Jushi Hldgs Inc Cl B

Ladies and gentlemen, good afternoon. My name is Ryan, and I will be your conference operator today. At this time, I would like to welcome everyone to Jushi's Holding Inc. First Quarter 2024 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 first quarter 2024 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 Baric, 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.juchico.com. In addition to the company's GAAP results, management will also provide supplementary results on a non-GAAP basis. Please refer to the press lease 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.juchico.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 JUJI 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 Jushi's 10-K and other periodic filings and registration statements. These documents may be accessed via EDGAR and SADAR as well as the Investors 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. Jushi 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 quarter. I will then turn the call over to Michelle to review our financial results in further detail before opening the question and answer period. I want to start off the call with an important regulatory update. We are very happy to report that there has been important news that the DEA will potentially reschedule cannabis from Schedule 1 to Schedule 3. The federal approach to cannabis has long needed to progress forward, and we are thrilled with this potential overdue development. This change would represent a dramatic positive shift for those of us in the industry. For corporations, this would mean relief from the 280e tax provision as well as long-sought recognition and legitimization for a market that provides jobs, economic growth, and medical alternatives to those who need them. For medical patients and consumers, this potential outcome will aim to bring about a much stronger marketplace, which could help advance product innovation and accessibility to better serve customer needs. While we're excited about what this could mean for the future, we do anticipate that it would take time to come into effect. There are likely to be several steps that would need to take place first, including the White House Office of Management and Budget reviewing the proposal before it is published in the Federal Registrar for public comment. Then, there is a public comment period which could take two to three months. Once these steps have been completed, the DEA presents all comments to the Administrative Judge. Barring any lawsuits from opposing groups, the DEA would publish its final ruling. It is thought that the new Schedule 3 designation could be implemented as early as November of this year or sometime in the first half of 2025. Looking at our operations, we began the year on strong footing as a result of the optimization efforts our team implemented in 2023. In the first quarter of 2024, our gross profit expanded to $32.3 million, reaching a gross profit margin of 49%. Additionally, our adjusted EBITDA increased to $13.3 million with a 20% adjusted EBITDA margin. These results demonstrate the effectiveness of our operational improvement plan and our ability to consistently generate margin growth both on a sequential and annual basis. Our revenue base of $65.5 million in the first quarter is a good result in the context of a seasonally weak first quarter in our predominantly weather-affected northern markets and a slowdown from the strong holiday sales in the fourth quarter. In addition, there was a reduction in store hours due to weather-related closures. Wholesale revenue continues to grow as we broaden our product lineup with high-margin offerings, increase our product potency and quality, as well as our cost competitiveness as a result of further product development and optimization of our grower processors. With a continued focus on our core priorities of reducing costs and scaling our grower processor operations, we achieved increasing yields and significant potency improvements over the first quarter. This equated to larger quantities of high-quality flour with enhanced terpene and cannabinoid profiles, enabling us to accelerate the launch dates for various high-margin SKUs across a variety of formats. We continued to ramp up the production development pipeline during the quarter. reintroduced 443 new and unique SKUs across our five vertical markets in the first quarter. In our flour vertical, we introduced a larger 7-gram and 14-gram format in the Bank brand in Pennsylvania and Massachusetts, and rolled out the full product offering under the Seche brand in Nevada. Under our concentrates portfolio, we relaunched the lab in Ohio and continued to expand our tasteology, edibles, and trochees offerings with the introduction of new unit and pack sizes in Virginia and Pennsylvania. As a result of these expansions, Jushi brand and product sales grew to approximately 54% of total retail revenue across the company's five vertical markets for the quarter, compared to 50% in Q1 2023. By providing a highly diversified offering that suits many preferences, we aim to forge stronger connections with consumers and significantly expand our reach, fostering repeat visits and positive brand sentiment and engagement. In addition to seeing steady foot traffic across our retail network, our digital footprint is also performing strongly. Over the first quarter, downloads of our Hello Club loyalty app increased by 12% from the end of last year. At the state level, Virginia experienced an approximate 14% increase in online pre-order value on a year-over-year, same-stores basis. I'll now highlight several state-specific standout performances over the first quarter. Virginia continues to be our top growth performer with revenue of 33% compared to the first quarter of 2023. Statewide dispensary revenue exceeded our expectation towards the end of the quarter and was nearly in line with the last weeks of the fourth quarter during the holiday season. On the product front, we introduced a new tasteology package size, which has already performed very well among patients. Also, we continue to expand deliveries outside our retail HSA2 regions. We are specifically focused on HSA1, which has no stores. Fredericksburg and Charlottesville are just two examples of markets we are investing in to grow our patient base. Next, in Pennsylvania, we opened our 17th Beyond Hello location in mid-January. The new Pocono store has been positively received and continues to demonstrate consistent revenue growth week over week. During the quarter, we also made our first bulk sale from our grower processor, which is an important milestone and reflects the opportunity we have to continue to grow our wholesale business. In Illinois, we continue to see the return of customers having surpassed a year since adult use sales launched in neighboring Missouri. Our retail network experienced steady growth every month during the quarter as a result of our competitive pricing and high-quality products. Our product availability, particularly in formats such as flour and gummies, has contributed to our growing customer loyalty in the state. Demand in Massachusetts continues to be steady, prompting us to expand our opening hours for the Tingsboro's Nature's Remedy dispensary in February. Additionally, our everyday value one-eighth product offering remains popular with customers, driving our units sold in the first quarter. Lastly, in Ohio, during the first quarter, we demonstrated consistent revenue growth month over month and attracted nearly 700 new patients in the first quarter alone. This achievement can be attributed to the introduction of a value menu that has resonated extremely well with the customers, which has contributed significantly to our growing retail market share in the state. The organization-wide strategic improvements we made last year enabled us to begin 2024 stronger than ever from a margin standpoint. To help us drive our growth initiatives this year, we recently bolstered our leadership strength with the appointment of Todd West to Chief Operating Officer. Todd is an experienced cannabis executive with over 25 years of operations management experience in retail, manufacturing, and wholesale, including five years in cannabis with Cresco Labs, where he's an EVP of operations. We continue our nationwide focus on efficiencies, including the initiatives we have spoken about before, such as the enhancement of equipment to deliver better output, higher batch and lower-cost distillate methods, labor model optimization, as well as minimizing green waste by improving cloning procedures and reducing bud loss during harvest. On the new product side, our goal is to create greater alignment across our divisions to reduce the time to market for newer, higher margin products. This includes the debut of a new brand, Flower Foundry, a new high-quality everyday flower brand that will bridge the space between our artisanal hijinks brand and our bank and sachet value brands. Stay tuned for more updates as this launch is expected in the second half of the year. As our potency, terpenes, bud quality, and genetic varieties continue to improve, we expect it will be easier to capture pricing and margin with a new brand. A strong new genetic pipeline makes it an ideal time to launch a new flower brand. The opportunities for low capital intensive growth continue. We plan to open new dispensaries with licenses we own in Pennsylvania and Illinois, and one that may be granted to us in Ohio. We should continue to grow our wholesale business as our product improves, as we increase yields at our grower processors, and as we launch new products. Virginia remains an organic growth market with new and better products, growing same-store sales, and an increasing delivery business. In addition, we can enhance excitement at our retail stores across the country and potentially drive foot traffic and sales with a broader array of improved Jushi products. as well as new brands in our five vertical markets. Also, Ohio adult use is around the corner, and we own an unleveraged grower that we can potentially use as collateral for an expansion loan. Lastly, we are in negotiations to buy retail stores and store licenses in Ohio. In order to deliver sustainable growth to our shareholders, we have been diligently deleveraging our balance sheet and paying down debt. Since the summer of 2023 and through today, we have paid down approximately $9.8 million of first lien financing with Sunstream Bancorp, Inc., including an April 1st payment of approximately $2.4 million and reduced our other debt by $5.1 million for a combined funded debt reduction of over $14.9 million. This has brought our debt subject to scheduled repayments down to approximately $190.4 million. Our goal remains to reduce debt with free cash flow, the sale of underperforming and non-cash generating assets, state tax refunds, and the potential ERTC program refund claim for approximately $10.1 million. Additionally, as we move towards certain debt maturity dates, We have been proactively engaging with many parties to refinance these obligations. We expect to further reduce the amount of first lien and other debt over the year. On the state-specific regulatory front, we are encouraged by the advancements toward an adult use market in Ohio, which we believe could see sales launch as early as this summer. We are confident in the infrastructure we have secured in the state, particularly on the retail side. On the grow processor side, we have a significant opportunity to grow with a lower cost of capital financing option as we own the grow real estate directly and we can use tools such as mortgages to expand our footprint as necessary. As part of the transition to an adult use market, Jushi's Medical Dispensary is expected to become a co-located medical adult use store and the company will receive another adult use retail dispensary license as an owner of a Class II cultivator license. The regulator intends to begin the process of issuing additional dispensary licenses on or about June 7, 2024. Under the adult use legislation, all current licenses entitled to an additional dispensary can be assigned a lottery-based ranking to establish location priority among applicants. The recent outcome of Governor Youngkin's decision in Virginia is incredibly disappointing. However, we remain optimistic that a solution that supports the establishment of a safe and regulated adult-use retail market is on the horizon. We believe this is the only logical way to combat the rampant illicit market that continues to be a threat to public health and safety. Legislation got very far this year as an adult-use retail bill made it to the governor's desk. and he seemed to have an adult use retail deal in mind before the widely reported stadium deal with the Washington Wizards and Capitals fell apart. In Pennsylvania, many productive discussions are taking place between lawmakers on the establishment of adult use market in the state. We believe momentum is building here and that there is a strong support to ensure Pennsylvania does not continue to lose out on significant tax revenue and job creation to bordering states. Overall, there are numerous developments happening at both the state and federal levels, and we are confident in our positioning and existing infrastructure to capitalize on potential upcoming changes in the industry. Approximately 69% of our current operating retail store footprint is in states that we believe are likely to soon transition to adult use, and we'll be ready to scale and grow as these markets develop. With that, I'll now ask Michelle to review our financial results before we open the call to questions.