The Cannabist Co Hldg

Hello, and welcome to the Cannabis Company first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the call over to Asia Gilbert, you may begin.

Thank you, operator. Good morning, and thank you for joining the Cannabis Company's first quarter 2024 earnings conference call. With me today is Chief Executive Officer David Hart, President Jesse Shannon, Chief Financial Officer Derek Watson, and Senior Vice President of Capital Markets and Investor Relations Leanne Evans. Earlier this morning, we issued a press release reporting our first quarter 2024 results. A copy of this release is available on the investor section of our corporate website, where you will be able to access a replay of this call for up to 30 days. Certain remarks we make today regarding future expectations, plans, and prospects for the company constitute forward-looking statements within the meaning of applicable Canadian and U.S. securities laws. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, which we disclose in more detail in the risk factor section of our annual Form 10-K for the year ended December 31, 2023, which has been filed with applicable regulatory authorities. Any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent date. While we may update any such forward-looking statements in the future, we specifically disclaim any obligation to do so, except as otherwise required by applicable law. Also, please note that on today's call, we will refer to certain non-GAAP financial measures, such as EBITDA and adjusted EBITDA. These measures do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. The cannabis company considers certain non-GAAP measures to be meaningful indicators of the performance of its business in addition to, but not as a substitute for, our GAAP results. A reconciliation of such non-GAAP financial measures to their nearest comparable GAAP measure is included in our press release issued earlier today. With that, I will turn the call over to David Hart to get us started. David?

Thank you, Asia. Good morning, everyone, and thank you for joining us today. We're pleased to discuss the results of the first quarter and, more importantly, share how our team is driving this business forward in 2024 and beyond. As we outlined on our fourth quarter earnings call in mid-March, we've clearly defined our mission for 2024, to build a better company, not just a bigger company. To that end, we've established four key areas of focus. First is enhancing the customer journey for existing medical and adult use customers today, as well as for the new customers of tomorrow as cannabis transitions to adult use in more of our markets. Second is capturing supply chain efficiencies and sweating the retail, cultivation, and manufacturing assets that we've already invested in. We're actively working to leverage the underutilized capacity through wholesale growth and strategic partnerships with third-party brands. Third, we will capitalize on the next chapter of Canvas evolution as adult use adoption leads to increasing TAM and the creation of new market segments. And fourth, we will continue to improve our capital structure to ensure our ability to grow responsibly over time. I'm pleased to report that we have made and continue to make meaningful progress on each of these initiatives. We are doing so from the ground up. As I mentioned last quarter, Jesse and I have been actively meeting with our leadership across the retail, cultivation, and manufacturing parts of our business. Those who are on the front line of our operations across the company have the clearest line of sight to what we need to do and what needs to be improved. Some of their ideas are small, some are large, but collectively they are transformational. We are changing the structure of the organization to drive changes efficiently. We are implementing the systems and software solutions to support greater transparency, connectivity, and generation of insights to help steer the business. We are also making concerted efforts to enhance company culture as we engage the team in this new chapter. As a result, the organization is aligned, empowered, and excited to build a better business, and our momentum is building. As examples of our progress, let me highlight a few key developments we achieved in the first quarter which we view as the green shoots indicative of early progress towards our goals. Regarding margins, we achieved a 500 basis point improvement in adjusted gross margin in Q1 compared to the fourth quarter of 2023, and improved adjusted EBITDA by more than 250 basis points over Q4. These improvements were driven by asset utilization, improved margins at the retail level, and early wins with brand partnerships. On wholesale, we saw a substantive improvement in wholesale margins, as well as a decrease in the overhang from underutilized facilities that we have previously referenced. We launched new strategic brand partnerships in the quarter, substantially broadening our wholesale product offering and increasing the mix of finished goods. On balance sheet management, we completed a convertible debt offering in March in order to satisfy the remainder of our May 2024 maturity. We reduced the principal of our 2025 maturity through an exchange, and we continued to implement cost reduction initiatives at the corporate level. We also completed the exit of a non-core market with the closing of the asset sale in Utah. and we continue to evaluate any underperforming assets in our portfolio. As you can see, we are making meaningful progress across our organization. One of the biggest initiatives is improvement in our wholesale operation, not only honing it in to run more efficiently, but also to run it more profitably by shifting our mix towards finished goods and by partnering with select brands to augment our product offering. In just a few minutes, Jesse will provide more details on our wholesale and partnership efforts. Before that, however, I would like to address the recent reports regarding the potential decision by the DEA to recommend the rescheduling of cannabis to Schedule 3 from Schedule 1. As is likely lost on no one listening to this call, we are witnessing historic change in policy at the federal level. While the timeline remains uncertain, the rescheduling of cannabis has far-reaching impacts on our industry, undeniably for the positive. With the reclassification to Schedule 3 and the resulting end of 280E, The entire industry will benefit from a more normative cost structure, substantially lowering our cash tax costs, freeing up capital and cash flow for debt reduction and investment and growth. I have to say, we look forward to shedding the disproportionate tax burden. Derek will address the company's outlook related to 280E momentarily. At the state level, we continue to expect a number of our markets to flip to adult use, such as Ohio, Delaware, and Virginia. We are aggressively positioning ourselves for success in these markets. We also continue to expand in states that have more recently transitioned to adult use, such as New Jersey and Maryland, where we are growing both the wholesale business and our retail footprint. So let me summarize where we are and where we are going. First and foremost, we have a strengthened strategic focus. We are moving fast. We are prioritizing profitability, enhancing cash flow, reducing underutilized capacity, strengthening our balance sheet, and building a sustainable business. we will continue to capitalize on a strategic footprint with a specific focus on evaluating the potential of non-core and less profitable assets. We are leaning into the most profitable markets and those that have future optionality to drive growth. Supporting this effort is a key focus on improving operational efficiencies through better systems and processes, especially in retail and back-of-office functions. In turn, this will drive better financial health through cost reductions and effective capital allocation. Most importantly, we will continue to align our strategies with market demands, focusing on higher margin products and partnerships to drive sustainable shareholder value over the midterm. We look forward to continuously implementing operational improvements into exiting 2024 in a materially improved position, poised to compete more effectively. With that, I'll now turn the call over to Jesse to give you more color in some of the play-by-play. Jesse?