Jushi Hldgs Inc Cl B

Good afternoon. My name is Dovan, and I will be your conference operator today. At this time, I would like to welcome everyone to Jushi Holdings, Inc.' 's second quarter 2025 earnings conference call. Today's call is being recorded. I will now turn the call over to Trent Wolovec, Co-Chief Strategy Director. Thank you. Please go ahead.

Good afternoon, and thank you for joining us today on Jushi's second quarter 2025 earnings conference call. My name is Trent Wolovec, and I am the Co-Chief Strategy Director at Jushi Holdings, Inc. With me on today's call are Jim Cassioppo, our Chairman and Chief Executive Officer, John Barak, our President, Chief Revenue Officer, and Corporate Secretary, 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.jushiko.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 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 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 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 are detailed in Jushi's 10-K and other periodic filings and registration statements. These documents may be accessed via EDGAR and SEDAR, 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. 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, I will provide a high-level overview of our financial performance during the second quarter of 2025, followed by a discussion of our recent operational achievements and key 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. To begin with, I am pleased to report encouraging top line growth in the second quarter with revenue of $65 million compared to $63.8 million last quarter and $64.6 million in Q2 of 2024. This performance was driven by increases in retail revenue of $2.6 million sequentially and $2.4 million year over year, with strong contributions from both Ohio and Virginia. This was partially offset by decreases in wholesale revenue of $1.4 million sequentially and $2 million year over year, primarily due to limited availability of products available to third parties as we prioritize supplying our retail stores, and delays from the state-mandated seed-to-sale system conversion that limited shipments near quarter end in Virginia. With strong sales momentum and five stores now open in the state, Ohio continues to be a significant growth driver in our retail channel. Gross profit for the second quarter was $28.9 million, or 44% of revenues. compared to $25.8 million or 40% in Q1 of 2025 and $32.6 million or 50% of revenue in Q2 of 2024. Sequentially, we are beginning to see early improvements in gross margin as the impact of previously elevated production costs driven by lower production volumes and inventory inefficiencies in earlier periods continues to phase out. In the second quarter, net loss was $12.3 million compared to $17 million last quarter and $1.9 million in the prior year. On a sequential basis, this represents a $4.7 million reduction of net loss. Adjusted EBITDA was $13.7 million compared to $9.8 million in Q1 of 2025 and $14.5 million in Q2 of 2024. Cash flows used in operations was $1.9 million in Q2 of 2025 compared to cash flows provided by operations of $7.5 million for Q1 2025 and $5.5 million in Q2 of 2024. The decrease quarter over quarter was primarily driven by a decrease in cash flow from working capital whereas the decrease year-over-year was also due to a decline in our operating results. Turning to our retail expansion strategy, we have strategically concentrated our growth-oriented investments on accelerating the expansion of our store footprint over the past three quarters. Since launching this initiative in the fourth quarter of 2024, six new locations have been opened. This includes Linwood in Pennsylvania and Peoria in Illinois, expanding our total store count to 18 and 5 in those states, respectively. In Ohio, we added dispensaries in Oxford, Toledo, and Warren, followed by our most recent opening in Mansfield in the second quarter, just in time for the state's first-ever 420 with adult use sales in effect. Our Mansfield, Ohio location is currently operating under a management services agreement under the Beyond Hello name, we expect to close on full ownership of this site later this year pending regulatory approval. With this progress, we remain on track to open 10 new stores in total by the end of the year or early next year since the retail expansion strategy launch. Late in the third quarter or early in the fourth quarter, we expect to open our sixth dispensary in Ohio located in Parma as well as our anticipated entry into the New Jersey market with a store in Little Ferry. We also plan to add locations in Mount Laurel, New Jersey and Springdale, Ohio by the end of the fourth quarter or early in the first quarter, 2026, all pending regulatory approval. As of the end of the second quarter, we have 1,201 employees across 40 retail stores, representing a modest 2% increase in headcount from 1,177 employees in Q2 of last year. That is despite a 14% increase in our store count, up from 35 a year ago. This speaks to the success of our labor optimization initiatives, along with disciplined cost management across our business. Looking ahead, we have identified high potential store locations in Massachusetts and Ohio, along with multiple new opportunities in Illinois. Several store relocations are currently in the planning stages as we continue to refine our footprint to maximize retail space and optimize our presence in each market. However, after completing the current wave of openings, We may shift to take a more opportunistic approach to retail growth, strategically reallocating capital to our grower processor operations in alignment with evolving regulatory developments in Pennsylvania and the election polling in Virginia. In grower processor operations, we are already making strategic high return investments to address current demand in Pennsylvania and Virginia, while preparing our platform for the potential adoption of adult use programs in these states. Our capital spend primarily targets canopy expansion, enabling us to scale production to full capacity as needed in both states, while improving quality and output to better serve our patients. In Pennsylvania, we are in phase one of our three-phase GP expansion. This phase includes converting a legacy oversized existing grow room that was primarily used for low-margin distillate into three smaller, high-quality flower rooms. While the overall square footage remains the same, this redesign enables us to better control environmental conditions such as temperature, humidity, and airflow, which are critical to optimizing plant health and yields. By creating smaller, more manageable environments, we are able to increase planting density and plant quality. This should be a very high ROI investment as we expect the renovation to improve biomass yield in the space by 240% with an estimated 400 to 500 pounds of incremental flower per harvest, which is like adding an extra 4,000 square feet of canopy or 10% equivalent total increase. In phase two, we plan to retrofit another oversized grow room currently being used for non-grow activities using the same approach, allowing for the addition of up to three more flower rooms with the projected canopy increase of approximately 15%. Phase three, which is contingent upon adult use becoming a reality, focuses on another canopy expansion. This will involve relocating administrative operations to another building on the property, freeing up licensed space in the existing warehouse to be converted into cultivation. This expansion could accommodate an additional 5,000 to 10,000 square feet of flower rooms and has the potential to increase our canopy by an incremental 10 to 15% subject to final design. Taken together, these upgrades are expected to increase our total canopy in Pennsylvania by approximately 35 to 45 plus percent once all phases are complete. In Virginia, we have opened a new 2,500 square foot flower room during Q2 at our grower processor facility and have the capacity to add up to two additional rooms of similar size within our existing footprint. Construction on one of these additional rooms has begun. With these three new rooms, our canopy is expected to increase by up to approximately 50% in 2025 and 2026. We are also currently in the design phase for potential GP warehouse expansion in Virginia and have the potential to do the same in Pennsylvania as we have significant undeveloped plots of land at both of these locations. However, as mentioned on our last call, we do not plan to move forward with these projects until there is greater clarity on the regulatory landscape the market needs and a lower cost of capital for the company. In Ohio, we have the flexibility to scale our grower processor operations if we choose to increase our vertical presence, particularly if our cost of capital improves. The good news is we are building significant retail distribution that can absorb such an expansion, and the grower processor is in a building with excess land that we own. This is a project we would like to start in 2026. The benefits of our quality improvements and operational efficiency initiatives across our grower processor operations are beginning to be reflected in our financial results. This progress follows a number of targeted actions taken throughout 2025 to address operational challenges and inefficiencies, particularly in Massachusetts and Pennsylvania, where we are now seeing encouraging results in both yield and product quality. While these improvements typically take time to flow through to our retail operations, we are encouraged by the positive trends emerging across both channels. Next, I would like to highlight the continued expansion and innovation within our brand and product portfolio. Over the second quarter, we strengthened our offering with the launch of 602 new product SKUs across our footprint. In some of these cases, we capture higher margin on these SKUs as we are growing in the higher quality space of the market. Our Seche and the Lab brands remain strong performers, accounting for 253 and 193 SKUs launched, respectively. While our higher quality brands, Flower Foundry and Hijinx, are still in early stages of growth, they continue to show steady traction in total package sales. Also, our product assortment continues to grow across all states. Significant progress was made on both the wholesale and retail fronts in Ohio. On the wholesale side, we expanded product distribution to 12 additional dispensaries during the quarter, bringing our total presence to approximately 33% of dispensaries in the state, up 27% from Q1. On the retail side, the successful launch of our Mansfield store, along with continued growth in Warren, drove record-breaking sales weeks throughout the quarter, including Memorial Day and 420. In Virginia, we increased availability of high-potency flour from Flour Foundry, which ended the second quarter as our third top-selling brand in both dollars and units in the state. Additionally, we also launched Shio, a new cannabis lifestyle brand created in partnership with Real Housewives star Stacey Rush. The brand features rosin-abused fruit chews available in two SKUs, Rise featuring a THC and CBG profile, and Rest, a THC and CBN blend. These products are currently available at all Beyond Hello stores across Virginia and with third-party dispensaries expected to carry them in the near term. Our Virginia delivery operations continue to drive our performance in the state, with year-over-year and sequential growth across delivery orders, sales, and total unique patients in both our HSA-2 and out-of-HSA-2 areas. Based on data from our third-party provider, delivery sales rose year-over-year by approximately 40% in HSA2 and 108% out of HSA2, while orders per day expanded by 35% and 100%, respectively. We also saw meaningful growth in patient engagement with notable annual growth in unique patients. The result reflects the strong relationship we are building with patients in Virginia and reinforce Jushi's position as a trusted provider in the market. Transitioning to our balance sheet, we continue to focus on strengthening our capital structure to support our long-term strategic priorities. In Q2, we received approximately $4 million in employee retention credit claims, including interest, which included both factored and non-factored claims. This added approximately $1 million in incremental cash to our balance sheet. To date, we have received $6.2 million of the $10.1 million in ERC claims, excluding interest. Additionally, as part of our ongoing focus to strengthen our financial position and support our strategic expansion plans, the retail license for a Las Vegas strip dispensary in Nevada was sold and transferred for $3 million in cash. Given the dominance of the illicit market and its impact on the regulated market, we concluded that maintaining a presence in that specific region of the state was no longer strategically justified. This decision reflects our commitment to actively manage our portfolio of stores to maximize sales performance and shareholder value. Lastly, the recent federal passage of the One Big Beautiful Bill is expected to strengthen our balance sheet. The bill allows for the inclusion of depreciation and amortization, which are significant non-cash expenses when calculating our interest deductions. We expect our deductible interest to increase by approximately six to seven million dollars which would reduce our taxable income and generate an estimated $1.2 to $1.4 million in cash tax savings, assuming a 21% tax rate. While more progress is needed to stabilize the industry financially, this is an important step forward. The bill also makes 100% bonus depreciation permanently available. allowing us to fully expense qualifying capital investment up front. This election-based provision is expected to benefit us even more in the future as we expand our capital investment across the footprint. Moving to our regulatory outlook, while the broader landscape continues to evolve, we are closely tracking developments in Pennsylvania and Virginia poised to be long-term catalysts. In Pennsylvania, bipartisan and bicameral discussions around adult use legalization are ongoing, with proposed fees tied to a program conversion that is closely linked to the state budget, which is expected to remain under negotiations through the summer. Governor Shapiro has a clear opportunity to finalize adult use cannabis legislation, offering a revenue-generating alternative to raising taxes on Commonwealth residents. This is a pivotal moment that calls for decisive leadership, and we are hopeful that this critical initiative will move forward. Next, in Virginia, the gubernatorial race continues. Democrat candidate Abigail Spanberger has gained momentum with recent polls showing a lead of 12 to 17 points and a strong fundraising effort in the second quarter of $10.7 million. We are hopeful that a Democratic candidate victory could renew momentum for the industry, given that the Democratic-controlled legislature has passed an adult use bill in Virginia two years in a row. At the federal level, progress continues on proposed regulations for hemp-derived intoxicating and synthetic THC, which has long posed unfair competition to the licensed cannabis market. Now having advanced through the House and a Senate committee, this reform is critical to establishing a fair, safe, and well-regulated industry across the U.S. and ensuring public health and safety. There has been renewed support and lobbying to reschedule cannabis from Schedule 1 to Schedule 3. The recent appointment of Terence Cole as DEA Administrator adds a potentially pivotal voice to the process, as early indications suggest he may be open to a more thoughtful and reform oriented approach to cannabis policy. Senator Schumer's attempt to include the Safer Banking Act in the government funding bill was blocked, which has prompted him to explore merging the cannabis banking measure with cryptocurrency legislation as an alternative path forward. Following potential rescheduling, the Safer Banking Act could advance shortly after, though it may take up to a year to clear all approvals. We continue to monitor both federal and state-level cannabis policy developments and believe we are well-positioned to benefit from a refreshed regulatory environment, one that acknowledges the reality of today's industry and advances the normalization of cannabis through thoughtful, modern legislation. With that, I will now ask Michelle to review our financial results before we open the call to questions.