Ascend Wellness Holdings, Inc.

Thank you. Thank you. Thank you. Thank you. © transcript Emily Beynon Thank you. Thank you. Thank you.

Good afternoon and thank you for standing by. Welcome to ASCEND Wellness Holdings fourth quarter and full year 2025 earnings call. Before proceeding, ASCEND 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 today's earnings release and AWH's SEC and SEDAR filings, including their most recent report on Form 10-K. During today's call, the company will be referring to non-GAAP financial measures, such as adjusted EBITDA. Reconciliations to the most directly comparable gap measures are in an appendix to the presentation and in the company's earnings release. I am pleased to introduce the Ascend management team joining us on today's call. We will begin with Sam Brill, Chief Executive Officer and Director, who will provide an overview of the company's strategic priorities and key operational developments over the fourth quarter and full year 2025. After that, Roman Nemchenko, Chief Financial Officer, will review the company's financial results for those periods. With that, I'd like to turn the call over to Sam Brill. Sam, please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2025 earnings call. 2025 was a pivotal year for Ascent. With refreshed leadership in place, we made significant organizational changes and executed on our initiatives to drive sustainable growth, strengthen operational efficiency, build customer loyalty, and position Ascend for long-term success in our highly competitive sector. We maintained our primary focus on three core pillars for 2025, densification, profitability, and sustainability. Delivering on our densification strategy was a key focus. More retail locations allow us to drive stronger margins, deepen vertical integration, and unlock greater operating leverage. During the year, we opened eight Ascend and partner-owned and operated dispensaries, bringing our total number of locations to 47 at year end. These new stores continue our strategy of securing prime retail locations in high-traffic, well-accessible areas. While we expected more dispensary openings during the year, Recall activations are often dependent on protracted regulatory approvals, which delayed several planned openings. We successfully advanced our profitability efforts, exceeding our $30 million annualized cost savings goal during the year, which drove improved margins and strengthened our cash flow profile. Improvements were also achieved across our cultivation and manufacturing operations, resulting in stronger product quality and improved production efficiencies. This enabled a higher quality experience for consumers while driving margin improvements across our CPG portfolio, which continues to demonstrate industry leadership. We have strengthened our long-term sustainability of our business with improved margins, a solid cash position, and extended debt maturities, providing a solid foundation to build upon going forward. With our 2025 strategy successfully executed, we entered 2026 from a position of strength with refreshed goals. We continue to pursue retail densification to grow our top line with 12 more dispensaries targeted for 2026 subject to regulatory timelines and approvals. We will continue enhancing our customer-first retail model with our Refresh Loyalty Program to differentiate our already strong retail portfolio while strengthening our competitive edge. and we will continue bolstering our CPG platform with more innovative and premium branded product offerings, improving our revenue program and overall margin profile. We believe these renewed initiatives position the company for long-term success. Moving to our Q4 and full-year financial performance. Net revenue for Q4 was $120.5 million compared to $124.7 million last quarter, down 3.4% quarter over quarter and in line with guidance for the industry-wide promotional heavy quarter. While overall revenue was modestly lower sequentially, retail sales grew 1.4% driven by new stores that opened earlier in the year. Retail accounted for approximately 70.5% of total revenue in Q4 as we continued channeling wholesale biomass into higher margin vertical sales of our branded finished goods over lower margin bulk sales. Despite increasing retail saturation across several markets, our retail transactions increased 1.7% for the year, with Q4 improving 4.9% year-over-year and up 10.4% compared to Q1 2025, driven by new store openings. As anticipated, wholesale revenue declined 13.1% sequentially. The decline was driven by an increased focus on routing biomass towards higher margin finished goods for retail sales, combined with ongoing market-wide pricing pressures in Illinois and New Jersey. Despite challenging market conditions, we've remained focused on factors within our control, such as maintaining price discipline and prioritizing our retail channel for our biomass. Price compression remains a significant headwind, particularly in Illinois and New Jersey, where the price program continued to decline in Q4, according to BDSA. Our operating platform gives us the flexibility to respond effectively, providing strong controls over quality, cost structure, and product differentiation as we navigate this difficult market environment. For the full year, net revenue totaled $500.6 million compared to $561.6 million in 2024. Year over year, unit volumes grew across the portfolio. We saw 20% more pounds equivalent of cannabis in 2025, reflecting increased demand for cannabis, providing an underlying industry tailwind. Consumer adoption of cannabis is increasing, and there is growing evidence of substitution trends from alcohol towards cannabis in certain demographics. However, industry-wide retail competition and intense pricing pressures temper total sales both quarterly and annually, particularly during highly promotional periods around the holidays. In Q4, adjusted EBITDA was $30.2 million, representing a margin of approximately 25.1% of 20 basis points sequentially. For the full year, adjusted EBITDA totaled $116.9 million, with adjusted EBITDA margin of approximately 23.4%. We made significant efforts optimizing our cost structures, implementing and increasing our operating efficiencies, and improving the price and utilization of our internal biomass. This margin performance is particularly notable given the highly promotional and price competitive environment throughout the year, especially during the Q4 holiday season. Despite continued industry-wide pricing pressure, we have remained disciplined. The focus remains on protecting brand equity, maintaining price integrity, and driving a premium product mix rather than pursuing short-term volume through aggressive discounting. We continue to deliver strong operating cash flow with $38.1 million generated for the full year. Next, our liquidity profile remains solid. We ended 2025 with $85.7 million of cash and no significant debt maturities until 2029. During the year, a strategic refinancing initiative was completed, repaying our $60 million term loan with $10 million from cash on hand and $50 million in private placement of 12.75% senior secured notes due 2029. We also secured $9.3 million in mortgage financing on three Ohio properties at a competitive 8.5% interest rate, maturing in September 2030. These decisive actions collectively extended our debt maturities, fortified our balance sheet, and enhanced our liquidity, positioning the company to navigate industry volatility from a position of strength while maintaining a disciplined focus on selective high return growth opportunities. Moving to our retail footprint, 2025 marked meaningful progress under our densification strategy. Guided by our hub and spoke model, we established a strategic presence in prime retail locations across key markets. This approach gives us greater control across the value chain and is supported by our customer-centric mindset embedded throughout both our CPG and retail strategies. Over the course of the year, eight new retail locations were added to our footprint, including partner-owned and operated stores. In Q4, our first New Jersey social equity partner store opened in Little Falls. The store increases our footprint in the state to four locations. As a reminder, we are one of only six operators eligible to participate in the state's social equity program. We have also received regulatory approval for a second social equity partner store in Eatontown, New Jersey, which is expected to open in April. We have three additional New Jersey social equity partnerships currently in development. This increased retail presence in New Jersey will allow us to improve the utilization of our operating facilities and drive more vertical retail sales. Two additional stores have been added to our retail footprint since the beginning of the year, including an additional partner owned and operated location in Illinois and our sixth Ascend store in Ohio. In January, we closed an underperforming store in Ann Arbor, Michigan, to better concentrate resources on our stronger retail assets in the state. Today, Ascend's retail footprint includes 48 locations across seven states, including Ascend branded dispensaries and partner owned and operated retail locations. Looking ahead, our retail development pipeline remains robust, with a target of 12 additional stores across our footprint expected to open by the end of 2026 pending regulatory approvals, which would bring our total Ascend and partner owned and operated dispensaries to 60. Moving to our retail operations, our customer-first strategy drives ongoing improvements to our service and offerings, ensuring they are tailored to local market dynamics and deliver consistent, engaging, and elevated experience across the Ascend network. In 2025, our fully integrated e-commerce ecosystem was launched, transforming the way we connect with our customers. This platform combines a redesigned shopping experience and an Ascend app with AI-driven functionality and Ascend Pay, our pay-by-bank solution. As part of this platform, we also relaunched our loyalty program, Ascenders Club, which offers our most valuable customers tiered statuses that unlock exclusive perks, including gifts, discounts, and early access to new products. Sales through Ascend Pay increased 49.4% from Q3 to Q4, driven by a 51.5% increase in transactions and a 57.8% rise in units sold via the pay-by-bank function across both Ascend and partner-owned and operated retail locations. In Q4, total Ascenders Club members grew by 56%, and active members increased by 23.7% sequentially. Ascenders Club members accounted for 88% of retail transactions, which were up 15% for Ascend retail locations. In 2026, we continued to enhance these programs, leverage campaign transactional data and AI-driven analytics to refine pricing and offerings, resulting in a more relevant and differentiated customer experience. 2025 marked a year of strong execution, expansion, and innovation across our leading branded product portfolio. as we advanced our CPG driven commercialization strategy and accelerated our product development pipeline. According to BDSA, throughout 2025, we proudly maintained a position as a top three brand house by both sales and units sold across Illinois, Massachusetts and New Jersey combined. Over the course of the year, we launched a record 566 SKUs exceeding our internal estimates. Automation and operational enhancements implemented across our cultivation and operations were critical to achieve the scale of our 2025 CPG innovation. This led to materially enhanced product quality and consistency while reducing costs. Today, we are producing some of the highest quality flour in our history, delivering company-wide record yields and THC percentage. This has positioned us to drive stronger, more consistent performance across our portfolio and improve revenue per gram and overall profitability. Building on our branded portfolio leadership, we launched two new brands in 2025, Highwired and Honor Roll. Highwired, our infused flower brand, has been breaking company records since its Q2 launch. In Q4, the brand continued to drive meaningful market share gains in both pre-roll and infused flower categories, From Q3 to Q4, Ascend pre-roll share increased approximately 22% across Illinois, Massachusetts, and New Jersey combined, while infused flower share grew approximately 25%, both largely driven by high wires momentum. The brand continues to be a leading contributor to growth in the infused flower category, ranking second in total sales and units in New Jersey, and third overall in sales and units across Illinois, Massachusetts, and New Jersey combined, as of the end of Q4 2025, based on BDSA data. Honor Roll, our newest brand, offering top quality free rolls made with 100% flour, initially launched in Illinois at the end of Q4, and expanded into Massachusetts and New Jersey in Q1, where it's already seeing strong traction. Alongside these two strong new brand launches, our commercialization team has expanded formats, flavors, and formulations across all key brands. FN expanded its effect-based gummy lineup with new flavors and formulations and entered the vape category with several of its most popular effects. High Wire continued to broaden its offering with sugar caps featuring high-quality flour infused with live resin and coated in ultra-potent THCA sand to create crystallized buds. Meanwhile, Ozone launched a liquid diamonds disposable vape featuring refined THCA crystals offering a potent flavor-rich concentrate. The brand also expanded its pre-roll lineup with new proprietary blends in a 10-pack format in response to strong consumer demand. Simply Herb introduced new disposable vapes in a variety of unique flavors and strains, which has been an increasingly popular offering amongst customers. Notably, many of these newly released products rank among our highest grossing SKUs in Q4, demonstrating our ability to create products that resonate with consumers across different preferences and formats. Finally, we launched our ultra limited small batch ozone king of queen cola. Only a limited number of these exclusive 14 gram top flower full cola stalks were produced across Illinois, New Jersey, and Massachusetts, reflecting our incredibly high standards. This was a passion project for master growers who curated a cola that met their highest standards and represented something they would want for themselves and proudly share with colleagues. It was as much art as it was a consumer product, with each unit personally signed by master growers just as an artist signs their work. As part of our enhanced loyalty program, only our Legends tier members, our most valuable customers, were offered an opportunity to enjoy these unique products as a holiday item. The response was overwhelmingly positive, with customers sharing their acclaim and photos of their colas over social media, reinforcing the strong connection between our most loyal customers and our highest quality offerings. Building on that success, we plan to introduce additional King of Queen colas into the market on a limited basis and additional differentiated loyalty experiences in 2026, including exclusive menus featuring some of our rarest and most premium products. Today, we officially unveiled the next evolution of our flagship lifestyle brand, Ozone, a defining milestone in its history. The new Ozone is a celebration of our people, the cultivators and product experts whose passion for the plant drives everything we do. Their dedication has elevated the quality and consistency of our products across markets, and this relaunch reflects that progress. It is about delivering an elevated and dependable experience for our customers in every category we serve. The updated visual identity enhances shelf presence while reflecting the enhanced quality within each package. The new website and online apparel storefront expand the brand's presence, creating touch points across both physical and digital spaces. The relaunch has begun in Illinois, Massachusetts, and New Jersey with other key markets to follow in the coming quarters. As part of the brand's transformation, we will also be launching the brand's first full-spectrum gummies, new macro-dose gummy offerings, additional flower strings, and new liquid diamond and live resin vapes. This rebrand sharpens our focus on the customer and underscores our commitment to quality and a dependable experience across every category we serve. There are several other exciting launches planned across product lines in 2026, with the ozone refresh marking a key step in elevating the quality and distinctiveness of our in-house brands while continuing to target areas of untapped opportunity. From a regulatory standpoint, we are hopeful that the rescheduling rulemaking process is completed in a timely manner. While this catalyst is significant, short of federal legalization, We believe our approach to remain disciplined, consistent, and focused on execution across our markets will position us for long-term success. Additionally, we believe another potential catalyst is the hemp product ban, scheduled to be enacted in November of this year. The intoxicating hemp market has been estimated at upwards of $20 to $30 billion and has grown in parallel to the cannabis market, selling the exact same products without regulation, licensing, or 280E taxation. This hemp market explosion further proved the incredible demand for THC and the potential revenue growth available for our industry. It is estimated that upwards of 40 to 50% of the intoxicating hemp market revenue could transition back to the regulated market. We look forward to this potentially large catalyst if it's enacted as scheduled before the end of the year. With that, I will now hand the call over to Roman to discuss our financial performance for the fourth quarter and full year.