Ascend Wellness Holdings, Inc.

Good morning and thank you for standing by. Welcome to AWH first quarter 2024 earnings call. I'd now like to hand over the conference to your first speaker today, Rebecca Kaur, Executive Vice President of Investor Relations and Strategy. Please go ahead.

Good morning and welcome to AWH's earnings call for the first quarter of 2024. The presentation that accompanies this call can be found on the investor relations section of our website. Before we proceed, I would like to remind you that the following discussion and presentation contains various forward-looking statements or information. These forward-looking statements or information are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. For more information on these risks and uncertainties, please refer to slide 2 of this presentation. Today's earnings release and our SEC and CDAR filings, including our most recent report on Form 10-K. We encourage you to review these materials carefully. During today's call, we will be referring to non-GAAP financial measures, such as adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures are in the appendix of the presentation and in our earnings release. On today's call, you will hear from John Hartman, Chief Executive Officer, and Mark Kassebaum, Chief Financial Officer. With that, I'll turn the call over to John starting on slide four.

Thanks, Rebecca. Good morning, everyone, and thank you for joining our first quarter earnings call. I'd like to express my appreciation to all our key stakeholders, our patients and customers, shareholders and lenders, business partners, and especially the Ascend team, for their hard work in delivering a solid first quarter to jumpstart the year. I'll begin my prepared remarks by providing an update on the quarter and then discuss our retail and wholesale segments. Next, I'll hand it over to our CFO, Mark Kassebaum, who will give a detailed update on our financials and offer an outlook for the remainder of 2024. Finally, I'll wrap up our comments by highlighting several of the key points of Ascend's investment thesis before opening the floor to questions. Turning to our performance this quarter, we were very pleased with the results. Our total revenue net of intercompany sales reached $142 million, marking a 25% increase over last year. This growth was driven by the opening of eight new dispensaries, the acquisition of four dispensaries in Maryland, and our robust wholesale business. Additionally, our adjusted EBITDA stood at $32.5 million, up 39% from last year, coupled with a significant year-over-year margin expansion of 239 basis points. Following our first full year of generating positive cash from operations and positive free cash flow, we're happy to report that the quarter again concluded with positive cash flow from operations. Despite expected quarterly fluctuations in free cash flow generation, we continue to plan to produce positive cash from operations and positive free cash flow for the full year. Moving on to other significant catalysts, we were very pleased to learn that the Drug Enforcement Agency agrees with the Department of Health and Human Services recommendation to reschedule cannabis from Schedule 1 to Schedule 3. This is a historic milestone in the most progressive move in cannabis reform in decades. This action not only reinforces our position regarding Section 280E of the tax code, but should also improve access to capital, remove barriers for patients and customers, and help to further reduce industry stigma. Based on our understanding of the process ahead, we expect the rescheduling will be finalized before the elections. We view this rescheduling step as the first domino of many to fall towards continued federal reform. From a judicial perspective, we continue to actively be involved in an industry coalition that is challenging the DOJ's enforcement of the Controlled Substances Act against state regulated cannabis businesses. This case is progressing through the lower courts with oral arguments scheduled to occur at the end of this month. We are committed to pursuing this case hoping it ultimately reaches the Supreme Court. While we track and welcome these important and industry-building changes, we remain intensely focused on executing our growth plans, which in large part are not reliant on regulatory change. From a business perspective, as mentioned, we had another solid quarter, bolstered by our fifth consecutive quarter of wholesale growth. We continue to aggressively pursue the retail partnership strategy with social equity licensees. This approach, combined with our impressive wholesale growth, is and will offset increased retail competition in New Jersey and Illinois. We see a clear path to expanding our footprint by over 50% through our planned growth and partnership strategy. Additionally, at the state level, we are anticipating adult use to begin in Ohio before the start of summer, and we have readied all five of our current stores to welcome a multiple of customers to what we serve today. Further, to stores we operate today, we believe there is a path to adding three stores to our Ohio footprint and are actively pursuing these locations. From a financing perspective, we are well positioned to reduce our debt balance and extend our debt maturities. The $73 million of cash and equivalents that we ended the quarter with, combined with our cash flow generation ability, placed us in a strong position to repay a portion of our current term loan. In April, we began a Dutch auction process declaring our intent to buy back up to $20 million of our outstanding term loan. The auction process closed on Friday with no lenders tendering their debt for purchase by the company. This is clearly positive feedback on the company's current credit position and bodes well for the coming refinancing. In regard to refinancing, we've had very constructive conversations on our term loan that is due in Q3 of 2025. Over the past few months, we've actively sought feedback from both existing and potential new lenders, receiving several indications of interest. We have carefully balanced the need to address this debt promptly with the potential for a more favorable environment in the future. Our working plan is to have the refinancing completed before it becomes current. Let's move on to slide five to discuss the retail business in more detail. As mentioned earlier, since the start of 2023, we have opened eight new dispensaries, two of which were launched in Q1 of 2024. Combined with our acquisition of four dispensaries in Maryland, which transitioned to adult use in July, these new operations have contributed to a 15% increase in retail sales year over year. However, as anticipated, retail sales were down 2% sequentially due to increased competition in New Jersey and Illinois. Our retail revenues for Q1 were $95 million, accounting for 67% of the company's consolidated net revenues. Notably, 51% of our retail sales came from products we produced, either under our own brands or for our partner brands. This increase in penetration reflects our strategy of capturing vertical margins while offering customers extensive product choices. Our loyalty program continues to thrive, supporting both new customer acquisition and customer retention. We are committed to investing in this program due to the significant returns it delivers. Currently, 89% of our customers and patients join our loyalty program by the time they leave our stores, and we are actively exploring ways to further invest in and target these customers. Additionally, we have seven new dispensaries in the pipeline across our existing states, which aligns with our strategy to densify and scale in our existing markets. In Pennsylvania, we have three additional owned licenses. We are on schedule to open our dispensary in Cranberry, Pennsylvania in Q3, in Whitehall, Pennsylvania in Q4. With one more license, we are in the process of siting. We expect to have six dispensaries in Pennsylvania open by year's end. In addition to our fully owned dispensaries, we are expanding our pipeline of partner dispensaries. As discussed on our Q4 call, we are actively seeking opportunities to enhance our market presence and retail shelf space by partnering with social equity license holders. We are in the process of finalizing agreements with two dispensaries in Illinois expected to open this month. A third partner dispensary in Illinois mentioned in our last call is set to open in Q3. Additionally, we have secured a partnership with a dispensary in Little Falls, New Jersey slated to open just after the start of 2025. This is just the beginning, and we are appropriately enthusiastic about the substantial opportunities ahead for our partners and us as we accelerate this growth approach. Let's move to slide six to discuss our wholesale business. I'm pleased to report a positive change in the ranking of our brands due to the hard work of our product development, operations, sales, and marketing teams. Our house of brands, which includes Common Goods, Simply Herb, Ozone, Ozone Reserve, and Royale, has ascended to become the third largest in the three primary markets where we compete from a wholesale perspective. Maintaining and enhancing this position remains one of our key priorities. In Q1, our gross wholesale revenue grew by 35% year-over-year to $79 million, driven primarily by increases in New Jersey, Massachusetts, and Pennsylvania, though partially offset by declines in Illinois and Ohio. Excluding intercompany sales, our net wholesale growth surged by 50% from last year and 10% from the previous quarter to $47 million. This growth in third-party sales was notably supported by a 40% increase in third-party doors, primarily in New Jersey and Massachusetts, but also in Pennsylvania. Sequential growth in third-party sales was particularly strong in Illinois and New Jersey. And in Pennsylvania, we are excited by the introduction of 1906 drops to third-party retailers in the state. During the quarter, we successfully launched our ozone effects-based gummies in Massachusetts, marking our debut in the state's edibles market. This expansion was enabled by our recent acquisition of a second cultivation facility in Massachusetts where we invested in a state-of-the-art kitchen. Additionally, we have planted several flower rooms since the acquisition in Q1, which will help significantly in addressing our supply gap in the state. Furthermore, we have secured long-term cultivation and manufacturing supply in Maryland through two key partnerships. Our first engagement involves a long-term manufacturing agreement under which our partner will produce ozone gummies, Simply Herb Vapes, and soon, flour. These products will be available in both Ascend and the partner stores. The second engagement is a complementary multi-year supply agreement covering the third party's full portfolio of products, including branded flour, pre-rolls, vapes, gummies, and concentrates. We are excited about these arrangements and look forward to leveraging this supply in the coming quarters. Now I will turn the call over to Mark to provide some details on the consolidated finances for the quarter.