Cresco Labs Inc

Good day and welcome to Cresco Labs' fourth quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then one on your touchtone phone. To withdraw your question, please press the star key followed by two. Please note this event is being recorded. I would now like to turn the call over to TJ Cole, Senior Vice President, Corporate Development and Investor Relations for Cresco Labs. Please go ahead.

Thank you. Good morning and welcome to Cresco Labs' fourth quarter 2024 earnings conference call. On the call today, we have Chief Executive Officer and Co-Founder Charles Bochtel, Chief Financial Officer Sharon Shuler, and President Greg Butler, who will be available for the Q&A. Prior to this call, we issued our fourth quarter earnings press release, which has been filed on CDAR and is available on our investor relations website. These preliminary results for the fourth quarter and full year 2024 are provided prior to completion of all internal and external reviews, and therefore are subject to adjustment until the filing of the company's quarterly financial statements. We plan to file our corresponding financial statements and MD&A for the quarter and year ended December 31st, 2024 on CDAR and EDGAR later this week. Before we begin, I want to remind you that statements made on today's call may contain forward-looking information. Actual results may differ materially. The risk, uncertainties, and other factors that could influence actual results are described in our earnings press release and in the annual information form and MD&A filed with the securities regulators. This call also contains non-GAAP measures also outlined in our earnings press release and in the MD&A filed with the securities regulators. Please also note that all financial information on today's call is presented in U.S. dollars and all interim financial information is unaudited. With that, I'll turn the call over to Charlie.

Good morning, everybody, and thank you for joining us on our full year 2024 earnings call. Two years ago, we set a clear goal to streamline operations and generate more cash while maintaining our wholesale and retail leadership. This commitment drove every decision we made. finding efficiencies, improving execution, and prioritizing profitability to make the strongest Cresco Labs possible. I want to highlight the exceptional work that our team has done this year. In 2024, we really focused on the quality of our revenue. For the full year, we generated $724 million in top line. While slightly lower year over year, we held absolute adjusted gross profit dollars flat, and we reduced adjusted SG&A by $29 million. The result was an adjusted EBITDA of $200 million, a $26 million improvement, and most importantly, $132 million in operating cash flow, a $74 million improvement from last year. We truly demonstrated our focus on the quality of the revenue. Demand for cannabis continues to grow. And while price compression persists, lower prices also make cannabis accessible to more consumers than ever. In Q4, price compression across some of our core markets created greater demand than expected, and we found ourselves with supply constraints. This limited our ability to fully capitalize on this momentum in the quarter, but we're rapidly turning on the extra capacity in our facilities to seize the opportunity. By unlocking additional production, we'll drive volume growth to offset price decline, optimize our footprint, and capture greater market share, fueling sustained profitable expansion. Profitability is still a key focus in 2025. We'll continue to strengthen our cash position by driving productivity in our core markets and prioritizing the quality of revenue. Now I'll walk you through the three strategic pillars we're executing against to build the strongest and most valuable Cresco Labs for the years ahead. Number one, we're ensuring we have the most strategic footprint. We're ready to expand our highly efficient footprint through two pathways. One, investing to reinforce our core markets and two, strategically entering new markets with favorable regulatory structures and competitive advantages. This balanced approach optimizes capital deployment, ensuring a mix of near-term and long-term returns while diversifying our market exposure. In line with this strategy, last year we strengthened our position in Pennsylvania by adding three new dispensaries. In Florida, We invested in our operations to enhance productivity, deliver higher quality, and lower prices, nearly doubling our market share year over year. In 2025, we're building on this success with plans to open additional stores in Pennsylvania, Florida, and Ohio. Our Year of the Core strategy prioritized depth over breadth, refining the capabilities that drive cost-effective scale and quality in each of our markets. With these strategies in place, we can extend our success in new markets while maintaining strong margins and profitability. Kentucky is the first of these new markets, a strategic addition to our portfolio. The state's newly launched medical cannabis market is backed by common sense regulations, including well-structured cultivation canopy and dispensary licensing frameworks, creating a favorable competitive landscape for long-term success. We're proud to be one of only two Tier 3 cultivation licenses in Kentucky, giving us up to 25,000 square feet of canopy, and that's more than 20% of the total canopy allowed in the state. With our proven speed to market capabilities, this license lets us scale efficiently, serve patients quickly, and continuously reinvest in our facilities to meet demand, just as we've done successfully in Illinois, Pennsylvania, and Ohio. Kentucky is a significant long-term growth opportunity, and we're excited to share more about our plans in the coming quarters. We're building a very solid growth pipeline. While adding to our core is a priority, trust that we will remain patient, ensuring we enter the right markets at the right time and right price. Number two, we remain the leader in branded wholesale products. Throughout the entire year, we demonstrated the strength of our brands across all major categories, including branded flour, concentrates, vapes, and edibles per BDSA. In 2024, we maintained our number one share position in Illinois, Pennsylvania, and Massachusetts, while also driving share growth in Ohio. This performance underscores our ability to execute, compete, and deliver what customers want in all four of our core wholesale markets. By continuously optimizing our cost structure without compromising quality, we're delivering category-leading products to customers while actively offsetting price compression through efficiency gains and product innovations. These efforts allow us to stay competitive, protect margins, and drive long-term sustainable growth. And number three, we're building a highly productive retail platform in the most strategic states. For the full year, we strengthened our competitive position across our markets. Our dispensaries were already outperforming the industry, and we expanded that lead even further, from being approximately 20% more productive than the average store in a market to being 30% more productive. Again, this sustained outperformance comes back to execution. Every aspect of our operations, including store experience, inventory management, and customer engagement, is built on the Sunnyside standard, leveraging established processes and proprietary technology to maximize sales. Even in the face of 15 to 25 percent price compression across our markets, We maintained retail revenue, year over year, while improving profitability, this is a phenomenal example of strategy capabilities and execution. This expertise is transferable and can be monetized in both new and underperforming dispensaries like in Pennsylvania, where we more than doubled the productivity of the stores, we acquired in 2024. We'll lean on these skills as we identify new expansion opportunities, including distressed and cost-effective assets where we can add value quickly and as we move into new markets. In closing, 2024 was the culmination of our team's tremendous effort to refocus on operational excellence and prioritize cash flow above all else. We successfully reset and repositioned the business for sustainable growth. In 2025, we're extending our focus to strategically deploy capital to create growth and maximize returns for the years ahead. It's a straightforward approach. Execute at the highest level, generate cash, reinvest in high ROI opportunities, and repeat. With that, I'll hand it over to Sharon to walk through our Q4 performance in more detail.