The Cannabist Co Hldg

Good day and welcome to the first quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then one on your touchtone telephone. If anyone should require assistance during the call, please press star then zero to reach an operator. As a reminder, this call may be recorded. I would like to turn the call over to Lee Evans, Senior Vice President of Capital Markets. You may begin.

Thank you, Operator. Good morning, and thank you for joining ColumbiaCare's first quarter 2022 earnings conference call. With me today are Nicholas Vita, our Chief Executive Officer, David Hart, our Chief Operating Officer, Derek Watson, our Chief Financial Officer, and Jessie Shannon, our Chief Growth Officer. Earlier this morning, we issued a press release reporting our first quarter 2022 results, which we also filed with applicable Canadian securities regulatory authorities on CDAR and the U.S. Securities and Exchange Commission on EDGAR. A copy of this release is available on the Investors section of our 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, including statements relating to the Cresco Labs transaction, 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 Factors section of our annual Form 10-K, dated March 31, 2022, as filed with applicable regulatory authorities and in subsequent securities filings. 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-GAAP financial measures, such as 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. ColumbiaCare 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 Nicholas Vita to get us started. Nick?

Thank you, Lee, and good morning, everyone. I'd like to thank you all for joining us this morning to discuss our quarterly performance, macroeconomic and state-level dynamics, and the operational opportunities, strengths, and headwinds we are encountering as we continue to execute against our strategic objectives. Before we jump into the results of the first quarter, let me begin with a quick update on our planned combination with Cresco Labs. As you may have seen via press release this morning, we did not receive a second request for more information under the Hart-Scott-Rodino review. As the notice period expired this past Friday night, this is a significant milestone in our progress towards close, and we're very pleased that we can now move forward knowing that this has been cleared. We are currently working through the proxy circular clearance process with the SEC, and once completed, we will move forward with the shareholder approval process. Additionally, I am pleased to report that we have officially initiated the divestiture process in the markets where we have regulatory overlap. We're in the early stages of that process, but our the definitive leader in the cannabis industry. We will share any material updates from the divestiture process when appropriate to do so. In the meantime, we continue to operate as a standalone company and are managing the business with prioritized emphasis on driving profitability while we leverage the capital investments we've made to optimize the near-term growth opportunities materializing throughout ColumbiaCare's portfolio over the next 12 to 18 months. Turning to the results of the first quarter, along with updates on more recent developments in our mid-term strategy, we saw more than 43% growth in top-line year-over-year, and although we declined sequentially due to factors ranging from market cyclicality to inflationary pressures impacting the consumer's wallet, performance was good on a year-over-year comparison. As the largest operator in Colorado, consistent with Q1-21, the expected first quarter seasonal weakness was particularly in the wholesale market, followed by followed the relative strength of Q4-21 that drove significant wholesale revenue and gross margin expansion for ColumbiaCare. As David will discuss in more detail, our wholesale revenue fell sequentially and underperformed in comparison to our internal expectations driven mostly by the greater than expected magnitude of the markets of locality during Q1 in Colorado and the decision to retain all inventory in New Jersey as it became clear that adult use was being activated towards basically the second quarter. There were other decisions that we made in response to the ever-increasing state-level complexity in the pricing environment, but we are up year-over-year in several key metrics. As we have been shifting our operational emphasis from revenue growth to profitability, we remain focused on driving margin improvement and are seeing the impact of our strategic plan. Even in a declining top-line environment, we saw gross margin improvement of 150 basis points sequentially and nearly 700 basis points over the prior year. Adjusted EBITDA margin improved more than 930 basis points over company towards generating free cash flow to fund our growth, strategically using internally generated capital rather than external capital to capture the enormous opportunities ahead of us. Derek will provide more detail on the financial results of the first quarter and our outlook shortly. First, though, I would like to focus on our discussion on the milestones recently achieved, which give us continued confidence in our growth plan and execution. Despite the complicated environment, we are on our front foot and leaning into the markets that will propel growth. As I've discussed in the past, our first growth pillar is growing our retail network in key markets. Although we won't see a full quarter's impact of these openings until Q2, throughout Q1 we successfully executed five additional store openings, including four in West Virginia and one in Virginia, bringing our Virginia total to four as of today. In the first quarter, we also converted two dispensaries to the cannabis brand, bringing us to 31 total locations under the cannabis banner out of 84 active retail locations. David Hart will share more detail on these openings as well as our other significant capital investment initiatives in just a few moments. Another significant component of our growth strategy is positioning ColumbiaCare in key strategic markets ahead of adult use adoption. As you know, subsequent to the end of the first quarter, New Jersey transitioned to adult use on April 21st. We were thrilled to be part of the day one adult use sales in New Jersey with our cannabis stores in both Vineland and Deptford seeing exceptionally strong store traffic and fervent community support that continues today. As of Q1, Virginia overtook Ohio in spite of Ohio's strong performance and is now one of our top five markets for both revenue and adjusted EBITDA for the first time. We have eight additional locations in development in Virginia and are excited to see that market growth accelerate when the new patient registration process takes effect in July. Columbia Care is exceptionally well positioned in New Jersey and Virginia as well as New York ahead of the significant market shift that is expected there. Other notable achievements during the first quarter included continued improvement in both cultivation productivity and potency, as well as continued brand strength. Our ColumbiaCare brands, such as Classics, Seeds & Strain, 777, achieved a record percentage of total sales and helped drive the sequential improvement in gross margin. As you can see from these accomplishments, we remain on a path to execute our strategies, and today we reiterated our guidance for the full fiscal year. As Derek and David will share with you, the market environment driven by it Magnet consumer, labor costs and shortages, and supply chain disruptions remains very, very difficult. In fact, even more difficult than at the end of last quarter. But the Columbia Care team continues to execute. We are confident in the catalyst and growth trajectory for the rest of 2022 and remain excited about the Cresco transaction, which will position our companies to be the clear leader in cannabis. With that, let me turn the call over to Derek. Derek?