Ayr Wellness Inc

Ladies and gentlemen, please stand by. Your conference call will begin momentarily. Once again, ladies and gentlemen, please stay on the line. Thank you. THE END Thank you. Thank you. Thank you. Thank you. THE END Welcome to the AIR Wellness Fourth Quarter and Fiscal Year-Ended 2020 Earnings Call. Joining us today are AIR CEO Jonathan Sandelben, the company CFO Brad Asher, and the company CEO Jennifer Drake. The company will discuss forward-looking matters on this call, including targets for revenue and adjusted EBITDA. The forward-looking information is subject to the assumptions and risks as described in the company's management discussion and analysis for the quarter-end year-end of December 31, 2020. As well, we remind you that adjusted EBITDA is a non-IFRS measure, we refer you to the reconciliation to IFRS measures and other disclosures concerning non-IFRS measures contained in AIRS management discussion and analysis for the quarter and year end of December 31st, 2020. I will now turn the call over to AIRS CEO, Jonathan Sandelman.

Thank you and good morning, everyone. 2020 was a year of transformation for AIR. We are excited to report a strong finish to the year with fourth quarter revenues up 48% year over year, and adjusted EBITDA of over 100%. We continue to maintain margins at the high end of the industry. While we continue to deliver strong operating results throughout the year at our market-leading operations in Massachusetts and Nevada, the air story of 2020 was about building a foundation for a new air wellness, a bigger and better MSO. We spent the end of 2020 aggressively expanding our footprint and investing in our business to be positioned for exceptional growth in 2021. We began 2020 as a two-state MSO, and we begin 2021 as a seven-state top five MSO. We are not done yet. 2020 was also a year of great change for the industry. as new states move forward with adult use programs, and the federal election shifted the tides in Washington. As we enter 2021, we enter with a leading scale, talent, and recently bolstered balance sheet that currently has more than $236 million of cash. In the fourth quarter, we started investing in the additional infrastructure and people, which will prove critical as our new operations in Pennsylvania, Florida, New Jersey, Arizona, and Ohio begin to ramp in 2021. Things are moving quickly. We opened our second air wellness dispensary in Pennsylvania at the end of February. Two more will follow early this summer, and the final two by the end of the year. The first phases at both of our cultivation facilities are on track for harvest this spring. one in April and one in June. We expect Pennsylvania to be a meaningful contributor both to revenue and EBITDA in the back half of 2021. In Florida, we closed on our acquisition of Liberty Health Sciences in just over two months, one of the fastest public-to-public transactions ever, and our team is already fast at work to begin the integrations. We have a strong team in place led by Darren Potter, who joined Liberty in November. We recently hired Mike Medora from Grow Healthy to spearhead the retail expansion from 31 stores to 42 stores or more and drive a more robust delivery business. As I've said many times, we firmly believe that everything we do starts with the plans. And we continue to demonstrate that by investing additional resources in our cultivation facility and team. Many of whom are already at work in Gainesville with Darren to bring the important asset up to the productivity levels we know are achievable. We already have five new outdoor hoop houses planted and are at work replacing greenhouse panels and HVA systems at the indoor facility. You will see the same focus on quality cultivation when we close on Arizona and Ohio later this month and New Jersey this summer. We continue to make progress on our organic growth opportunities as well. We opened our sixth store in Nevada, where we continue to grow and gain share in an economically challenged environment. We look forward to the return of tourism to the state. which is the lifeline for the majority of our local dominant customer base. In Massachusetts, we're moving forward with our plans for our three adult use stores, clearing local zoning boards and getting construction underway. The timing with the CCC is always unpredictable, but we continue to drive the process forward as fast as we can. In the meantime, our medical dispensaries and wholesale businesses remain strong. We have begun construction of a new cultivation facility, which will triple our output, enabling us to grow our wholesale business at the same time supply our adult use stores. While you don't see the impact of these investments in our Q4 revenues, you will see our revenue and EBITDA ramp throughout 2021. Our CEO, Jen Drake, will talk through the specifics of this later. The full impact will be seen in 2022, where we've stated our expectations at least $725 million in revenue and $325 million of EBITDA is achievable based on our current operations, almost six times the $56 million of EBITDA we reported for 2020. Just a few final words before I turn the call over to Brad. I want to welcome the Liberty shareholders to AIR. We appreciate your strong support and faith in us and know that we have a bright future together. Finally, I want to welcome the Liberty employees to the AIR family. At AIR, we believe that each member of our team, now totaling over 1,100, is an essential part of our success. I want to thank you all for your hard work and dedication as we build on our mission to deliver the highest quality cannabis, the best customer experience, and to be a force for good in our communities. This is what our new corporate name, Air Wellness, stands for, enriching the lives of our customers, our teammates, our neighbors, through cannabis-inspired wellness and wonder. I look forward to doing many great things together in the future. With that, I'll pass the call over to our CFO, Brad Asher, to walk you through our financial results.

Thanks, John. We are excited to report record results across the board for the quarter and year. In 2020, sales increased to $155 million for the year. with the fourth quarter contributing a record 47.8 million of sales. This represents a 47% increase over Q4-19. This increase in sales was driven by consistent operational improvements to the business, with growth across both retail and wholesale business lines. Our adjusted EBITDA increased to 55.7 million for the year, with the fourth quarter contributing a record 19.4 million of EBITDA. This represents a 110% increase over Q4 of 19. The increase in adjusted EBITDA was primarily driven by robust sales across our markets, while maintaining 58% gross margins. This profitability more than offset the ramping of G&A and sales and marketing, which were up 27% on a year-over-year basis, as we invest in talent and infrastructure ahead of the upcoming acquisitions that John mentioned earlier. Moving on to the balance sheet, we continue to have one of the strongest capital positions in the industry. In 2020, we raised $110 million with our debt offering and $48 million from the exercise of warrants, both contributing to our year-end cash position of $127 million. This is compared to just $8.4 million of cash at the end of 2019. And subsequent to year-end, we announced an equity offering in January, which further reinforced the balance sheet with another $118 million USD. In addition to the financing sources of cash, we continue to generate industry-leading free cash flow with over $7 million and $36 million in cash from operations during the quarter and year, respectively. This is a 10x increase from just $3.6 million of operating cash flow in 2019. Our strong cash position is a vote of confidence from the markets, and not only funds our announced acquisition and CapEx plans, but allows us to capitalize on future opportunities in new states and go even deeper in our existing markets. In addition, we are pleased to announce that we are transitioning to U.S. GAAP for 2021, so this is effectively our last quarter reporting on an IFRS basis, and our Q121 financials will be our first presented in U.S. GAAP. This change will position us to be early movers for an uplifting in the U.S. markets upon eligibility, which, needless to say, would dramatically improve our liquidity and lower our cost of capital. As a result of our status as a permanent foreign private issuer, or FPI, we have the advantage of filing under the MJDS, which allows us to make an election for U.S. GAAP reporting. In terms of the U.S. GAAP to IFRS differences you should expect to see going forward, it is important to note these differences are all in line with industry norms and not unique to AIR in any way. Inventory and biological assets are two of the areas that show the greatest differences between IFRS and GAAP in our industry. Under GAAP, we no longer have the biological asset fair value requirement and all fair value is removed from inventory. In addition, the majority of our leases are currently classified as financing leases under IFRS, an expense or depreciation of interest, whereas under GAAP, we expect these leases to be considered operating leases and therefore included in EBITDA as a G&A expense. While this doesn't impact cash flow in any way, it will have an impact on reported EBITDA. We will provide additional details regarding our transition to GAAP. on our Q1 conference call, but we are excited about this accounting change and expect us to simplify our statements by removing many of the fair value adjustments required under IFRS. Lastly, I want to add that we have built our accounting and finance departments to scale by committing to a consistent tech stack and leveraging automation. Thanks to the hard work of our teams, we have seen great results in integrating our acquisitions thus far, and I'm proud to announce that our Florida business is already fully migrated and live in our accounting software today, less than two weeks post-closing. I'll now pass the call over to our COO, Jennifer Drake.