Ascend Wellness Holdings, Inc.

Good afternoon and thank you for standing by. Welcome to Ascent Wellness Holdings' fourth quarter 2024 earnings call. The presentation that accompanies this call can be found on the Investor Relations section of the company's website. Before proceeding, AWH 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 the risks and uncertainties, please refer to slide 2 of this presentation, today's earnings release, and AWH's SEC and CEDAR filings, including their most recent report on Form 10-K. During today's call, the company will be referring to NANGA financial measures such as adjusted EBITDA, Reconciliations to the most directly comparable gap measures are in the appendix to the presentation and in the company's earnings release. On today's call, I am pleased to introduce Ascend's management team, starting with Sam Brill, Director and Chief Executive Officer. Sam will provide an update on the company's key objectives and high-level financial priorities. Also on the call is Frank Perullo, Co-Founder, Director, and President. Frank will share updates on the company's operational plans and highlights from the quarter. And lastly, Roman Nemchenko, Chief Financial Officer, will review financial performance for the quarter. I'd now like to hand the conference over to your first speaker today. Samriel, please go ahead.

Thank you, Operator, and thank you to everyone joining us on the line today. This was our first full quarter with a new management team in place, and I'm incredibly proud of the work the entire team has done to support our key transformation initiatives and new strategic roadmap. Ascend has the right assets in the right places in the right markets, and now we're focused on how to best utilize those assets to drive profitability and sustainable cash flow generation. I'm very pleased to share that we've already seen faster-than-expected improvement in both our profitability and cash generations. More importantly, we installed a new mindset and culture around cost controls going forward. Looking first at profitability, during the first quarter, we improved the adjusted EBITDA margin by 450 basis points for $30.2 million, representing a sequential increase of 20.4%. This is largely due to our execution on the approximately $30 million in annualized cost savings we identified, which has been substantially completed to date. We expect some of these savings to take a little longer to show up in cost of goods sold, as we cycle out of higher-cost inventory and add automation and other efficiencies to our facilities. As discussed last quarter, improving profitability remains our top goal, and we believe there's still more opportunity to close the margin gap with our MSO peers. Next, we also exceeded our initial expectations for delivering on cash generation. With fourth quarter cash from operations of $35.2 million, we have successfully achieved our eighth consecutive quarter of positive cash from operations and realized free cash flow of $30.1 million for the quarter. This helped increase our cash and cash equivalents to $88.3 million at the end of Q4 2024. Lastly, we continue to implement our densification strategy and have identified a robust pipeline of opportunities. as we focus on expanding our store base by approximately 50% for 20 locations in the midterm. We currently have 10 locations identified, which we expect will mostly come online throughout the second half of 2025. This includes three in Ohio, one in Pennsylvania, two partner sites identified in New Jersey, as well as four additional partner stores in Illinois, which would bring the total partners in the state to six. While we're pleased with the improvements we've made during the quarter, The work is far from complete. Over the past couple years, our organization has become overly focused on corporate priorities, losing sight of the most critical element of a retail and CPG business, the customer. Correcting this is an immediate priority for our entire team. To succeed, we must prioritize the needs and wants of our consumers in everything that we do. To that end, we've begun implementing a series of changes to our retail experience and we are refreshing our brands to help reinvigorate our top line. Let's move to slide five to discuss the key highlights from Q4. As previously mentioned, we substantially completed our $30 million in annualized cost savings initiatives and implementing long-term processes and controls. We also sustained our industry-leading average revenue per store, despite a challenging consumer environment that we operate in. This was our first full quarter of adult use sales in Ohio, and the initial response from consumers has been great. Given the restrictive regulatory framework, we expect to see more growth in this market when advertising is allowed and additional form factors such as pre-rolls are introduced later this year. In addition, we launched Ethin, a brand focused on delivering targeted effects, which has been a significant success in wholesale and is the number one selling edible brand in our stores. For the first time in the company's history, we're buying back AWH shares. We view our shares as undervalued, so we believe there's no better time to return value to shareholders. To that end, we repurchased 11 million shares of Class A common stock, representing over 5% of the shares outstanding. Furthermore, we announced the commencement of a share buyback program to repurchase for cancellation up to another $2.2 million in stock, which began in January. Subsequent to the quarter end, we repurchased an additional 620,500 shares through this program. Turning now to slide six, where I'll discuss the core strengths of the business going forward. Since taking on my new role with Ascend, I've had the opportunity to tour many of our facilities and retail stores and learned about the important assets we've amassed. Over the last two months, I went further and took the time to work alongside our talented team in cultivation, manufacturing, and retail. This experience allowed me to fully appreciate and understand their respective roles and has given me a better perspective on their insights. It allowed me to see firsthand what's working well and where we may face challenges ahead. This experience has helped me inform our decision to reinvigorate our customer-centric approach. I'm truly grateful for the hard work and dedication of every member of our team as we continue to move forward together. Spending this time across our organization has deepened my perspective that Ascend really does stand out in the industry thanks to our core strengths that I previously discussed on last quarter's call. First off, we have a strong retail footprint with exceptional locations. We believe these strategically positioned storefronts will continue to give us an advantage as the industry evolves. The company continues to maintain its data-backed focus on premier locations and high-density population centers. With more competition building, we expect that the retail locations will play a significant role in where customers choose to shop, and we have some of the best locations in each of our states. Next, our customers continue to have a great experience when they visit. as demonstrated by our excellent net promoter score of over 70 at the enterprise level. However, that does not always translate into repeat visits or strong ticket sizes. Therefore, we are developing new KPIs to help drive customer retention and average ticket. Frank will elaborate more on this shortly, but we are optimizing our interactive kiosks and online menus to enhance the consumer experience by making it easier for them to find what they want and need. This superior experience also leads customers to choose our products and engage with our brands. Over the next few weeks, we plan to commercialize approximately 350 refreshed SKUs. We can offer these highly popular products due to our strong cultivation and production capabilities. During Q4, our cultivation team delivered the highest ever network average grants per square foot, the highest network average potency, and the most pounds we have ever harvested. Lastly, to ensure these products reach our customers, We've developed an outstanding and comprehensive distribution network that covers over 90% door share in each of our top two wholesale markets. Given our focus on driving margin growth, we have strategically evaluated our product portfolio with a focus on eliminating unprofitable SKUs and delinquent wholesale accounts. While this will have a short-term impact on revenue, our efforts will help to build a stronger foundation that will set us up for long-term success. While we anticipate there will still be challenges ahead for both the industry and Ascend, I firmly believe that our key differentiators will empower us to succeed as we execute on our strategic goals for 2025. The opportunity for us is there, and we are excited about Ascend's potential going forward. Now we'll turn it over to Frank Perullo, president and co-founder, who will discuss our key operational initiatives beginning on slide eight.

Thank you, Sam. Good afternoon, everyone. I am pleased to be here today to share an update on the assessments and actions we've performed and implemented across our organization to drive and strengthen our business. As Sam highlighted, we saw significant initial momentum following the implementation of our key transformation initiatives during the quarter. Simply put, we are running our business better, as evidenced by our improvements in profitability. We've focused our assessments and actions on our people, processes, and technology. In many cases, resources needed to be allocated more effectively, tools implemented, and processes were immature or we were gassed with a lack of process. We have made significant progress in all areas, but we'll be working on a roadmap of continuous improvement in all facets of the business. An example of a success I am particularly pleased with was the team's ability to positively impact working capital in the quarter through reducing gross spend and better inventory management across both channels of the business. We employed better tools, improved processes, and allocated the resources needed to improve our inventory management and biomass routing at our manufacturing facilities. That being said, competition is growing across our markets as they mature. which is leading to some top-line revenue pressure, specifically in our core regions. While this presents challenges, it has reinforced our belief that our strong retail presence and wholesale capabilities will continue to drive our success as these markets mature. Operational excellence will be a key pillar of the roadmap to help deliver for our customers. We're focused on building our business for long-term growth with an emphasis on delivering high-quality products and an exceptional retail experience for patients and customers. The customer will be at the center of how we think and what we do every day at Ascent. Let's first look at how we put the customer first in the retail business. Let's move to slide nine. Q4 was only the second quarter in over three years that we did not add a new store. We finished 2024 with $372.2 million in retail revenue a 0.3% increase year-over-year. In the quarter, we achieved $90.4 million in retail revenue. A focus area in the quarter was to identify key retail opportunities to improve top-line revenue margin, customer retention, and acquisition strategies. A key focus for our team going forward is returning our organization to a customer-first mentality. Our assessments targeted the fundamentals of retail, including having the right products and pricing while giving the customer the best experience. In the quarter, we worked to ensure we curated the right selection of products on our menus. We also had to sell through aging inventory and overstock SKUs in the quarter to bring our days on hand to optimal levels. We worked to ensure we had well-balanced menus to give the customers great AWH-branded products and the top-selling SKUs in each market. Having market-by-market planograms in-store and virtual, as well as more effectively utilizing market data on sell-through and customer shopping habits, are key initiatives to ensure we have the right product for our customers. We also focus the review on our buying org to ensure we always have the right products in stock at the right price and margin. Driving better deals for our customers will be key to our retail success as markets normalize. It also helps drive the right segmentation for AWH products in our stores where we want to be the best priced products in each category. The work started to pay off as we achieved the highest level of AWH penetration in the quarter. During the quarter, we increased AWH penetration to 55%, a 6% increase quarter over quarter. AWH penetration is a key KPI to drive strong margins and keep our manufacturing facilities producing the units needed to drive down cuts. In addition to ensuring we deliver an exceptional experience at our retail dispensaries, we are also focused on providing a similarly positive experience through our online capabilities. We are pleased to announce that in the quarter, we started the build-in transition of our e-commerce site, letsascend.com, to a new e-commerce portal to transform the manner consumers engage with Ascend. We're creating a more curated online shopping experience that offers a streamlined selection of products with an integrated loyalty program. The new e-commerce portal will utilize AI and machine learning to help personalize each customer's experience. We will deliver a better online shopping experience for our customers, whichever manner they get their cannabis. Delivery, curbside, in-store, our new e-commerce portal will be the one-stop shop. The new Ascent shopping experience will start to roll out to customers next week and will be in all markets by the summer. In the quarter, we also reset our retail training programs for new and existing employees. The goal was to increase engagement and the level of service given to every customer from the moment they walk in and is greeted with, welcome to Ascent. Ultimately, it's about the customer's journey, and we're committed to ensuring that cost-saving measures do not compromise the quality of the experiences we deliver. Lastly, as part of our retail densification strategy, we have identified potential partner locations in Illinois and New Jersey, which we expect to significantly ramp up store openings during the second half of 2025. In New Jersey specifically, we have the opportunity to develop up to seven partner locations, We view this as a strong market for us and one where we can carefully hone our partnership approach, which can then be rolled out across additional markets. Our first New Jersey partner store located in Little Falls is on target to open early in Q2. We have two additional New Jersey partner stores in development to open later in 2025. This is in addition to our final PA store under our license, as well as the three additional Ohio stores. all currently under development. Let's move to slide 10 to discuss the operation and wholesale business. In 2024, we sold a record number of pounds of wholesale products and increased wholesale revenue in each of the company's key markets compared to the prior year. In the quarter, we maintained or gained share in each of our key wholesale markets. Our cultivation and operations teams supported these wholesale milestones delivering record results across the network. During Q4, our cultivation team delivered the highest network average ever of grams per square foot, potency, and the most pounds harvested. These positive results helped drive increased production at our facilities to fuel both retail and wholesale channels. During the quarter, we increased brand recognition across the portfolio in various markets. with AWH Brands being market leaders in all the third-party wholesale markets in which the company operates. Our Simply Herb brand remained the number one selling brand in Massachusetts. Ozone rose to the number one brand in units and number three brand in sales in New Jersey. Ozone also remained the number two brand in sales and number one in units in Illinois. Also in the quarter, we grew our brand portfolio. With increased demand for our products, as previously mentioned, we drove an increase in vertical sales of 6% in Q4 compared to Q3 2024. Strong brands help improve vertical sales, which will continue to drive asset efficiency and a larger share of our revenue from in-house products. In turn, our CPG initiatives will further help enhance our margins. We introduced Essin, a brand designed to deliver targeted effects using minor cannabinoids. The brand has been well-received in all the markets where it's available and is a top performer in the edibles categories at our stores. We plan to expand the effing line in the coming weeks with additional targeted effects. Building upon this success, we are launching a new line of premium-infused pre-rolls, which will be available in all major markets this year. This expansion is expected to start rolling out later this month. This will help us meet the evolving demands of our customers, ensuring that we continue to provide high-quality, innovative products. We are commercializing almost 350 products across six markets during Q1 in all product categories, ensuring Ascend branded products are available to our customers however they consume. While we are pleased with the early success of the changes implemented across the network, we have more work to do to continuously improve the people, process, and tools servicing the business. Our assessment and review of our commercial and operations org helped to create a roadmap for 2025. The roadmap serves to stratify breadth and depth of production output to match our customer preferences. These actions should help stabilize production attainment and labor, allowing us to steer the business to lower COGS and higher margins. A key initiative still in flight to help enable this progress is automation. At our Athol Mass Cultivation and Manufacturing Facility, we are currently introducing automation and new equipment on several production lines, including pre-rolls, flower pack, and vape filling. The equipment and process changes happening right now in Athol will be used as a guide and proof of concept to increase efficiency, throughput, and help lower our cost of goods. Increased automation can transform the ways which we produce our products, allowing us to scale operations more efficiently and fuel more product innovation, such as our new infused pre-roll-on. As we prove and refine this approach, we expect we will see meaningful labor savings and improved efficiencies once we roll it out at scale across our footprint. We're also making targeted investments to improve yields and reduce variability while ensuring this is done carefully to mitigate disruptions. In conclusion, we closed out 2024 with several positive highlights, including the successful transition to adult use sales in Ohio, the swift implementation of our cost-saving initiatives, and the strong performance of our latest brand launch. 2024 was the first full quarter of our refresh management team addressing our margin and profitability challenges. With these areas improving, we will continue to focus on the customer to guide the roadmap for 2025. We need to think like a customer and keep them at the center of all we do. I will now turn it over to Roman Nemchenko, our Chief Financial Officer. Roman will discuss our financial performance and near-term expectations.