Goodness Growth Hldgs Inc

Hello, and welcome to the Goodness Growth Holdings Inc. Third Quarter Earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, analysts may ask questions by pressing star 1 on the telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to Mr. Sam Givens with Investor Relations. Please go ahead, sir.

Thank you, Lisa, and thanks to everyone for joining us this morning. With me on today's call are our Chief Executive Officer, Dr. Kyle Kingsley, and our Chief Financial Officer, John Heller. Today's conference call is being webcast live from the investor relations section of our website. Dial-in and webcast details for the call have also been provided on slide three of today's presentation, which is also available on our website. Before we get started, I'd like to remind everyone that today's conference call may contain forward-looking statements within the meaning of US and Canadian securities laws. These statements are based on management's current expectations involve risks and uncertainties that could differ materially from actual events in those described in such forward-looking statements. For more information on forward-looking statements, please refer to cautionary note regarding forward-looking statements in today's earnings release. Now I'll hand the call over to Dr. Kinsley.

Thanks, Sam. Good morning, everyone, and thank you all for joining us this morning. I'll begin with a high-level review of our performance and recent business highlights, then John will provide a more detailed review of the financials and outlook before we open the floor to questions. I'll start on slide four of today's presentation where we provided a summary of results from the third quarter, which underperformed compared to our expectations due to factors we'll discuss on today's call. Total revenue of $13.4 million increased approximately 28% compared to the third quarter of last year, excluding discontinued operations. This performance reflects year-over-year growth in all of our markets and continued sequential growth in Maryland, Minnesota, and New Mexico. However, we experienced a sequential decline in revenue in Arizona and New York as a result of two distinct events, which also negatively impacted gross margin performance in the quarter. John will detail the specific revenue and margin impacts of these events later this morning. The first of these negative performance drivers was unfavorable weather in Arizona, which experienced one of the harshest monsoon seasons of the past decade and caused a substantial amount of lost biomass and revenue during the third quarter. Recall, unlike other publicly traded MSOs operating in Arizona, our exposure in the state is primarily our outdoor cultivation operation. And crop loss due to weather impacts and natural disasters is an inherent risk of operating outdoors, but we believe the long-term cost benefits of scaled outdoor cultivation justifies these risks, especially in Arizona where we believe there's a clear niche for low-cost biomass. The other nature of our operation at Olfenhead Farm obviously presents weather-related risks, which could create volatility in our performance. We acquired this asset in 2019 along with several other cultivation assets in the Southwest because we were attracted to geographic locations that were suitable for outdoor cultivation. Our team continues to believe that having optionality to source low-cost outdoor biomass at scale could have a meaningful impact on our manufactured product margins if interstate commerce of cannabis is allowed in the future. So despite these inherent weather-related risks, we like our current position as a wholesale biomass supplier in the Arizona market, and we're pleased to continue developing our expertise as a scaled outdoor producer with these assets. The second negative performance driver that impacted sequential revenue growth and margin performance during the third quarter was the non-recurrence of a high-margin wholesale bulk oil order in New York that occurred during the second quarter. Political climate in New York over the past several months has created a fair amount of uncertainty in the timing of the implementation of the adult use program. During the second quarter, we were optimistic that recreational use sales could commence potentially as early as next summer. With one of the largest current manufacturing facilities in the New York market, we believe we were in a position to capitalize on our inventory of distillate and bulk oil for manufactured products by increasing wholesale sales to other operators that were also preparing to ramp up inventories ahead of the beginning of adult use sales. At that time, we believed it was likely there would be continued demand for wholesale bulk oil sales in New York. But the change in leadership of the governor's office during the third quarter appears to have impacted market expectations about the timing of adult use sales, and as a result, bulk oil wholesale order flow in this market. We're obviously not happy with our third quarter results, but we have much to look forward to in the coming quarters. And we've made a lot of progress in several areas since last quarter's calls, especially in the realm of new product implementation. Following the recent upgrades we've made to our manufacturing facilities in Maryland, we're pleased to share on today's call the launch of two new brands, which are supporting our rollouts of live resin concentrates and edibles in the Maryland market. On slides five and six of today's presentation, we've included some marketing materials from our launches of High Color and Kings and Queens, which are the work of our Chief Marketing Officer, Harris Rabin. We believe adding to our product depth is currently important as the nascent markets of New York and Minnesota look to accelerate the in the coming years. We're also very pleased to welcome renowned chef Michelle Mango to our team during the third quarter. We'll be overseeing the development of our edibles products. Michelle began her work with us in Maryland with the launch of gummies products featured in the high-color marketing materials on slide six. The SKU pipeline we're now offering in Maryland represents the widest selection of products across our various operating markets. Our improved product offering should help us drive revenue and profitability in Maryland in the future, especially with the pending acquisition of our second retail dispensary in Baltimore, likely to close during the fourth quarter. That transaction received regulatory approval a couple of weeks ago, and we're looking forward to shifting the product mix in the store more toward our own manufactured products. In addition to the launches of High Color in Kings and Queens, both Harris and Michelle's teams have a lot of other exciting work in progress. and we'll continue sharing updates on these initiatives as we receive regulatory approvals for new launches across our various markets. As we progress towards the end of the year and begin fiscal year 2022, several regulatory catalysts should contribute to improve financial performance As most of you know, we received regulatory approval in the state of New York to begin selling flour during the fourth quarter. We recorded our first flour sales in New York on October 30th. We expect to increase our flour strain variety in New York over the course of the next several weeks with an expectation of having at least six high-quality flour strains available in our New York dispensaries by the end of this calendar year. We're also looking forward to the commencement of adult use sales in New York and flour sales in Minnesota's medical market early next year. As a reminder, we expect adult use sales to begin in New Mexico during month of April and flower sales to commence in Minnesota on or before March 1st of 2022. From a development standpoint, our teams are continuing to focus on the substantial growth opportunities we see in the New York market. As disclosed in a news release last month, we've executed a sale-leaseback transaction with IIPR, which fully finances the development of a 324,000-square-foot indoor cultivation and processing facility. We have received regulatory approval from the state to operationalize 170,000 square feet of this facility, which leaves the remaining square footage of this building available as shell space for potential future expansion. We've brought in two outside, highly cannabis-experienced consultants to assist with the development of this new facility, and construction is well underway with an expectation for completion sometime during the second quarter of next year. This timeline will provide us with the opportunity to complete at least one full cultivation turn prior to the commencement of recreational sales, as well as opportunities to adjust and optimize operating procedures before ramping potentially to full approved capacity following the onset of the state's adult use program. In addition to the expansion of cultivation and processing capacity in New York, Patrick Peters' retail team has been busy working to identify and secure locations for new dispensaries, as well as candidates for relocations for some of our existing medical dispensaries. We are still awaiting clarity from the state's regulatory body regarding the classification of economically underserved areas, which will require before deciding where to open the first two of our four additional retail dispensaries this year. Pardon me, next year. We're confident that our recent and ongoing efforts to improve operations and scale production across our markets, as well as our expanding retail dispensary footprint, will help drive stronger financial performance in fiscal year 2022 and beyond. I'd also remind investors that we believe there's still potential for the state of Maryland to pass adult use legislation in 2022, which could result in stronger growth and profitability in that market as compared to our current expectations. Of course, we believe New York and Minnesota represent remarkable growth opportunities, and we're highly focused on ensuring we drive success as these markets ramp. That concludes my prepared remarks, and I'll hand the call over to John for more detailed review of the financials and outlook.