Ascend Wellness Holdings, Inc.

Good afternoon and thank you for standing by. Welcome to Ascend Wellness Holdings' first quarter 2025 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, but may cause actual results to differ from historical or anticipated results. For more information on the risks and uncertainties, please refer to slide two of this presentation, today's earnings release, and AWH's SEC and CEDAR filings, including their most recent reports on Form 10-K. During today's call, the company will be referring to non-GAAP financial measures, such as adjusted EBITDA. Reconciliation to the most direct comparable GAAP measures are in appendix to the presentation and in the company's earnings release. On today's call, I am pleased to introduce the SENS 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 Pirullo, Co-Finder, Director, and President. Frank will share updates on the company's operational plans and highlights from the quarter. And lastly, Roman Demchenko, Chief Financial Officer, will review financial performance for the quarter. I'd now like to turn the conference over to your speaker today, Sam Broom.

Please go ahead.

Good afternoon, everyone, and thank you for joining our first quarter 2025 earnings call. I'll start off today with a high-level update on the industry, our strategic roadmap, and how we started the year. Looking broadly at the regulated U.S. cannabis industry, despite some challenging regional headwinds, the industry is still growing. Top-line cannabis revenues and the share volume of legal products sold continues to increase, and more states are looking to implement both medical and adult-use cannabis programs. According to FlowHub, sales in the regulated U.S. cannabis market grew over 9% in 2024, surpassing $31 billion, and are on pace to grow another 12% this year. This has been driven by a shift in cannabis customer demand, primarily the younger demographic who are increasingly looking for alternatives to alcohol. daily cannabis users have now surpassed daily alcohol users. In fact, a recent survey showed that nearly half of Gen Z respondents want to reduce or eliminate the consumption of alcohol, and cannabis offers a variety of form factors and dosing options that are very appealing. While the regulatory environment for cannabis remains murky, following several setbacks during the rescheduling process and many failed bills in Congress, The recent commentary from President Trump's DEA nominee, Terry Cole, and feedback from those who have had conversations with the White House leaves us cautiously optimistic that progress can be made under the current administration. We began 2025 with clear priorities, growth through densification in our key markets, margin improvement, and deepening our customer engagement as we continue to evolve our retail and CPG strategies. I'm pleased to share that we're making steady progress and have performed well across all three initiatives, despite near-term headwinds. Furthermore, we've built a market-leading position and an important retail moat within our current programs. As we go deeper in states where we have significant cultivation capabilities, it will allow us to expand our vertical opportunity to improve margins and offset pricing headwinds. We will be increasing our retail footprint by 50% in our core markets over the next 18 months, with half of those new doors to come in 2025. We continue to identify new opportunities to grow our customer base as we fine-tune our newly implemented CPG approach. These efforts include new brand and product launches, entering new segments, refreshed packaging, and popular in-house and third-party brand activations. Our actions taken to improve profitability are resulting in continued momentum from the cost control measures we put in place late last year. We successfully implemented and even exceeded the $30 million in annualized cost savings we identified. While our cost of goods sold initiatives started to triple through in Q1, it was largely offset by continued regional price compression during the quarter. We are actively reviewing our operations to unlock further efficiencies, such as packaging and automation updates for new cost saving optimization opportunities. The broader regional market challenges we discussed on our last call have persisted throughout the first quarter, with price compression continuing to be the biggest headwind for BDSA data. While transaction volumes held steady, lower pricing put pressure on our top line in margins. We expect our ongoing efforts will ultimately help us close the margin gap between us and our peers, but there's still work to do. That said, we're seeing encouraging signals that our margin improvement strategy is taking hold. Overall, Q1 was as expected, with revenue coming in at $128 million, and we maintained an adjusted EBITDA margin of 21.1% despite the market conditions, seasonality, and a heavier wholesale mix. We ended the quarter with cash-in equivalents of $100 million, giving us the financial flexibility to execute on our strategy while maintaining a strong balance sheet. Let's turn to slide five to discuss our retail densification strategy update. Shipping to our expansion efforts, we remain focused on our mid-term goal of growing our footprint by 20 new retail doors with 10 expected to come online by year-end. We are targeting our key states where we already maintain brand leadership and sizable cultivation operation. This ability to expand our retail base and increase our vertical sales is a key focus. Building on the groundwork we laid in Q1, we added three more partner stores in Illinois, with our Markham, North Riverside, and Linwood partner locations now open. We also identified an additional partner store opportunity, which would bring our total in the state to six. In New Jersey, we expect to open our first partner store in Little Falls in the coming months, and we have another three partner locations identified for later this year. We have an active development pipeline across our footprint, keeping us on track to meet our 2025 expansion targets. This also includes three sites in Ohio and one in Pennsylvania. These dispensaries continue our strategy of securing prime high-traffic retail locations and will enable us to capture further vertical sales while building our brand footprint in these high-value states. As I previously shared, refocusing on the customer is now a top priority across the organizations. To support this shift, we started making meaningful changes to our retail experience and are refreshing our brands to help drive top line growth. Let's turn to slide six where I'll discuss our latest steps during Q1 in detail. Our refresh customer strategy is beginning to gain traction, and we're starting to see transaction growth at stores where key initiatives such as e-commerce have launched. Early results from the e-commerce pilot program show a 6.9% increase in e-commerce order volume, a 7.7% rise in revenue per user, and a 50% drop in order abandonment compared to pre-launch metrics. While pricing pressure has offset some of these gains, we believe the opportunity is there as we expand these efforts. In Ohio, our adult use ramp-up continues to be very strong in contrast to what we've seen in other markets. Our Ohio stores have performed ahead of our original expectations, and we are excited about the future potential this market offers. On the brand side, Q1 saw some exciting developments, with several of our already leading brands moving up in the state rankings, further positioning us as an emerging CPG leader in key markets. During the quarter, we became the number two leading brand house across Illinois, New Jersey, and Massachusetts combined. Three competitive key states where we maintain significant operational capacity. The recent Illinois launch of our infused brand, High Wired, has received a very strong early response. Since launching in late April, it has become the best-selling infused flower brand and the fourth best-selling brand across all flower sales in our Illinois stores. In addition, Effin continues to perform well and is now ranked as the number one sleep skew in both Illinois and New Jersey. We have plans to expand the Effin line with new targeted effects set to launch in the coming months. Our customer-first mindset is not a slogan. It's our edge, and the results are beginning to show. According to recent BDSA data, while the specific markets that we operate in contracted in Q1 with a 3.4% decline, we held our ground and grew our market share by 4% compared to Q4 2024. Finally, we continue to actively utilize our share buyback program to take advantage of what we view as a significant disconnect between our underlying business value and our public share price. During Q1, we repurchased approximately 790,000 shares, with an additional 781,000 repurchased after quarter end, for a total of approximately 1.57 million shares repurchased as of the end of April. We still have about 75% of the authorized amount remaining under the current program, and we will continue to assess the highest return available on our capital as the year progresses. In Q4, we identified and began implementing key initiatives across the business, with further progress made throughout Q1. With Q2 expected to remain steady, the second half of the year should mark a ramp-up phase as those initiatives begin to scale. While we're keeping our close eye on ongoing price compression, we're equally focused on executing strategic initiatives that strengthen our position. Our priorities remain clear. delivering for our customers through innovation, evolving our CPG and e-commerce strategies, and enhancing product quality and the customer experience across the board. We've been confident in our strategy and committed to our densification and optimization priorities. We are executing with discipline, and we are staying focused on delivering long-term shareholder value. Before turning the call over, I'd like to sincerely thank our AWH team for their fantastic work helping to overcome challenges while successfully implementing our initiatives. There's a lot more work to do, and I'm confident that we have the right talent to execute. With that, I'll hand it over to Frank.