to be close to 2 billion by 2025. The Cannabis Regulatory Commission is expected to meet March 24th, where we hope that they will approve some alternative treatment centers to begin to sell adult-use cannabis after a 30-day waiting period. Ascend is among five ATCs in New Jersey which have completed their applications and are in the substantive review process with the state. Although we are readying the assets to prepare for adult use 30 days from March 24th, we are not budgeting for the benefit of New Jersey adult use until the summer when adult use seems more likely. This timeline is not materially different from our view of the start of New Jersey sales as we discussed on our worst earnings call. Our Rochelle Park store, just minutes from Garden State Plaza, the second largest mall in New Jersey and the third largest in the greater New York City area, is open and operating with 20 points of sales. We've also received approval from the town of Rochelle Park for adult use. We are waiting to break ground on the expansion of our Montclair store and for the municipality to formalize its resolution to support the adult use market. Our Montclair expansion will more than double our square footage and points of sale in the store. Our Fort Lee store has the potential to be one of the top stores in the country. It is on a central artery just five minutes from the George Washington Bridge. The store is still under construction and is expected to be complete by early summer. 2022 will be an exciting year for the patients and customers in New Jersey with the opening of adult use. We are excited to be an important player in the market. Now, I would like to turn the call over to Frank Perrillo. Frank and I founded the company together in 2018. Frank played a pivotal role in the success of Ascend. Over the past three years, Frank has served as chief strategy officer, securing several critical acquisitions and partnerships, as well as overseeing construction and regulatory aspects of the company. We wouldn't be where we are today without Frank's pivotal role in helping to build the company. Going forward, Frank will be responsible for AWH's day-to-day operations with retail, sales, and marketing operating teams. He will be responsible for the growth and margin expansion goals while I will continue to focus on capital allocation and strategic alternatives. I can see no better steward of the company than Frank as we move forward into the next phase. With that, I'll turn it over to Frank.