Jushi Hldgs Inc Cl B

Good afternoon. My name is Camilla and I will be your conference operator today. At this time, I would like to welcome everyone to Jushi Holdings, Inc.' 's fourth quarter and full year 2023 earnings conference call. Today's call is being recorded. I will now turn the call over to Lisa Foreman, Director of Investor Relations. Thank you. Please go ahead.

Good afternoon and thank you for joining us today. on Jushi's fourth quarter and full year 2023 earnings conference call. My name is Lisa Foreman, and I am the Director of Investor Relations at Jushi Holdings, Inc. With me on today's call are Jim Cacioppo, our Chairman and Chief Executive Officer, John Barrick, our President, and Michelle Mosier, our Chief Financial Officer. This call is also being broadcast live over the internet and can be accessed from the investor relations section of the company's website at ir.yushiko.com. In addition to the company's GAAP results, management will also provide supplementary results on a non-GAAP basis. These refer to the press release issued today for a detailed reconciliation of GAAP and non-GAAP results. which can be accessed from the investor relations section of the company's website at ir.jishiko.com. Additionally, we would like to remind you that during this conference call, we will make forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business. Although JUCHY believes our estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate. We caution you that actual results may differ materially from any future performance suggested in the company's forward-looking statements. The risk factors that may affect actual results will be detailed in JUCHY's 10-K and other periodic filings and registration statements. These documents may be accessed via EDGAR and CDAR, as well as the investor relations section of our website. These forward-looking statements speak only as of the date of this call and should not be relied upon as predictions of future events. Dushy expressly disclaims any obligation to update this forward-looking information. I will now turn the call over to Jim.

Thank you, Lisa, and thank you, everyone, for joining our call today. This afternoon, I will provide a high-level overview of our financial performance as well as discuss our operational achievements and developments over the year. I will then turn the call over to Michelle to review our financial results in further detail before opening the question and answer period. 2023 was an incredibly important year for Jushi as we achieved many crucial steps to drive growth over the next year. I will outline three of these important achievements. First, we optimized and stabilized our revenue base, as well as consistently generated significant margin growth and began deleveraging through increasing EBITDA and paying down debt. Next, by implementing far-reaching cost cuts, scaling our grower processors in Pennsylvania and Virginia, implementing strong commercial practices, as well as implementing ongoing program of growth and optimization across our grower processor footprint, We have been able to increase our output and produce higher margin products to support our strong retail network and grow our Jushi branded product sales across our vertical markets. This strategy enabled us to increase our gross profit and reduce our operating expenses, which resulted in adjusted EBITDA growth of $33.7 million in 2023, reaching a total adjusted EBITDA of $40.8 million for the 12 months of 2023, with an adjusted EBITDA margin of 15%. Lastly, we put into place a physical plan, store infrastructure, and a management team that will allow us to return to industry-leading revenue growth when three of our key states convert from medical to adult-use programs. The incremental margin of the adult-use sales growth should be much higher than our existing margin, given the operating leverage in the business. Given Jushi's concentration in two of these states, Pennsylvania and Virginia, the company's revenue and EBITDA will dramatically change for the better. We are not standing still and waiting for the adult use flips in Pennsylvania, Virginia, and Ohio. We are working very hard to expand our margins in our existing business through a continued focus on efficiencies and utilizing better operating techniques. I would like to take a moment to highlight some examples in our grower processor business, demonstrating the progress we have made in 2023, and then discuss areas that have the most opportunity for the company in 2024. In 2023, we made the grower processor business much more data driven by increasing the amount of data we track and analyze, as well as upgrading almost all senior and plant level staff management. As I discussed earlier, we scaled up our growth to meet market needs and focused on a robust new products effort to add variety, excitement, and margin to the business. Several current initiatives that are aimed at yielding efficiencies and profitability benefits for 2024 include reducing green waste by optimizing our cloning procedures and reducing our bud loss during harvest, increasing our use of state-of-the-art plant sanitation techniques and equipment, Expanding a fourth quarter post-harvest processing task procedure that may have significantly improved our post-harvest processing techniques. And four, reducing the time to market for new higher margin products. The main goal of these efforts is to improve our product quality and value to the consumer as well as increase the potency and yield of our grower processor under the existing canopy without deploying significant new capital, but rather better utilizing capital previously spent. Our 2023 benefits from our grower processor optimization were significant as we increased total pounds of biomass harvested by approximately 26% from January 2023 to January 2024. In addition, in the fourth quarter of 2023, Jushi brought to market 175 new unique SKUs across our five vertical states, which helped us fuel the growth of Juicy Branded products to 53% of total retail revenue across our vertical footprint compared to 36% in 2022. In line with our success with product quality and product cost, I'm incredibly proud to share that we grew our wholesale revenue in 2023 with a 30% improvement over the previous year. We also celebrated our highest revenue week of 2023 during the second to last week of December. The effective coordination and communication between our retail and commercial teams enabled us to gain market share from our competitors owing to a highly targeted, strong promotional campaign that led to our highest volume of total Jushi sales recorded for the year. This success even surpassed traditionally high-performing sales periods such as Green Wednesday, and 420. I'll now briefly highlight several state-specific standout performances over the fourth quarter. In Virginia, retail sales grew 42% year-over-year across our full complement of stores, despite bordering state Maryland's transition to adult use in July. In the fourth quarter, we launched additional products under the Bank brand, as well as Tasteology chocolates, which is an in-demand product. We believe customers appreciate the care we put into selecting and responsibly sourcing our ingredients. Also, our patient growth remains robust with over 53,200 total number of unique patient visits at Beyond Hello dispensaries within Jushi's exclusive retail service area as of the close of business on March 1st, 2024. Next, Pennsylvania. where we recently debuted tasteology trochees, which are now available to consumers and are already generating strong consumer buzz and positive feedback. Tasteology trochees are differentiated by being one of the only vegan trochees utilizing natural ingredients such as fresh fruit purees responsibly sourced from France. Sales in Illinois have begun to stabilize following the large first and second quarter 2023 declines due to Missouri's launch of adult use sales. We have received anecdotal feedback from Missouri customers who say that they are returning to our stores due to the price, value, and high quality products offered across our Beyond Hello retail locations. In Massachusetts, our Kingsborough Beyond Hello dispensary processed a single-day record, breaking 1,904 orders on December 22nd. We also rolled out a statewide revamped structure of our everyday value 1-8 product offering with a more focused, user-friendly menu for customers, which has proven to be well-received with a phenomenal 12,000 units sold in just three weeks in November, making a seven-fold increase over the previous promotions. And over in Ohio, We have seen great sales momentum following the successful execution of promotions offered around our first holiday season, which helped contribute to our second highest week during the second to last week in December. Also, we look forward to the developments taking place in this state with the approved for implementation adult use program. Jushi is excited and prepared to serve a new demographic of consumers. Over the past year, it has been encouraging to see meaningful reform advocacy efforts from both lawmakers and industry leaders at both the state and federal levels. With several initiatives underway in several markets, we believe Jushi is strategically positioned to capitalize on the new era we expect the industry is about to enter. With adult-use sales coming to Ohio in the near term, Pennsylvania will now border five states with legal adult use markets, once again fueling discussions among lawmakers. We are incredibly supportive of Governor Shapiro's recent comments during and following his yearly budget speech, stressing the urgency to establish Pennsylvania's adult use market to help curb the rampant, unregulated illicit market while also ensuring the state and its citizens do not lose out on the benefits the establishment of adult use market could bring, such as tax revenue and job creation. In Virginia, we remain hopeful that Governor Youngkin will not veto the long-waited recreational sales bill, which would allow adult-use sales to begin on May 1, 2025. Our efficiencies, cost reductions, product diversity, and quality in a legal, tested setting brings patients into the legal market. However, we believe the illicit market continues to operate freely and thrive with the Commonwealth's policy for legal possession without legal procurement, which is a very significant public health and safety concern. Pennsylvania, Virginia, and Ohio combine to represent 24 out of 35 of our operating retail store licenses. which places approximately 69% of our current retail store footprint in states that we believe are likely to soon transition to adult use. In anticipation of these potential future markets, we continue to prime our platform to be ready to scale as needed. Looking ahead to 2024, we believe our established nimble footprint puts us in an enviable position in key markets that have yet to be fully unlocked, enabling us to capitalize on our fast follower approach to expand as demand evolves. Throughout 2024, we will continue to focus on launching innovative products, increasing our operational efficiencies, and de-levering our balance sheet through a variety of mechanisms. The reduction of debt will include non-dilutive methods such as cash from the balance sheet, free cash flow, the sale of underperforming or non-cash generating assets, state tax refunds, and the potential ERTC program refund claim for approximately $10.1 million. Starting in the summer of 2023 and through today, we have paid down $7.3 million of first lien debt and reduced other debt by $5.1 million for a combined funded debt reduction of over $12 million. This brings our debt subject to schedule repayments to $193 million. With that, I'll now ask Michelle to review our financial results before we open the call to questions.