Jushi Hldgs Inc Cl B

Good morning. My name is Latonya, and I will be your conference operator today. At this time, I would like to welcome everyone to Jushi's third quarter 2021 earnings conference call. Today's call is being recorded. I would now like to turn the call over to Michael Pearlman, Executive Vice President of Investor Relations. Thank you, sir. Please go ahead.

Good morning. Thank you for joining us today for Jushi Holdings Inc. third quarter 2021 earnings conference call. Joining me on today's call are Jim Cassioppo, Chief Executive Officer, Chairman and Founder, and Ed Kramer, Chief Financial Officer. This morning we issued a press release announcing our third quarter 2021 financial results. The press release, along with the presentation that accompanies this call, are available on our website under the Investor Relations section and filed on CDAR. Before we begin, I'd like to remind listeners that certain matters discussed in today's presentation or answers that may be given to questions asked could constitute forward-looking statements within the meaning of Canadian and United States securities laws, which by their nature involve estimates, projections, plans, goals, forecasts, and assumptions. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect actual results are detailed in JUCHI's annual information form and other periodic filings and registration statements. These documents may be accessed via the SIDAR database. These forward-looking statements speak only as of the date of this call and should not be relied upon as predictions of future events. With that, I would now like to turn the call over to Jim Cassioppo, Chief Executive Officer. Jim?

Thank you, Michael, and thank you, everyone, for joining our call today. Let's begin on slide two. This morning, I would like to take a few minutes to provide an update on our third quarter performance and highlight the progress we have made across the organization, along with our operational achievement. I'll then turn it over to Ed, our newly appointed Chief Financial Officer, to review our financials. We'll then review... What sets Jushi apart from our peers and our outlook? And lastly, open it up to questions. I'll now begin by reviewing our third quarter results on slide three. I'm pleased to report that our revenue increased by 13% to $54 million in the third quarter of 2021 as compared to the second quarter of 2021 and 117% on a year-over-year basis. On a sequential basis, our revenue growth was driven primarily by higher sales at our Beyond Hello stores in Pennsylvania, Illinois, and Virginia, and increased operating activity at our grower processor facilities in Pennsylvania and Virginia. Additionally, the Nature's Remedy of Massachusetts acquisition, which closed on September 10th, contributed approximately three weeks of revenue during the third quarter. For the third quarter of 2021, adjusted EBITDA was $6.4 million, an increase of 38.5% over the second quarter of 2021, and 124.9% year-over-year. We opened four stores in the Q3 2021, including the acquisition of two Nature's Remedy stores in Massachusetts, and have opened a total of 11 stores year-to-date as of today. As compared to the prior year, adjusted EBITDA increased by 124.9%, driven by significantly higher revenue and gross profit. Our quarter was on target for revenues, and I want to thank our team of hardworking Jushi employees for what they do every day. I would now like to highlight the progress we have made across the organization, along with our operational achievements, beginning on slide four. Over the course of the company's history, we have proven that our disciplined M&A strategy is working, having strategically expanded our footprint nationwide in several high-growth limited license markets at what I believe to be industry-leading acquisition multiples. And this continued into 2021. We have been slow to expand through M&A in the past 18 months compared to some of our peers. Our high growth asset profile combined with a low company valuation creates a high bar for acquisitions as we seek to avoid unnecessary shareholder dilution. In the third quarter of 2021, we are extremely proud to have successfully completed three acquisitions and announced the signing of another. First, the completion of the Nature's Remedy acquisition marked our official entry into the Massachusetts market, the seventh state in Jushi's expanding national footprint, and our third vertically integrated state at the time of the announcement. With Nature's Remedy, Jushi adds two retail dispensaries in Kingsborough and Millbury, and a 50,000 square foot cultivation and manufacturing facility in Lakeville, Massachusetts. The Lakeville facility's flower canopy encompasses approximately 26,000 square feet, which Nature's Remedy expects to expand to approximately 33,000 square feet by the end of November. Nature's Remedy is also evaluating further expansion opportunities in the existing Lakeville Industrial Complex, as well as on the 10 acres of land owned by Nature's Remedy in Grafton, Massachusetts. We acquired this asset at very attractive multiples of 2.7 to 3 times Nature's Remedies' 2022 EBITDA. We also plan to expand our retail presence in Massachusetts' rapidly maturing adult-use market by acquiring one additional adult-use store under the state's three-store cap. we signed a definitive agreement to acquire an entity operating at adult use and medical retail dispensary under the name Apothecarium in Las Vegas, Nevada. The Apothecarium acquisition, together with the April 2021 purchase of Franklin Bioscience Nevada LLC, a holder of medical and adult use cannabis cultivation, processing, and distribution licenses, will enable Juicy to become vertically integrated in Nevada. which will provide margin uplift, as well as provide significant branding exposure for Jushi's high-quality product lines, including the bank, the lab, tasteology, and sachet. This will be Jushi's fourth vertically integrated state, accompanying Pennsylvania, by the way of its affiliated subsidiaries, Virginia, and Massachusetts. And third, We significantly increased our presence in the Ohio market with the acquisition of a licensed cultivator and by completing the previously announced acquisition of a licensed medical cannabis processor. The acquisition of a cultivator and processor is a significant step forward in our plan to scale our footprint and vertically integrate in Ohio. We also plan on acquiring up to five new retail dispensaries in Ohio under the state's five-store cap, either through applications or through acquisitions. This morning, we are also very excited to announce that we have entered a definitive agreement to acquire New Leaf, a Nevada-based vertically integrated operator, for a total consideration of up to $62.5 million. New Leaf currently operates two high-performing adult use and medical dispensaries in Las Vegas, Nevada and Lake Tahoe, Nevada, in addition to a 20,000 square foot cultivation facility in Sparks, Nevada, as well as a 13,000 square foot processing facility in Reno, Nevada. Additionally, New Leaf owns third licensed retail dispensary located directly on las vegas boulevard expected to become operational in early 2022 subject to regulatory approval and other conditions upon completion of the acquisition of new leaf and the previously announced apothecary nevada acquisition jushi will grow its retail presence to four dispensaries with the potential to significantly increase our presence in the Nevada retail and wholesale markets. This period of rapid growth is only just getting started here at Jushi. With a robust M&A pipeline, we are confident it is the right time to further strengthen our liquidity to continue this momentum. Subsequent to the quarter end, we entered into a $100 million senior secured credit facility We're what we're referring to as an acquisition facility from Sunstream Bancorp, a joint venture sponsored by Sundial Growers, Inc. Now, I'd like to specifically highlight our operational achievements during the third quarter. Let's begin with retail on slide five. In Pennsylvania, we opened our 14th and 15th Beyond Hello dispensaries. in the third quarter. Coinciding with the store openings, we saw increased sales driven by improved inventory levels, a broader selection of products in store, targeted promotional activity, and an increase in membership in our loyalty program. During the third quarter, we hosted and participated in several events ranging from educational pop-up events to community events focused on veterans and health-related causes. We also increased our engagement with the local chamber of commerce's and are organizing an average of five to seven events a month. Subsequent to the third quarter, we opened our 16th Beyond Hello dispensary and have planned to open our 17th and 18th Beyond Hello locations in Pennsylvania before year end. In Illinois, our four existing Beyond Hello stores continue to perform well. Additionally, our partner, Northern Cardinal Ventures, was awarded a conditional retail dispensary license via the state's lottery process in the third quarter. Pending regulatory approvals, the new store, which is designated for the Peoria Bureau of Labor Statistics region, will become the fifth Beyond Hello location in Illinois. During the quarter, we also organized and supported several local community events, including Studs of Love and Run for Epilepsy, and expanded our partnership with the Laundry Project, which assists lower-income families with meeting basic needs, including washing clothes and linens. Also, Juicy continues to host and participate in local educational pop-up events and nonprofit outreach in the Saget and Bloomington normal communities. We are also pursuing five additional retail licenses in Illinois that will increase our retail footprint to the state cap of 10 and plan to apply for or acquire three craft grow licenses to support our growing retail footprint. Moving on to Virginia. Subsequent to the quarter end, we opened our second store in Virginia, just seven miles from the Dulles International Airport and 30 miles from Washington, D.C. The new store features 17 point of sale systems, 70 on-site parking spots, and a separate delivery service area. We expect to open at least three and maybe a fourth additional dispensary in 2022 in high-density locations like Alexandria, Arlington, and Fairfax. New locations are expected to be freestanding buildings that range from 7,500 to 10,000 square feet, feature 20 or more point-of-sale stations, offer drive-through access, 50-plus parking spots, and have a separate delivery vault supported by a separate delivery space to capitalize on Virginia's delivery potential. We recently closed on a phenomenal piece of real estate in Arlington that we expect to be a great store and it's a short five minute walk to two metro stations and within a 10 minute drive from about 280,000 people with an average income of $155,000 per annum. The current plans for this Arlington location include 42 parking spaces and 25 POS systems. nine of which will be dedicated to express pickup. Let's turn to slide six. I'm very encouraged by the steady growth in our store funds over the past year. In the third quarter, our store count increased by four, including the two stores we acquired through the Nature's Remedy acquisition. At the end of the third quarter, we operated 24 stores, up from 10 in the prior year. Subsequent to the quarter end, we opened two new stores and now operate 26 retail stores across five markets. Before year end, we expect to add an additional two locations in Pennsylvania and operate a total of 28 stores across five markets and a license footprint of 39 licenses, including the recently announced Nevada deals. By the end of 2022, we are targeting a total of approximately 50 store licenses or more across seven markets to be added through applications and acquisitions. I would now like to provide an update on our expansion efforts at our grower processor facilities in Pennsylvania and Virginia on slide seven. Let's start with Pennsylvania. At our grower process facility in Scranton, we continue to make good progress on the redesign and build out of the facility and remain on track to complete phase one of the expansion by the end of the first quarter of 2022 and begin to generate revenue in Q2. The initial improvements we have made to the facility have resulted in improved yields and quality. As previously discussed, Phase 1 of the build-out, which has recently been refined, will increase total square feet of the facility from 81,000 square feet to approximately 123,000 square feet, increase canopy from approximately 18,000 square feet to approximately 44,000 square feet, and increase annual biomass capacity from approximately 10,000 pounds to 25,000 pounds. Phase 2 of the expansion is expected to be completed by the end of the fourth quarter of 2022 and will increase the total square footage of the facility to an upward-revive 210,000 square feet, increase canopy to approximately 100,000 square feet, and increase annual biomass capacity to approximately 67,000 pounds. Furthermore, we have added many parcels of land to the footprint and are close to being able to expand to over 350,000 square feet pending regulatory development. In Virginia, we launched a series of cannabis brands and products in the Commonwealth, beginning with the debut of our brand, The Lab, in the form of 0.5-gram and 0.3-gram vaporizable cartridges, and infused products. In September, we were thrilled to have received Virginia Board of Pharmacy approval to sell smokable flower, which allows us to expand patient access to our full suite of products. We have already begun to see the positive impact that flower sales have on a medical program following the launch in September, and we have seen strong momentum in the fourth quarter. However, the flower rollout in Q3 and Q4 is slower than expected due to regulatory bureaucracy. At our vertically integrated facility in Manassas, we continue to move forward with phase one of the build-out of the 93,000 square foot facility. We remain on target to have 19,000 square feet of canopy and an annual production capacity of 12,000 pounds of biomass that will come to market by the end of the second quarter of 2022 or early Q3. as the construction ends at the end of Q1 and the growth cycles begin in Q2. As previously reported, the company is also in the design phase of constructing a second connected on-site building that would also be built out in two phases. Phase 2 is expected at approximately 100,000 square feet, 35,000 square feet of canopy, and 23,000 of annual biomass capacity of approximately 195,000 square feet, approximately 54,000 square feet of canopy, and approximately 35,000 pounds of annual biomass capacity. We expect to be able to complete phase two by the end of the first quarter of 2023 and begin the planting cycle in Q2 of 2023. Phase three would add another approximately 70,000 square feet to the facility, 69,000 square feet of canopy, and 45,000 pounds of annual biomass capacity for approximately 265,000 square feet, 123,000 square feet of canopy, and 80,000 pounds of annual biomass capacity. Before we dive into our financial results, I'd first like to sincerely thank Kim Baumbach for her countless contributions to Jushi. We are extremely grateful for her service and wish her the best luck in her future endeavors. Kim will remain with the company through December to ensure a continued smooth transition. I'd now like to introduce Ed Kremer, our newly appointed Chief National Officer, who assumed his role subsequent to the end of the third quarter. Ed's career includes nearly 25 years of financial growth, restructuring, executive leadership experience, and sales and marketing at high-growth startups and publicly traded companies in the technology, fashion, manufacturing, wholesale distribution, licensing, and retail environments. Most recently, Ed served as Chief Operating and Restructuring Officer of Latote and Lord & Taylor. where he oversaw the organization's M&A and restructuring efforts during the global COVID-19 pandemic. Prior to his time at Latote and Lord & Taylor, he held a number of executive leadership and finance roles with public and private equity-backed leading consumer products companies, most notably Oakley, Oliver Peoples, Beats Electronics, better known as Beats by Dr. Dre, Noon Home, and 360 Fly. We are thrilled to have Ed join the team. I will now pass the call over to him to discuss our financial results for the third quarter before we discuss our 2021 outlook. Ed?