The Cannabist Co Hldg

Hello, and welcome to the ColumbiaCare first quarter 2021 earnings conference call and webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Lee Evans, Vice President, Investor Relations. Please go ahead.

Thank you, Kevin. Good morning, and thank you for joining Columbia Care's first quarter 2021 earnings conference call. With me today are Nicholas Vita, our Chief Executive Officer, Lars Boesgaard, our Chief Financial Officer, and David Hart, our Chief Operating Officer. Earlier this morning, we issued a press release reporting our first quarter results, which we also filed with the applicable Canadian Securities Regulatory Authorities on CEDAR. A copy of this release is available on the Investors section of the corporate website, where you will also be able to access a replay of this call for up to 30 days. Please note that the remarks we make today regarding future expectations, plans, and prospects for the company constitute forward-looking statements within the meaning of applicable Canadian 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 factors section of our annual information forum dated March 31st, 2021, as filed to the applicable regulatory authorities and posted on CEDAR. We remind you that 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-IFRS financial measures, such as adjusted EBITDA and gross profit margin, excluding changes in fair value of biological assets. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Columbia Care considers non-IFRS measures to be meaningful indicators of the performance of its business in addition to, but not as a substitute for, our IFRS results. A reconciliation of such non-IFRS financial measures to their nearest comparable IFRS measure is included in our press release issued earlier today. With that, I will turn the call over to Nick to get us started. Nick?

Thank you, Leigh, and good morning, everyone. Following a record-breaking year for ColumbiaCare in 2020, we've begun 2021 with significant growth across both top and bottom line. Once again, we are pleased to report record combined revenue and adjusted EBITDA for the quarter. In Q1, we generated $92.5 million in combined revenue, up 13% sequentially and 220% year-over-year. Eleven of our markets generated positive adjusted EBITDA during the first quarter, contributing to a record combined adjusted EBITDA of $10.4 million. an increase of $20 million year over year. Combined adjusted gross profit was $37.7 million in Q1, an increase of 316% year over year. We continue to build scale and leverage in our existing markets, leading to positive trend lines for growth and profitability. The sequential increase in combined revenue and adjusted EBITDA more than offset expected seasonality in Colorado and recently lifted COVID restrictions in California and was driven by substantial growth in Florida, Arizona, Illinois, and Ohio. Legacy ColumbiaCare same-store sales increased 60% year-over-year. Excluding contributions from our newly acquired businesses in California and Colorado, wholesale revenue within our legacy footprint grew over 700% year-over-year, a trend that we intend to maintain with an eye towards generating more than 50% of revenue from wholesale within the next 24 months, a significant increase from today's mid-teens percentage. Adjusted gross margin of 41% in 1Q is up 10 percentage points year-over-year and a continuation of the improvement from the 27% in 2019 and 38% in FY2020. Existing and maturing legacy markets showed continued improvement in gross margin in the quarter, with markets open 24 months or more, reporting an average of 42% for the quarter. Results in 1Q were impacted by expected seasonality in certain markets, in particular Colorado, and the decision to partially take offline and upgrade the largest indoor grow in Colorado in advance of the 100 days of heat during 2Q and 3Q, which we expect to result in accelerated gross margin and EBITDA expansion into 2Q and 2H 2021. In addition, recognizing the tremendous opportunity we have before us, We continue to deepen our state, regional, and national footprint by adding cultivation scale and automated manufacturing to capitalize on additional upside and rapidly expanding medical programs, and in particular, in markets transitioning to adult use across the country. We are deploying targeted human and financial capital throughout the first half of 2021 by building additional cultivation capacity and filling infrastructure gaps to maximize scale and drive profitability in the second half of 2021 and 2022. As we have seen in the past, CapEx spend continues to serve as a leading indicator for current quarter upticks in COGS until harvested finished goods are commercialized, translating into sustainable sequential gross margin improvements. Transition points like the ones we currently see throughout our portfolio represent extraordinary market windows to generate shareholder value. Significant strategic investments in markets such as New York, New Jersey, and Virginia will enable us to be the most efficient and scaled leaders in those markets and will cement our position as the industry leader on the East Coast. In New York, we are adding approximately 1 million square feet of cultivation and production capacity. In New Jersey, we expect to reach our maximum permissible limit for balloon canopy. And in other targeted states like Ohio, Virginia, Florida, and Massachusetts, we have continued to expand our cultivation, manufacturing, and retail capacity on a parallel path to meet current and future wholesale and retail demand. In New York, as an existing medical operator, we are leaning into cultivation with our latest acquisition of the single largest cannabis cultivation and production facility on the East Coast. In April, we announced the acquisition of approximately one million square feet of cultivation and production capacity in Long Island, New York. The sheer scale of the facility will allow us to maximize the production capacity in New York and provide us with the ability to leverage developed expansion capacity as needed based on the pace of New York regulatory developments and demand growth, which is expected to include the addition of flour in the second half of 2021. The first harvest and commercial sales for the medical program from this facility are expected to take place in Q4 2021. In New Jersey, retail sales growth outperformed expectations year-over-year and doubled sequentially. Two additional dispensaries will open in 2021, one in Deptford and a third by year end to match the expanded cultivation capacity, bringing us to the state maximum of three. We are also accelerating our canopy development with our first significant harvest expected later this year. Virginia, one of our newer markets, was our first market to be adjusted positive within 90 days of the first sale. Sales increased more than 50% each month of operations, and we achieved our first harvest in Q1. We are developing significant cultivation expansion plan to meet expected market demand as flour enters the medical program later on this year. As we've engaged in a number of accretive acquisitions, we have built a best-in-class integration team and implemented a methodical workstream-based approach to mitigate integration risk and ensure success in incorporating these entities and driving shareholder value. Brian Olson, our chief people and administrative officer, leads a team with decades of M&A integration experience that manages all post-closed M&A integration activity for ColumbiaCare. We established a project management office in November of 2020, staffed with talented resources experienced in leading strategic and tactical projects to mitigate negative impacts and to operationalize an execution and integration. We are fortunate to have such a talented team in sharing smooth integrations across our platforms. Before I turn the call over to Lars, I would like to quickly review some of the exciting initiatives we have in motion for the quarter ahead. Last week, we unveiled our new retail ecosystem called Cannabis, which is now open in Utah, a new market for Columbia Care. Our new retail brand introduces a higher standard to our in-store experience with a carefully curated selection of products, high-end storefront, interior design, and a unique technology-enabled personalized customer experience. providing access, support, and information without sacrificing the ability to offer a wide spectrum of product types and price points that our customers and patients have become accustomed to. The cannabis experience will be introduced across the country throughout the coming months, from San Diego to Boston, complementing ongoing nationwide rollout of our product brands such as Seed & Strain, 777, Press, Amber, and Classics. We look forward to continuously improving and innovating on these products we provide. As we look ahead, we remain on track to close the acquisition of Greenleaf Medical at the beginning of the third quarter, which will solidify our fully integrated leadership presence in Pennsylvania, Maryland, Ohio, and Virginia. Greenleaf is tracking well according to plan and expected to be accretive in both gross and EBITDA margins. We have dispensaries currently in development in Missouri. New Jersey, Virginia, and West Virginia that will open in 2021 with additional locations in the commercialization pipeline, along with the cultivation and product upgrades throughout our portfolio. As we are about halfway through the second quarter, we'd like to provide some insight into what we are seeing. The pickup in sales in late March was sustained in April, and we have very encouraging results out of markets like Illinois and Florida. We are on track to meet our expectations for the quarter and remain confident in our annual guidance of $500 to $530 million in combined revenue, adjusted EBITDA of $95 to $105 million, and combined adjusted gross margin of 47%. I'm proud of our entire team and organization and grateful for the communities we serve. Our first quarter results and the future growth drivers we simultaneously advance during the quarter will ensure that 2021 will indeed be a breakout year for ColumbiaCare. I will now turn the call over to Lars to review our Q1 financials.