Cresco Labs Inc

day and welcome to Cresco Labs first quarter 2025 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 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 first quarter 2025 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 first quarter earnings press release, which has been filed on CDAR and is available on our investor relations website. On Friday, May 30, 2025, we filed the company's quarterly financial statements and MD&A for the quarter ended March 31, 2025, on CDAR and EDGAR. 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 most recent Annual Information Forum 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 our Q1 earnings call. Before getting into our financials, I want to briefly acknowledge the extended timeline for our filings and earnings release this quarter. Simply stated, our auditors needed additional time to complete the review of our first quarter financials. Please note that the financials as presented remain unchanged from what we were prepared to report on May 9th. We understand and share your frustration with such delay and we appreciate your patience during this process. With that, I'd now like to discuss the broader strategy guiding our financial decisions over the last two years. For the last two years, we've deliberately focused on generating cash and strengthening our balance sheet rather than chasing short-term revenue. That strategy continues to pay off. We entered 2025 with the flexibility and financial strength needed to navigate market volatility, complete our debt refinancing, and remain both strategic and patient as we invest thoughtfully for long-term growth. In Q1, we delivered $166 million in revenue in line with guidance. This reflects our successful plan of limiting sales to wholesale accounts with credit risk to reduce our AR exposure. We generated $82 million in adjusted gross profit and $36 million in adjusted EBITDA. Our push for efficiency helped offset the lower operating leverage and minimize margin impact. Most importantly, these actions translate into strong cash results. We generated $30 million in operating cash flow and ended the quarter with $162 million in cash, our highest balance in the past three years. We're focused on ensuring our balance sheet remains in the strongest possible position to support long-term value creation. By staying disciplined and thoughtful in how we deploy capital, we're positioning Cresco Labs to drive margin expansion, gain market share, and invest in sustainable growth when the right opportunities arise. With that, I'll walk through the three strategic pillars we're executing against to build the strongest and most valuable Cresco Labs for the future. Number one, we're ensuring we have the most strategic footprint. We're expanding our footprint, intentionally prioritizing depth over breadth and profitability over revenue for its own sake. We're proud of our ability to drive cost-effective scale and consistent quality in our markets, and our cash flow enables us to develop new states as long-term accretive opportunities. We're putting this to work in our highest margin in growth states. In Pennsylvania, where we're number one in branded market share, we opened our 18th dispensary last week and are in the process of bringing more cultivation rooms online to meet increased demand. In Ohio, another high growth market, we're on the verge of opening the first of three new dispensaries in the state, another example of low capex investments that drive high incremental cash flow. In Kentucky, we're excited to bring our capabilities to a new population and demonstrate what cannabis can do for their communities. At the end of April, Kentucky Governor Andy Beshear joined us to unveil our plans for one of the state's largest cultivation facilities in Winchester. We'll operate one of the state's two Tier 3 licenses, the largest available, and we're building relationships with local partners to ensure the success of our Kentucky operations. To help educate the public and policymakers, we recently gave tours of both our Ohio cultivation facility and the future site in Kentucky. It was a great opportunity to showcase the sophistication of our operations and provide a firsthand look at what a responsible, high-quality medical cannabis program looks like. We have a track record of being first to market, building leading operations, and investing to meet demand, and we're excited to do the same in Kentucky. By deploying capital selectively, we're strategically building a portfolio of cost-effective growth opportunities while also strengthening our core operations, setting us up for long-term value creation. We'll continue to evaluate new assets and additional state opportunities in our typically disciplined fashion. Number two, we remain the leader in branded wholesale products. Our branded product portfolio strategy is grounded in disciplined execution and deep consumer insight. In Q1, this focus helped us retain our number one market share positions in Illinois and Pennsylvania, two of our most strategically important markets, and maintain a top five position across all of our limited license wholesale markets. We're maximizing growth across our core markets by winning with independent accounts. In Q1, we served 13% more independent accounts than last year and saw independent growth increase across all core wholesale markets. We achieved this by continuously optimizing our portfolio for what independents need, using real-time consumer and market data. For example, in Q1, we brought nearly 40 unique new flavors to market across key product categories. Looking ahead, we're pushing this momentum with innovation in product technology, formats, and packaging. This includes next-generation premium vapes under the Cresco banner, new hardware and larger formats for high-supply vapes and edibles, and new form factors designed to capture incremental occasions. Our partners know they can count on us, not just for consistent execution, but also for a reliable pipeline of winning products. Whether it's proprietary strains, breakthrough formats, or trusted SKUs from brands like Florical or Good News, we're committed to delivering innovation that resonates with consumers and drives velocity on dispensary shelves. And number three, we're building a highly productive retail platform in the most strategic states. We continue to strengthen Sunnyside's competitive position, fostering loyalty, building bigger baskets, and selling more units than we did a year ago. Across our footprint, Sunnyside dispensaries consistently outperform, generating approximately 25% more revenue per store than the state average. Ohio, our newest adult use market, is a great example of our playbook in action. Our retail team managed the adult use transition exceptionally well, scaling up our five stores to meet new demand. In Q1, we processed over twice as many transactions as we did a year ago, gaining market share and growing sales 4% sequentially. In markets like Illinois, competition has intensified significantly, with over 30% increase in dispensaries over the past year. This makes every touchpoint with our shoppers even more important, a key differentiator for us. Nearly 80% of our transactions come from sunnyside.shop, allowing us to build relationships and gather data That goes well beyond the point of sale. We're generating strong customer loyalty with over 60% customer retention and a growing rewards program comprised of nearly 400,000 active members. Competition is only getting tougher and customers are looking for differentiation beyond price. Sunnyside is meeting the challenge and pulling new levers to make shopping more convenient, more enjoyable, and more rewarding. In closing, our overarching goal remains unchanged. to enhance the quality of our earnings, generate consistent cash flow, and position ourselves as a long-term leader in cannabis. This quarter was no exception. We made disciplined decisions to strategically fuel future growth and reinforce our balance sheet so that we're positioned to be a reliable, long-term leader in this highly volatile industry. With that, I'll hand it over to Sharon to walk through our Q1 performance in more detail.