Cresco Labs Inc

Good day and welcome to Cresco Labs second quarter 2026 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 touch tone phone. To withdraw your question, please press the star key, then one again. 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. Welcome to Cresco Labs second quarter 2026 earnings conference call. On the call today, we have Chief Executive Officer and Co-Founder Charles Bachtell, Chief Financial Officer Sharon Schuler, and President Greg Butler, who will be available for the Q&A. Prior to this call, we issued our second quarter earnings press release, which has been filed on CDAR and is available on our investor relations website. These preliminary results for the second quarter 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 filed our corresponding financial statements and MD&A for the quarter ended June 30th, 2026 on CDAR and EDGAR earlier this morning. 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 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 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, everyone. Thank you for joining Cresco Labs' second quarter 2026 earnings call. Last quarter, we said that Q1 was the baseline for our 2026 growth, and we would build from there. Q2 delivered ahead of those expectations. We generated $173 million in revenue, up 15% sequentially. We produced $89 million in adjusted gross profit at a 52% margin, $40 million in adjusted EBITDA at a 23% margin, up 20% sequentially showing operating leverage, and we generated $15 million in operating cash flow. These results reflect new dispensaries, market stabilizations, and our continued operating discipline that converts growth into profitability in cash. Before I go further, I want to thank the Cresco team. Quarters like this don't happen by accident. They're the result of a highly focused team that's executing remarkably across wholesale and retail while knocking every new store opening and integration out of the park. This morning I'll walk through the quarter by touching on three themes. First, executing on our multi-pronged growth strategy. Second, winning where we operate. And third, unlocking equity value through federal reform. First, our growth strategy. Our growth strategy runs along two planes. Where we already lead, we go deeper. Where we're not operating yet, we find compelling inroads. And in both cases, we have organic execution and disciplined M&A in our toolbox. Pennsylvania is a clear example of reinforcing our position as the industry's consolidator of choice through strategic M&A. In Q2, we completed our first quarter operating nine acquired dispensaries under a managed service agreement that allowed us to begin establishing our operating standards and capture revenue ahead of close, which is pending state approval. The transaction has been immediately accretive. Without rebranding a single dispensary, we've increased the store's gross profit dollars by 11% compared to pre-acquisition baselines. This means the largest value unlock is still ahead of us as we introduce the Sunnyside brand and deploy our complete operating playbook after we close and take ownership. The Pennsylvania story is replicable because integration and operating capabilities are at the center of our consolidation approach. We do not merely tack acquired stores onto our platform. Our operating playbook lets us measurably improve them. We hold the number one branded share in markets like Pennsylvania, Illinois, and Massachusetts, and Sunnyside stores generate over 30% more revenue than state averages. So when we apply our brands and operating playbook, we're not only capturing internal margin, we're also selling more to more loyal customers at Better Economics. That's why assets are worth more inside of our platform. We're also leaning into organic opportunities to build positions in tomorrow's markets at today's entry costs. In Kentucky, our operations have shifted from build out into revenue generation. Our first branded products hit dispensary shelves in late June, and the first Sunnyside dispensary is on track to open in the fourth quarter. Above all, our growth strategy remains disciplined. Every opportunity is evaluated against clear thresholds, accretive economics, low integration risk, and markets with structural advantages. Second, we win where we operate. For Cresco, winning means leading product categories where brands matter most and running the most productive retail in our markets, all while rising above competitive and pricing pressures. In the second quarter, we are winning in core markets. Pennsylvania, another clear example with depth and execution compounding. We currently hold a record setting lead over our competition with the number one branded share in the state at 16%. When our latest acquisition closes, Sunnyside will also be the number one retail banner in Pennsylvania. While Pennsylvania demonstrates winning when we buy, Ohio demonstrates winning when we build. Sunnyside had the number two retail share position in the state, and our newest dispensary has consistently performed better than our peers. This is by design. We followed a careful site selection process, we opened doors quickly, and we started scaling from day one. On the cultivation side, our SOPs and innovative growing approach are enabling us to get more leverage out of the assets we already own. More supply at lower cost without sacrificing the quality that our brands are built on. In Illinois, competition intensified again this quarter as increasing vertical integration continues shifting the state's retail landscape. And still, we hold the number one position in flour, concentrates, and edibles. And we've held our revenue per gram of flour roughly even as the broader market compresses. Sunnyside remains the number one retailer in the state and our stores continue generating per store revenues well above the state average. That same discipline is also paying off in Massachusetts where a year focused on operational improvements is now showing in the numbers. Net wholesale revenue grew 27% year over year and we hold the number one brand portfolio in the state led by our position in flour. Execution is the through line that connects every one of those markets. From the grow rooms to the dispensary shelves, our teams keep getting more out of the assets we already own, better yields, better products, more productive stores, stronger brands. This is what allows us to hold share in competitive markets and expand strategically, all while protecting margin. In closing, for the last part of my prepared remarks, I want to step back from the quarter and touch on how we are thinking about equity value creation as the federal landscape changes. For years, the cannabis industry has grappled with the significant disconnect between the quality of businesses it's built and the value the market assigns to them. That gap is structural. Federal illegality, punitive taxation, and restricted access to capital and investors have all obscured the sophistication this industry has already achieved. Now, for the first time, those structures are finally changing. Rescheduling is the first true federal reform this industry has ever achieved. Rescheduling is the first true federal reform this industry has ever achieved. Its significance for patience and cultural legitimacy cannot be overstated, and it directly improves the underlying economics of this business. Removing 280E means eliminating the unfair tax burden that's weighed on this industry's income statements from the beginning. Net income improves, balance sheets strengthen, and operators can reinvest more of every dollar they earn. That is how the industry truly matures into America's next great growth sector. We share our shareholders' excitement and optimism as doors open to U.S. cannabis listings on U.S. exchanges. Rescheduling has changed the listing analysis. Companies in our sector are starting to complete that process. At Cresco, we're already executing on everything within our control, and when federal regulations allow, we will be ready to go. At the same time, we're also having conversations with leading banks and capital markets partners. As the broader cannabis environment normalizes, the opportunity set widens, whether that's through an uplifting, improving our cost of capital, or funding growth through M&A. We're making sure we're ready to move on whichever approach creates the most value for shareholders. Before handing it over to Sharon, I want to first share that she has decided to step down from her role as CFO. I want to personally thank her for building the financial infrastructure and discipline that positions us to pursue the opportunities I just described. We're grateful for her contributions and wish her well. We started our search for a new CFO for this next chapter, and we're working closely with Sharon to ensure a smooth transition. With that, I'll let Sharon walk you through the Q2 financial performance in more detail.