Jushi Hldgs Inc Cl B

Good day and welcome to the Jushi Holdings fourth quarter and full year 2024 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 star then one on your telephone keypad, and to withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Trent Wolovec, Chief Strategy Director. Please go ahead.

Good afternoon and thank you for joining us today on JUCHY's fourth quarter and full year 2024 earnings conference call. My name is Trent Wolovec and I am the Chief Strategy Director at JUCHY Holdings, Inc. With me on today's call are Jim Cassioppo, our Chairman and Chief Executive Officer John Baric, our President and Chief Revenue Officer, and Michelle Mosher, 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.jushico.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 release issued today for the detailed reconciliation of GAAP and non-GAAP results, which can be accessed from the investor relations section of the company's website at ir.jushiko.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 related to our financial conditions, results of operations, plans, objectives, future performance, and business. Although Jushi 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 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 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. Jushi expressly disclaims any obligation to update this forward-looking information. I will now turn the call over to Jim.

Thank you Trent and thank you everyone for joining our call today. This afternoon, I will provide a high-level overview of our financial performance during the fourth quarter and full year of 2024, following which I will discuss recent operational achievements and developments. I will then turn the call over to Michelle to review our financial results in further detail before opening the question and answer period. Beginning with our financial results, revenue for the fourth quarter of 2024 was $65.9 million as compared to $67.8 million in Q4 2023. Gross profit for the quarter was $25.4 million or 39% of revenue compared to $27.2 million or 40% of revenue in the fourth quarter of 2023. The modest decline in revenue was driven by continued price competition across our footprint. Gross profit was affected by higher per unit production costs as we address efficiency challenges at our grower processors in Pennsylvania and Massachusetts in the third and fourth quarters. Continued pricing pressure and increased holiday promotional activity also contributed to the impact on gross profit margins. Net loss was $12.5 million compared to $18 million in Q4 of 2023, and adjusted EBITDA was $8 million compared to $11.3 million for Q4 of 2023. We had a record quarter in terms of operating cash flows of $7.2 million. The fourth quarter undoubtedly presented its share of challenges for the consumer, and like many other retail businesses, we continue to feel the effects of reduced consumer spending on non-discretionary items. However, our strategic vision remains firmly in place, and we are confident in both our capabilities and solid fundamentals to navigate these conditions as we prepare for future growth and the potential for favorable regulatory advancements. Turning to our annual results, full year 2024 revenue was $257.5 million compared to $269.4 million in 2023. Annual gross profit increased by $2.1 million to $118.3 million compared with $116.2 million in 2023, largely due to increased private label sell-through in all our vertical markets and enhanced growth processor performance driven by our efficiency optimization initiatives. Adjusted EBITDA for the year increased by $5.4 million to $46.2 million compared with $40.8 million in 2023. Very importantly, these initiatives led to significant improvements in our cash flows from operations, achieving growth of 59% to $7.2 million in Q4 2024, compared with $4.5 million in Q4 2023. This improvement was also seen on an annual basis as we generated $21.6 million in cash flows from operations, an extraordinary improvement from the $3.3 million outflow in 2023. In the first three quarters of the year, our use of cash was focused on debt reduction. As we entered the fourth quarter, our priorities shifted toward growth-oriented capital expenditure and strategic M&A to increase our operational base and execute our 7-in-7 retail store strategy. As part of our seven and seven strategy, we've successfully acquired or opened five new dispensaries since the beginning of Q4 with dispensaries located in Linwood, Pennsylvania, Oxford, Toledo, and Warren, Ohio, and Peoria, Illinois. And I plan to open three more before the end of the third quarter. The dispensary in Warren, Ohio is not currently Jushi-owned, but operates under a management service agreement under the Beyond Hello name and is subject to a purchase agreement, which we expect to close upon later this year, subject to regulatory approvals. With the opening of 14 store locations anticipated by mid-2026, we are on track to expand our retail footprint by 40% since the end of Q3 2024. We are currently focused on securing locations in Illinois, New Jersey, Ohio, and Pennsylvania. We are also planning to move four underperforming retail locations by mid-year 2026. Over time, this retail store activity is expected to boost both top-line revenue as well as profitability, while enhancing our buying power to deliver even greater value to our patients and customers. It also positions us to optimize wholesale operations and minimize the risk of capital tied in growth processor as the market becomes more competitive. I'd now like to provide an update on our core footprint. Virginia continues to be our most profitable market with steady growth across both retail and wholesale channels. Year over year, retail and wholesale revenue in Virginia increased by just over 20%, driven largely by the opening of our Woodbridge location in 2023. On an annual basis, wholesale revenue grew by 48%, while retail expanded by 22%. We are taking a phased approach to scaling operations to remain in line with anticipated regulatory changes and market demand. We are about to activate our six-flower room while working towards turning on two additional flowering rooms by the end of the year. Additionally, we are adding hydrocarbon extraction, and we have expanded our CO2 capacity in this past quarter to support increased production. Virginia, our wholesale relationship with Verano continues to grow as they expand into the market, and we are eagerly awaiting the retail store openings by AIR with its recent HSA1 provisional license. We continue to expect in the short term, AIR will focus on the retail market rather than building out large-scale cultivation, and we look forward to supporting them and their patients in HSA1. Our delivery business in Virginia continues to thrive in both our HSA2 and out of HSA2 offerings, with consistent growth in total unique patients, orders, sales, and basket size. Our total delivery offering grew by 20.3% sequentially from Q3 to Q4, with gross margin percent expanding by 700 basis points. In Pennsylvania, we are currently in the design phase for a multi-phase canopy expansion that presents an opportunity to increase our canopy square footage by approximately 50%. We are beginning to act on this plan and will speed up the pace if adult youth legislation is signed into law. To support the canopy growth, we are expanding and refining our trimming, drying, and curing process, which will also enhance efficiency and quality. We have expanded extraction capabilities by adding hydrocarbon extraction capacity to further support growth of our concentrates offering. At the retail level, we opened our 18th Beyond Hello store in Linwood, Pennsylvania on February 25th, and we plan to move two underperforming locations in the state. Lastly, in Ohio, we're thrilled with the results from our first harvest in the newest room at our cultivation facility with over 100 grams per square foot for the room. We're particularly excited about the performance of our first run of new genetics across the expanded space in Ohio as the initial results have been excellent. Our continued success with high-quality, high-testing product enables us to maintain strong margins by selling finished goods not only through our own retail channels, but also into the wholesale market. To improve efficiency and reduce both labor and hardware costs, we are working with a tobacco-based vape company to implement a new filling machine and hardware, enabling us to achieve significant cost savings without compromising quality. Additionally, we are exploring, expanding, and adding to our extraction technology to enhance capacity, efficiency, and product quality. We continue to grow our retail presence in the Ohio market. During the fourth quarter, we entered into management services agreements for two operating dispensaries in Oxford and Toledo, Ohio. These agreements allowed us to manage operations while we worked through the regulatory approval process. Subsequent to year-end, following the receipt of all necessary regulatory approvals, we successfully closed on the acquisition of both dispensaries. In February 2025, we opened our fourth Ohio retail location in Warren, Ohio, and we expect our fifth location in Mansfield, Ohio, in the second quarter of 2025. both operating under a management service agreement until regulatory approval to transfer the license is received. On the product and brand front, we continue to roll out new and high-margin SKUs, which are proving to be increasingly popular with our customers and patients. Over the fourth quarter, we launched 415 new unique SKUs, marking a 9% sequential increase and nearly 50% year-over-year. Sachet, our value flower brand, continues to be a standout performer with 189 new SKUs launched in the fourth quarter. The Lab Concentrates brand closely follows with 136 new SKUs introduced. Just recently, on Valentine's Day, we launched our latest flower brand in Virginia, Flower Foundry. we saw this new brand jump to our number one sales SKU in the Virginia market within just three days. This was a massive success for our team, and we are incredibly excited to introduce this new premium flower brand into other markets in the near future. In three of our markets, Virginia, Nevada, and Ohio, we believe we have successfully increased flower quality to be amongst the highest in the state. Moving ahead to the balance sheet, in 2024, we improved our cash flows from operations from 2023 by approximately $25 million and paid down $18.4 million of debt. We further strengthened our balance sheet recently by growing our cash balance with cash received from both the IRS and the third party in connection with our ERC refund claims. To date, we have received approximately $1.4 million from the IRS, with majority received in 2025. We also received approximately $5.1 million of proceeds in the first quarter of 2025, a connection with the factoring of certain ERC refund claims. In addition, we recently raised approximately $4.6 million of additional cash by issuing some additional 12% second lien notes due 2026. I was among the investors who purchased additional second lien notes, demonstrating my commitment and belief in the long-term success of the company. We believe these capital infusions will enable us to continue to comfortably execute our retail expansion strategy and support investments and enhancements across our growth process or footprint, particularly allowing us to expand canopy space in Pennsylvania and Virginia in anticipation of potential adult use legalization. We believe this strategic expansion will position us for sustained growth in these key markets as regulatory developments unfold. We will continue to remain focused on the sale of non-core assets to generate additional cash. We expect them to generate approximately $3 million in net proceeds if and when we receive regulatory approval of a deal signed in 2024. We also have another $3 to $5 million of ERC claims inclusive of interest that we are looking at turning into cash. On the regulatory front, in Pennsylvania, there has been some progress around potential adult use legalization. Notably, co-sponsorship in both the House and Senate underscores the bipartisan, bicameral support for this initiative. We were pleased to see that Governor Shapiro included cannabis in his budget proposal for 2025-26, which, if passed by the legislature, would legalize adult use effective July 1, 2025, with legal sales beginning on January 1, 2026. While the timing and specifics of regulatory change remain uncertain, adult use legalization would significantly grow the market, creating new growth opportunities for us across the state, and importantly, expand access for patients and consumers. In Virginia, the legislature has passed bills to legalize recreational cannabis sales, sending the proposal to Governor Glenn Youngkin's desk for the second year in a row. Although he will likely veto the bill, the political momentum in the state is real, and there is an election for a new governor that will happen this year as Glenn Youngkin is termed out. We look forward to working with a new governor that respects the will of the voters. At the federal level, President Trump continues to shape his cabinet and focus on his key priorities in office. We anticipate more clarity on any federal regulatory process in the coming months. With our strong presence and history in the medical cannabis program in Pennsylvania and Virginia, we believe that we are uniquely positioned to capitalize on a more favorable state regulatory landscape in the largest parts of our business. As the tone and positions of key federal leaders evolve and cannabis becomes more normalized, we anticipate being a significant beneficiary of any potential federal changes. With that, I will now ask Michelle to review our financial results before we open the call to questions.