Jushi Hldgs Inc Cl B

Good afternoon. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to Ducey Holdings, Inc.' 's third quarter 2025 earnings conference call. Today's call is being recorded. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. 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 third 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 Baric, our president, chief revenue officer, and corporate secretary, and Michelle Mosher, our chief financial officer. This call is also being broadcasted 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 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.jujico.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, and future performance and business. Although Jushi believes our current 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 third 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. We continue to build positive momentum in the third quarter, delivering revenue of $65.7 million. This represents a steady sequential increase of $.6 million and a robust year-over-year growth of $4.1 million. I would note the third quarter has consistently been our seasonally slowest of the year. Retail revenue was slightly lower on a sequential basis by $0.7 million, but delivered a meaningful year-over-year increase of $3.3 million. The year-over-year growth was primarily driven by strong performance in Ohio and Virginia. In Ohio, we benefited from higher unit sales due to the addition of five new stores, while Virginia delivered strong same-store sales growth across our six-store network. Although price compression remained a challenge across markets, Ohio's performance stood out, continuing to deliver despite this ongoing pressure. Wholesale revenue grew by $1.3 million sequentially, with all markets contributing to quarter-over-quarter improvement. On a year-over-year basis, wholesale revenue increased by $.7 million, with Virginia as the one exception. where partners prioritize vertical sell-through, resulting in a softer annual comparison. Our third quarter sales performance reflects ongoing strength across both our retail and wholesale channels, fueled primarily by operational enhancements at our grower processor facilities. These continued improvements have elevated both product quality and availability, enabling us to better serve demand across our network while achieving improved margins. Gross profit for the third quarter was $30.7 million, representing 46.7% of revenue. This marks a notable improvement from $28.9 million, or 44.5% of revenue, in the second quarter of 2025, and $28 million, or 45.4%, in the third quarter of 2024. The 220 basis point sequential increase in gross profit margin, along with 125 basis point expansion year over year, highlights the continued positive impact of our operational enhancements on overall profitability. Net loss was $23.7 million compared to $12.3 million last quarter and $16 million in the prior year. Adjusted EBITDA was $12.8 million compared to $13.7 million in Q2 of 2025 and $10.3 million in Q3 of 2024. Cash flows provided by operations were $6.1 million in Q3 of 2025 compared to $1.9 million of cash used in Q2 of 2025 and $2.4 million of cash provided in Q3 of 2024. The improvements in operational efficiency and product quality across our facilities are now translating directly into stronger financial results contributing to increased sales and enhanced margins. This progress stems from advancements in genetics, facility upgrades, and approved operating procedures due to a material upgrade to our management team through promotions and new hires over the fourth quarter of 2024 and throughout 2025. Across our growth processor network, I'd like to highlight two key achievements. First, our yield has climbed to an impressive 84 grams per square foot across the GP portfolio, making a 13% increase year over year. Second, our potency levels have averaged 27% THCA, which is 10.5% above our 2025 target, and an improvement over 2024. This combination allows us to better meet patient and consumer preferences, driving growth in both retail and wholesale sales. As mentioned, we saw strong momentum with a 23.2% increase in quarter-over-quarter and an 11.9% rise year-over-year in our wholesale channel sales. While wholesale sales have been down for some time due to lack of availability of products, Our increased production capacity now enables us to satisfy increased internal demand across our retail network while continuing to support wholesale partners. Ohio continues to impress with a 2.4 times increase in canopy year over year, alongside continuous improvements in yield and potency. Our yield in Ohio is now around 92 grams per square foot, with potency averaging 29% THCA. The improvements in our quality are resonating in the Ohio market as we expand to 160 active wholesale doors in the third quarter, which is an 11% sequential increase. The successful improvement of both yield and potency as we expanded our canopy reinforces our confidence in our ability to replicate these results as we continue to scale, and particularly as we move forward with planned canopy expansions in Pennsylvania and Virginia. I'm also pleased to report that we have successfully navigated and addressed the operational challenges in Massachusetts and Pennsylvania. Our Pennsylvania GP is performing as good as any of our facilities in the portfolio. It is our largest facility with the ability to produce products in every category except for a few small ones like soda-type beverages, press pills, and creams. Moving on to our ongoing projects, we continue to deploy high return capital into our grower processor facilities, especially in Pennsylvania and Virginia. These high ROI projects are a vital part of our long-term strategy and enable us to strengthen our supply chain for both medical and adult use in these markets. In Virginia, we continue to expand capacity to meet rising demand in the medical market. We expect to bring our seventh cultivation room online at the Manassas grower processor in the first quarter of 2026. After that, we have the ability to add on one additional cultivation room within the existing footprint. In parallel to support adult use sales, we have begun design work on a new warehouse on our vacant land at the rear of our current facility that we will eventually connect. We are hoping to be in a position to begin construction of an adjoining building a couple of months after adult use is approved, depending upon the speed of regulatory approvals. In addition, there's more vacant land to allow for additional warehouse expansion projects if market conditions warrant such an investment. In Pennsylvania, we will shortly finish phase one of our two-phase expansion plan to increase flower capacity and required support areas like increased dry room capacity. This phase includes reengineering an outdated cultivation space into three smaller single-stack cultivation rooms capable of producing to our much improved standards. Phases two and three have been combined into a single phase as we currently have more than adequate capacity for the medical market. The new phase two is in the architectural stage. Phase two will substantially increase our capacity for adult use. This expansion is a reengineering of underutilized space in the current warehouse, which allows for a quick turnaround and lower capital investment to meet adult use needs. These two expansions are expected to increase our total canopy by approximately 35% once all phases are completed. As in Virginia, our grower processor facility sits on plenty of land, which will allow us to address additional market opportunities if growth and profitability are robust.

Turning to our retail operations, we expect to have added eight new stores by the end of this year.

These include currently operating locations in Toledo, Oxford, Warren, Mansfield, and most recently Parma in Ohio and Linwood in Pennsylvania. In addition, we are on track to open two additional locations by the end of the fourth quarter. One in Little Ferry, New Jersey, and the other is outside of Cincinnati in Springdale, Ohio. Little Ferry will mark our first entry into New Jersey, and Springdale will be our seventh store in Ohio. A third location in Mount Laurel, New Jersey, remains on track to open in the first half of 2026. I would note that in New Jersey, our little ferry location was built through a license application versus acquisition and has approximately 45,000 cars pass the store per day. This location is down the street from the visited Costco in New Jersey and is next to the busiest private aviation airport in the United States. We also sold an underperforming store in the Nevada market this year. We are also actively assessing a few potential store relocations to optimize performance and position within our core markets. We have three or four solid move opportunities, which we should be able to execute upon in 2026. Our goal is to move between 5% and 10% of our stores a year as leases expire and or better locations present themselves. With net store growth of about 30% in this 18-month retail expansion phase, our capital priorities have shifted to targeted production upgrades and capacity expansions on the global processor side of the business and the store moves on the retail side. Newly opened high-performing stores typically experience a ramp-up period of approximately 24 months before reaching stabilized same-store sale levels, as customers and patients become increasingly aware of their presence. At the end of the third quarter, Jushi had 1,251 employees across 41 retail stores compared to 1,182 employees and 35 stores at the same time last year. We continue to add new locations while maintaining lean staffing levels and driving productivity improvements across the network. While our store count grew by approximately 21% year-over-year, headcount increased by only 6%, reflecting our ability to scale efficiently. This speaks to the effectiveness of our corporate and retail operating model and leadership, which continue to deliver strong results. As the smoke clears in the regulatory environment at the federal level and in our states as they transition to better programs, there is a proven opportunity for Jushi to use the operating leverage to increase profitability. Basically, we increase revenues at a higher pace than expenses, which increases margins. This growth and margin story should play out as we increasingly use the Jushi platform to expand through acquisitions. On the performance side, our retail business remains supported by multiple growth drivers. Store traffic and transaction volume trended upwards across our core markets, reinforcing continued engagement among both patients and consumers. Pennsylvania was a highlight, with transaction volume rising 22% year-over-year, a direct reflection of our market penetration. We also saw continued growth of our private label share across several states, driven by the launch of 821 new product SKUs. This includes a wide range of offerings from emerging brands such as Hijinx and Flower Foundry, as well as legacy brands such as Sashay, Tasteology, and The Lab. Of note, we launched 355 SKUs under the Sashay brand and 209 under The Lab. Among our newer brands, Flower Foundry continues to grow its share, now accounting for nearly 10% of our total package sales in Pennsylvania and Virginia, and 8% of our total package units in those states. Shio, our partnership brand with Real Housewives' Stacey Rush, is off to a great start. The rosin-infused fruit chews have already climbed into the top 10 edible brands in Virginia. Jushi branded product sales as a percentage of total retail revenue was 56% across the company's five vertical markets, an increase of 110 basis points compared to Q3 of 2024, while remaining relatively flat compared to the prior quarter. There should continue to be a positive uptick in our vertical penetration with improved product availability and better retail management. In adult use markets, we are focused on broadening product assortments to remain competitive and drive higher basket sizes. We are effectively leveraging vendor support and localized campaigns to protect margin while increasing unit velocity. I would like to note that Jushi continues to be one of the largest third-party purchasers in our markets. Additionally, our new retail leadership team has made a strong impact, elevating in-store experience through better operating focus, merchandising, education, and customer engagement. From a year-over-year perspective, overall retail performance reflects the benefit of our new store openings and operational improvements across the platform. Units sold increased by 6.9% compared to the same quarter last year. In Pennsylvania, retail sales rose $0.3 million year over year, with the performance varying across regions. We continue to see bifurcation in the market, particularly in southeastern Pennsylvania, where the illicit market and the border markets in New Jersey and Delaware, especially in the Philadelphia area, remain a challenge. However, we are encouraged by recent legislative momentum and enforcement actions in the state, which could signal a shift in regulatory oversight and potentially pave the way for a more level playing field. As previously noted, Virginia retail sales rose by $1.5 million year over year, with our Beyond Hello market share growing by 1.5% sequentially. We continue to be a top-quality grower in the market with the most innovative new brands. In Arlington, our store saw significantly increased demand as enforcement actions intensified across the border in Washington, D.C. With ongoing regulatory scrutiny of unlicensed smoke, vape, and hemp stores, we believe more of that demand will continue to return to the legal, regulated channel, which usually is well-positioned to capture it through our solid footprint in the Commonwealth. This D.C. enforcement against illegal activities and resulting increase in sales in the legal market may be a microcosm of what will play out across our footprint as law enforcement attention towards these illegal activities improves across the country. Let's now turn to the balance sheet. Late in the third quarter, we increased the mortgage on our Manassas facility with SEC Bank, securing an additional $4 million in loan proceeds that funded high ROI growth capital expenditure in our facility. As part of the amendment, the loan maturity was extended to September 2030, and the interest floor was reduced from 8.25% to 7.5%. This reflects strength of our longstanding relationship with SEC Bank and the continued confidence they have in our business. In addition, we received $0.2 million in interest on employee retention credit claims that had previously been factored, which provided further cash inflow to the balance sheet during the third quarter. To date, the IRS has paid $6.9 million of the $10.1 million of ERC claims, excluding interest. I would note that we have meaningfully increased our store footprint by approximately 20% year-over-year and substantially increased investment in all of our grower processors without degradation to our balance sheet as some analysts openly worried about earlier in the year. Next, I would like to provide an overview of recent regulatory activity. Beginning with Pennsylvania, The state continues to face a significant budget gap with the reserve fund depleted to levels that likely means that it will not be adequate to cushion the next recession, even if it were a shallow one. Unfortunately, there has been no progress towards passing the final budget. The legislature and administration remain at a standstill. However, there recently has been some progress on standalone cannabis regulatory legislation. Legislation to establish a dedicated cannabis regulatory agency separate from the Department of Health, Senate Law and Justice Committee has passed the bill out 10 to 1 and is now expected to be voted on the Senate floor in mid-November. This is a critical step forward as a dedicated regulator is essential for proper oversight of the medical program and enforcement against unregulated intoxicating hemp products

and the integrity of the legal market.

Moving to Virginia. Today's election will determine the outcome of the governor's race and the makeup of the General Assembly. We expect to have visibility on the results as early as tonight for the governor's race and maybe tomorrow morning for the House. We would note that beyond Governor Youngkin, there generally has been significant Republican support for an adult-use cannabis program in the past. We believe Winsome Earl Sears may bring a more balanced and forward-looking perspective on adult use cannabis policy than has been emphasized by the current administration. We remain highly confident that both houses of the legislature are aligned to launch a regulated adult use market. In fact, the Chair of the Senate Finance Committee and the Speaker of the House each have expressed a desire to implement adult use sales as a new revenue source to offset lost federal funding. Based on those signals, we anticipate that adult use sales could begin somewhere between July 1st to October 1st of 2026. At the federal level, our most immediate priority is closing the Farm Bill loophole that has allowed intoxicating hemp products to proliferate in the market and serve as a front for illegal players. Both the House and Senate have passed their version of the Agricultural Appropriations Bill And a conference committee is now working to reconcile the two. We expect this issue to be one of three major items addressed in the upcoming minibus legislation currently being prioritized by House and Senate Republicans. We want to take a moment to thank all businesses and partners who have supported our litigation strategy related to intoxicating hemp. We will continue to shine a light on bad actors in this space, and hopefully we will create legal wins that lead to significant strides in distancing state-licensed and highly regulated cannabis operators like Jushi from what has become the wild west of intoxicating hemp products. I would note we've established a history of well-managed and successful litigation outcomes, and we won't sit idly by in our markets where we see malfeasance. However, it is clear that our industry cannot solve this issue alone. We need the support of administrations, legislators, regulators, and law enforcement to protect consumers and ensure a level playing field for compliant operators. We have already seen positive developments in Ohio, Pennsylvania, and Virginia, where legislative and enforcement efforts are beginning to take effect. Conversely, in states like Nevada, burdensome taxes and regulatory regimes and the lack of any enforcement effort continue to allow the illicit market to flourish in an astonishing manner. Nevada clearly has entered the realm of one of the worst regulated states in the country. We are disappointed that the larger legal cannabis players in that market have not gotten more aggressive to induce change. On the topic of rescheduling, we continue to feel optimistic and appreciate the ongoing leadership from President Trump on this and other cannabis-related issues. And finally, looking ahead to incremental reform, in the months ahead, we expect to see the introduction of several key cannabis reforms, including the SAFER and CLIMAX. These proposals are designed to improve access to capital and banking for state-regulated cannabis businesses like ours, which are important steps toward creating a stable, competitive, and compliant national industry. With that, I will now ask Michelle to review our financial results before we open the call to questions.

Thank you, Jim, and good afternoon, everyone. I will now provide more detail on our third quarter results. As Jim mentioned, revenue for the third quarter increased by $4.1 million to $65.7 million as compared to $61.6 million in the prior year. Revenue in our retail channel was $58.8 million compared to $55.4 million. The increase was driven by strong sales performance in Ohio and Virginia. In Ohio, sales grew by $3.9 million, primarily due to new store openings. Revenue in Virginia increased by $1.5 million, reflecting growth across all stores. This growth was partially offset by ongoing pricing headwinds across various markets. Wholesale revenue was $6.9 million compared to $6.2 million in the comparable quarter in the prior year. The increase was due to higher sales across most our markets, supported by enhanced production capacity and product quality, which enabled us to support both our own sell-through and third-party sales channels. This growth was partially offset by a $1 million decline in Virginia, where partners prioritized their own vertical sell-through. Gross profit was $30.7 million, or 46.7% of revenue, compared to $28 million, or 45.4% of revenue in Q3 2024. The year-over-year increase in gross profit and gross profit margin was primarily driven by higher production volumes, improved product quality, and stronger performance at agro-processor facilities, particularly in Massachusetts and Ohio. These improvements were partially offset by persistent pricing pressures across our footprint, which resulted in lower average selling prices. As Jim covered earlier, the operational challenges at our grower processing facilities have been addressed, and we're beginning to see improvements in gross profit as efficiencies take hold and higher production volumes support improved cost absorption. Operating expenses for the third quarter were $28.3 million, compared to $27.8 million in last year's third quarter. The increase reflects various offsetting factors, including higher depreciation and amortization expenses, primarily related to new dispensary openings and manufacturing facility build-outs, and an increase in legal and professional fees, partially offset by lower share-based compensation reflecting higher forfeitures as well as lower value of share-based compensation granted. Included in other income expense in Q3 is $800,000 related to our employee retention credit claims paid by the IRS during the quarter, inclusive of interest. We will continue recognizing the refund claims and income as the refunds are paid by the IRS. As of the end of the third quarter, we had approximately $3.2 million in remaining claims outstanding, of which $1.6 million was not factored. Based on the current interest rates we have received on process ERC claims, we expect to receive between $600,000 and $800,000 in additional interest in the remaining open claims. Also included in other income expense is a $6.3 million fair value loss on our derivatives for this quarter versus a $2.6 million gain a year ago. These are non-cash adjustments that primarily reflect changes in our stock price during the period. During the quarter, the One Big Beautiful Bill Act was enacted, which reinstated 100% bonus depreciation and expanded the deductibility of interest under Section 163 . While the legislation did not have a material impact on our overall income tax expense due to the need to treat the deductibility of these expenses as an uncertain tax position, the Act did reduce the amount of cash taxes we would have otherwise paid for the period by approximately $900,000. With the anticipated expansion projects at our grow processing facilities in 2026 and 2027, we would expect to benefit from the new legislation with lower cash taxes, thus increasing cash flow from operations. Our net loss for the third quarter was $23.7 million compared to $16 million in the prior year. Adjusted EBITDA was $12.8 million compared to $10.3 million in the third quarter of 2024, and adjusted EBITDA margin was 19.5% compared to 16.8% in the prior year. Moving to the balance sheet. As of September 30th, the company had approximately $26.2 million of cash, cash equivalents, and restricted cash. On a year-to-date basis through Q3 2025, capital expenditures were $13 million. For the full year 2025, Maintenance CapEx is expected to be approximately $4 to $5 million. Gross CapEx is anticipated to be in the range of $10 to $13 million, which will be dependent on the regulatory environment and market conditions. As mentioned earlier on the call, we completed an amendment to our existing secured commercial loan with FDC Bank, which remains secured by our Manassas-Gora processor facility. The amendment provided an additional $4 million in proceeds, extended the loan's maturity to September 2030, and reduced the minimum rate the loan could bear from 8.25% to 7.5%. This additional capital is anticipated to support ongoing capital expenditures, working capital requirements, and other operational needs. As of September 30th, we had $194.3 million of principal amount of debt subject to repayment, excluding the $21.5 million related to the promissory notes issued to San Martino that remain in dispute, and excluding leases and property plant and equipment financing obligations. As of September 30th, our term loans with principal balance of $47.3 million are scheduled to mature within the next 12 months. As of the date of the issuance of these financial statements, we have not yet secured financing. However, we have taken proactive steps to advance the current refinancing process, which we expect to be completed prior to the maturity of the term loans. Cash provided by operations with $6.1 million in Q3 2025 compared to $1.9 million used in Q2 2025 and $2.4 million provided in Q3 2024. The sequential increase was primarily driven by an increase from working capital. The increase year over year was due primarily to improved operating results. And with that, I'll now turn the call back to Jim for concluding remarks.

Thank you, Michelle.

We are pleased with the progress we made in the third quarter, both operationally and financially. Our continued investment in product quality, facility upgrades, and discipline execution is clearly flowing through to stronger sales and improving margins. We have built real momentum across both our retail and wholesale businesses while maintaining efficiency and strengthening our balance sheet. At the same time, we are actively preparing for what is ahead. In Pennsylvania and Virginia, we are making high return investment to meet today's demand and position ourselves for future adult use expansion. And on the regulatory front, we are engaged at every level from litigation and enforcement support to legislative advocacy to ensure a fair and sustainable future for the legal cannabis industry. We remain focused on executing with discipline, scaling strategically, and capturing the opportunities we see ahead as the industry continues to evolve, all while generating long-term value for our shareholders. Before we wrap up, I'd like to thank the team at Jushi. Their ongoing efforts across the business make everything we have discussed today possible, and I appreciate their continued commitment. Thank you all for joining us today and for your continued support.

We look forward to sharing more updates in the future.

Operator, please open the call to questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then two. At this time, we will pause momentarily to assemble our roster.

Our first question comes from Luke Hannon with Canna Congenuity.

Please go ahead.

Thanks. Good afternoon, everyone. Jim, I want to circle back on your comments on Virginia. You talked about a lot of the opportunity that you have in front of you as far as expanding cultivation there and being ready for adult use. And then you talked about the window where you expect adult use sales to kick off should the election go in your favor and in cannabis' favor later today. But with that said, I'm trying to figure out overall. You also talked about the capex issue. that you're incurring this year, I'm trying to figure out when it comes to being prepared ultimately for adult use next year, and again, you fleshed out some of what that entails, what overall is how much larger is that CapEx budget going to be to be prepared for that, and will it be ready in time to be able to meet all the adult use demand that you expect?

Thanks, Luke.

I would say that the retail side of the business was designed for adult use. So the vaults are very large. The parking lots are very large. There's only six stores in Northern Virginia that services 3.3 million people. So being able to service a large amount of people flowing through is very important. And that's done. And that's really hard to change, if you know what I'm saying, because you have an undersized store with undersized vaults. And So that's a real, you know, something we've been paying for along the way because the leases are higher than ordinarily what you would do for sort of a medical market or without such a head start, let's say, on the retail side with the exclusivity we have right now. So we're in great shape. The grower processor, we currently are producing more than we can sell. in the medical market. And we had four rooms at the beginning of the year up and running. They're all about the same size. We've increased by, we'll have increased by three rooms by the end of the first quarter to seven rooms. So you could do that percentage increase. The sixth room is not up and going. We're just planting that soon. And the seventh room is under construction. So that's a fair amount of capacity coming on. So there's only one of those rooms that's had productive capacity thus far, which has put us into the oversupply situation right now. In addition, we have the ability to buy third party. Our understanding is there's two very good growers in the state. We believe At least one of them will have a fair amount of excess capacity. We have a very strong commercial relationship with them, and we'll be exploring that, obviously, if there's a shortfall from our capacity. And I'd point out in Ohio, we did not have enough capacity, but we were able to not miss sales because we've had third-party capacity in place. We've done this before, both in Ohio and Pennsylvania. So we feel pretty confident You never know exactly, but we feel pretty confident that we will be the biggest seller of the product in the state. We believe that other people won't be able to absorb their capacity with their six doors in more rural environments, and we believe that it will naturally flow to us. So we feel like there's some protection there. In terms of getting the CapEx online, we could do an eighth room, which would then double our capacity from you know, the medical market, right? So that's pretty good. And we haven't approved that yet. What we're doing is expanding the capacity, which will take a while. The CapEx project I talked about, we're not prepared to talk about the amount. We do believe we have support from the banking group that we have, the bank we have. You've seen, you know, extend us more credit this quarter or this past quarter. And so we feel like we have their support, and we feel like we can increase the amount of bank financing we have, and we believe the equity component is something we can afford. And that CapEx project, we would not start until adult use is approved. We're not going to take that kind of risk given the size of our company. So that's how we're thinking about it. It's a risk-reward where I'd love to have all the capacity in place and roll the dice and be paying interest on loans that I don't really need the capacity for. In some ways, I wish I was in that position, but we're not, and we have to be smart about the way we do things.

Got it. I appreciate it. I'll pass the line. Our next question comes from Pablo Zuanek with Cantor Fitzgerald.

Please go ahead.

Actually, good afternoon, Jim. It's with Swanish and Associates. Jim, can you just give some context on the lawsuit against DoorDash and other retailers? It was just in Virginia, right? And are you planning to do that in other states like Pennsylvania? I'm just trying to understand whether it's just going to be there. Would you expand it to other places? What type of feedback have you gotten from your industry peers? If you can just comment a little bit more. Thank you.

Yeah, so the Virginia action was against DoorDash and I believe Total Wine and then some other party, I believe. And in each state, there are unique parties. That's the only state where we had entities like DoorDash and Total Wine. The other ones were your more normal way of violating laws kind of people, as opposed to companies that should not be doing this and should know better, right? So I would draw that distinction. We pursued actions right now in Ohio, Virginia, and Pennsylvania, I believe. Trent could speak more to this at some point. But Ohio, the governor actually has put a stop to it to try to get the legislature to move. We haven't done an action, but that may be coming along. And so we plan to pursue this in all of our markets. We've generated a lot of attention and support from people in the industry. And I believe you're going to see some copycat moves in other states as well.

Thank you.

And then just regarding Pennsylvania, I don't know if you can comment, but where in that meeting that Mike Tyson was with Governor Shapiro and Senator Laughlin and other members of the legislature, if you were in the room, can you give us more color about, I guess, the temperature in the room? How much of an impact did it make? It just seems that we've been talking about Pennsylvania forever, and they just are not able to come together, right? But, you know, was this like an inflection point, or am I exaggerating? Thank you.

Yeah, so I would imagine it was not an inflection point. I was not in the room, but that's just not how the way the process works. I think it was a supportive thing. We're glad to see Mike involved and certainly involved in Pennsylvania. And there's another large company you could talk to that probably has a better insight and probably was in the room. And in terms of what we see in the process in Pennsylvania is we see right now a budget that – I can't answer that because we're very close to the situation. We see a budget that for this year, which began on July 1st of this year, 2025 – So this 12-month budget, they're several months past due, and it's very unusual to go this far. They've gone into the end of the first quarter in other years, but not often. So they're behind their duties, and there's an election next year for governor, so we think this is a lot of politics, and we think there's actually, my personal opinion, but I believe management team and Patricia all share the same opinion, I think we think there's broad support on both sides of the aisle and with the governor's office to do this. There are some folks in some powerful positions who may not like to see it because they're in the back pocket of pharma. We don't know. They don't tell you that. But it seems to us there are some people out there who make noise once in a while, who have people paying them money to do so. There's also other people who just aren't going to vote for it. But we think there's broad support. And we would also note that this legislation that is working its way through the Republican Senate, controlled Senate, and it's a bipartisan situation, it was a 10-1 vote for this cannabis regulator for an adult use market. It's a very important precondition, and we believe that's important. And we also think there's some stuff they're doing to cut down on the illicit market as it relates to the hemp stores and the smoke shops and et cetera. So we think there are some important things going on. And as of note, they're on the Republican side of the aisle where they're generated from. That really are very important in the adult use environment. So we're actually quite bullish on this happening at some point in the future. We just don't know the timing. And we are putting our money where our mouth is. We've increased our capacity already for adult use. It's not fully online yet, but first planting is happening soon. And then there's more capacity that we don't have to build out right now, but we're preparing to build out to get in shape for that. And we may even pull that trigger sooner rather than later, depending upon where it falls in our commitment stack. We have a lot of things we could do to grow the business.

Right. Now, obviously, your work position in Pennsylvania and Virginia, if those markets go right. Look, just one last question, and it's a bit of a comment, but I'd like to hear your thoughts on this. You know, I was at the Blank Room conference recently, and, you know, listening to some of the conference goes like IIPR. There's this line of thought that even if there's no, let's say there's, let's think of a scenario that there's no rescheduling over the next 12 months. There's no change at the federal level. and then companies like yourselves need to refinance that next year sometime. What some companies are saying, even some banks are saying, is that because of the attrition in the industry and some companies actually, you know, having to exit the industry or failing, right, going to receivership, that the companies that remain are in a stronger position. And I will include yourselves in that group. And as a result, the banks are more willing to do business with the ones that remain. And as a result, companies are in better shape to negotiate terms to refinance that. I don't know. Is that wishful thinking? And again, we're talking about a scenario in which there's no changes at the federal level.

Yeah, I think that there are several banking institutions and credit counterparties that have gotten more comfortable with cannabis. And we've been chatting with these folks And it's a natural evolution in what would I call like a credit market that's done very well in the past 24 to 36 months. There's a lot of private credit out there. It's one of the fastest growing parts of the business in alternative assets. It is not one of. It is the fastest growing by far. For Blackstone, they've raised $50 billion in quarters or maybe year-to-date or something in their credit business. And so I think you just have a wind at your back in credit, and that causes people to look at cannabis. Banks are getting more aggressive. They feel the Trump administration and the Republicans want to loosen up some of the tightness they're under. That goes way back to the global financial crisis. So I think it's hard to say what factors are causing people to loosen up a bit, but they clearly loosened up a bit in terms of how they're thinking about cannabis. So that's how I would comment on that. In terms of the remaining companies being better off because other people have restructured, I think there is some real truth to that. And I think the big truth to that is you're seeing a lot of grower processors being closed down. So in Massachusetts recently, you've had several grower processors closed down. which is, you know, help the business. And, you know, that plays itself out. You know, people, you know, get out of those leases. And I would say that if somebody's choosing to get out of a lease and a grower processor sits vacant and it already probably wasn't the best asset, I would imagine if they're getting rid of it, I would think that it's not coming back anytime soon in great shape. And there's not a lot of people looking to expand capacity. So I think some of it anyway, a good portion of it's probably somewhat permanent in terms of fixing the supply-demand balance on the growth processor side. And of course, weaker stores will close as well. That's a less significant aspect. So I think we all are stronger. And in terms of whether the banks are doing that because of that reason, I doubt it. They're probably as much scared by the fact that some people are going down because they think that way. So I would say it's more the wins behind the credit markets.

Right. Thank you. Thank you.

Our next question comes from Frederico Gomez with ATB Capital Markets. Please go ahead.

Thanks for doing my questions. First question, just on the I guess the commentary on Virginia and the wholesale there, the decline of 1 million, as I guess third parties prioritize their own vertical sell-through. Is this a trend that's expected to continue in that market? And I guess could we see further decline in wholesale sales in Virginia because of this?

No, I think we've probably bottomed out there based on what happened in the third quarter relative to the second quarter. But I don't think it's going to be a big decline or anything. It's not that big a business, quite frankly. But I think it's very simple. We had a real uptick last year when there was a change in control. I could use the names, but Verano took over Columbia Care Cannabis operation, and they invested in it and turned it around, which was a smart move for them. And now they have capacity, the kind of capacity they want with decent quality, good quality. And that didn't exist before. That was definitely, that was an asset sitting fallow. So that was probably the biggest uptick. But there's also another large player you know, made strategic think throughout the country to sort of get more vertical. You just kind of see this stuff come and go. Not that big a deal to us, really, but we comment on it, so you understand that. But I actually, to be honest with you, you know, I'm actually glad to give up a little bit of wholesale business because I think adult use is going to come. We'll see with the election tonight. We think you'll know by 8 o'clock or before 8 o'clock tonight. And, you know, adult use coming to Virginia, we want all that capacity coming on because we think we'll have demand for it in our system.

Great. Thanks for that. And then second question, just on your entry into New Jersey, how do you view the retail market there and maybe opportunities to open additional stores? Just given all the competitive pressures that we're seeing in that market, what's the strategy for retail in New Jersey? Thanks.

Yeah, you know, I would keep in mind the competitive pressure on when people talk about that. I mean, there was one large MSO that had a $100 million revenue store. I mean, what do you think was going to happen? You know, I mean, we think it was going to go up or down or sideways. I mean, it's pretty clear that was going to go down, you know. And so, like, if you had this sort of huge head start, you know, in the business on a retail basis, you definitely got to mine that in the early days of adult use. But on top of that, all of these folks put in, to my knowledge, very large global processors. and they have excess supply, and now other people are opening. So it becomes that sort of verticalness or building a business to satisfy wholesale demand. Most people wouldn't do that to a huge extent today. Some will, but most wouldn't. But they made these investment decisions, what, five years ago or something like that. Six years ago, they designed these buildings. So they did these huge buildings, which has proven to be not the best thing in the world if you only have three stores or whatever it is, five stores. So I think when you look at people that are in New Jersey, their prices are going down, right? And they're looking for places to put their excess capacity on the grow processor side. And this head start that they had in retail, they were earning excess profits, excess revenues, on these stores. They were tremendous stores. I applaud their ability to get into that state. We tried and failed. They did a great job. But that's going to go down, right? And so now how do we look at it? Well, we look at it like we want an application. And so it's a very cheap entry. We know how to build these things and run these things. It's geographically close to Pennsylvania and other areas that we have in the Northeast, so we can manage it quite easily. And as we said in the prepared remarks, It's a great location that we're opening up with 45,000 cars that pass by it per day, the number one Costco store in the state, and the airport, Peterborough is right there, the largest private aviation airport in the world. So, like, I mean, those are all good factors. And, you know, our downside is, you know, we sell it to one of those guys and probably make money if for some reason it's not great. So I think that's good risk award, and we decided to do it.

Thank you.

Our next question comes from Andrew Semple with Ventum Financial. Please go ahead.

Great. Good afternoon. Thanks for taking my questions here. First up, congrats on the margin performance this quarter. Good to see margins reflating there. Could you maybe talk to what you're expecting to see for margins in the Q4 period? I know typically it's a seasonally weaker period of the year. We typically see more discounting. Are you expecting to see that again this year? And then I guess more broadly in, you know, 2026, you know, you are highlighting that margin pressures were driven by yield improvements and improvements to operations. Do you think you can hold this higher margin level, you know, extra seasonality factors when looking more broadly next year?

Okay. Well, Andrew, I have to thank you. I thought we had a good quarter. You're the first person. I think we're four or five deep that acknowledge that. Thank you very much for the acknowledgement. But in terms of margins, they have improved. I think it's sort of a permanent improvement. In terms of the quality of our grow going up and now our retail management team, we've replaced substantially a large percentage of our top retail team. And so we're very happy with the way we're running the business. So in terms of the fourth quarter, you do see higher sales, right? And we are a company that's smaller. So our corporate overhead is greater as a percentage. So that helps us. And then, yes, you're right, there is discounting on the gross margin side. But we do have some wins that are back. Will they offset? I don't know. I'm not that concerned about it as I look at the company, a swing in the quarter. But I'm looking forward to the fourth quarter from a revenue perspective, certainly. And historically, we've done very well on an EBITDA basis there. I would also note on a year-over-year basis, we have a really weak comp. So that'll be good for us in terms of EBITDA. So I feel really good about how I'm going to view the fourth quarter as the CEO and largest shareholder. But whether the margins are ticked down or tick up, I don't know. And in terms of 2026, You know, if we get adult use in Pennsylvania, Virginia, our margins should be substantially higher because we'll be just selling a lot more. We'll have higher revenues, higher margins, and really, I think we're the company most poised for taking advantage of operating leverage. So, you know, we have a system in Pennsylvania with 18 stores that could do a lot more revenue on the same lease base. We have a grower processor that we're not expanding leases. We're not taking any more lease dollars down. to expand it. So our margins will go up quite dramatically when PA goes adult use. And then in Virginia, the similar story plays out as well. Like I said, we have quite expensive retail leases especially compared to the rest of our system because they were designed for adult use, which that means we're larger, better located stores that we find these leases during COVID when nobody else would actually, you couldn't get those kinds of leases outside of COVID because they wouldn't do it with cannabis companies. So we got lucky in one way, but we got unlucky because we were able to find these very large leases and then adult use hasn't come for a few years, right? So we've been living with that. Now there's still great stores, don't get me wrong, but I think there's definitely margin uptake there for sure. So I would say that if they go adult use, very significant margin uptick. That's what I'm focused on because I think it's going to happen. The question is when, not if. And then in terms of as a business that just carries forward, I would say there will be some puts and takes. The put would be in Ohio. In other words, Ohio will increase margins because we're growing same-store sales. We've opened all these stores recently. We don't think that they're going to peak before two years, most of them, because of the way it works when you put new stores on in a market where you can't advertise, essentially. I don't even think you do billboards there. So people have to figure out that you have a store there and that it's a better product, but all the reasons why you shop someplace else, closer, whatever it might be. So I think that'll be a big uptick for us. I think we have some other businesses that have turned Nevada is small, but I think that one is turned from us for being sort of a negative contributor to a positive contributor for a variety of reasons, including the asset sale and the turn in the GP. And so, and then, you know, and then we, you know, so we, and then we have some easier comps, let's say in the first and second quarter next year in Pennsylvania and in Massachusetts, because the growths weren't as dialed in as they are. So as a full year basis, you know, I don't know, but there's, and we know there's price compression and you know, in some markets. So, you know, we know that you're going to lose some sales for competitive openings in some markets. So there's offset. So that's how I would think about it overall. Again, I don't think as a standalone basis, the margin is that important to the value of the company because, you know, it's going to get, you know, when adult use happens in these two big states of ours, it's going to be like a tsunami, you know, washing away all of that thought process. in terms of the amount of sales that you can generate. And we're preparing for that.

Understood, but still very helpful context there. And then maybe as my follow-up here, for the past several quarters, I think Jushi's been highlighting the number of SKUs it's been bringing to market as part of the GP turnaround efforts. Could you maybe, if you have any on top of mind, any of those SKUs that have been top performers for the company recently, what worked well with the launch of those products and how you're incorporating that into new products you're launching up and coming.

Yeah, so I would back up and go up 30,000 feet a little bit, just step away, open the aperture. The reason why we do this is we feel the customer likes excitement, likes new things. And we also have internalized a great brand development team inside our creative department where we do it in a very efficient way. So we feel like we have sort of on a dollar-for-dollar basis a really cost-effective way to roll out new products and new brands, and we feel like the customer wants that. And so that's sort of what underpins the philosophy of rolling out all kinds of different things. A lot of these are expanding SKUs of existing products, bigger bags, ounce bags, half-ounce bags in certain categories, two-gram vapes. I don't think we're doing three grams, but we're looking at it. Two-gram vapes. all-in-one vape, rolling all this out, doing rosin where we weren't doing rosin in certain markets, solventless product. So a lot of it's that, gummies that are rosin-based. So there's all these different SKUs, and you need to fill them out to get up to 60%, 65% vertical sell-through in your market. Because if you don't offer all those SKUs, then you're not competing on the full shelf. So again, we're trying to compete on the full shelf of products, And so we think it's going to continue to happen in some of our markets like Virginia where we don't have hydrocarbon yet. We've submitted for approval for hydrocarbon real shortly. So we want to offer all the SKUs possible. I would say Flower Foundry has been... our biggest winner from a dollar perspective where we brought out a brand that has higher potency and sort of replacing the bank which had lower potency as our middle brand. And the reason why we chose to do that now is not just to put a new brand on something that was the same old stuff, but we have a ton of new genetics. So we were able to take advantage of excitement in the new genetics, which the customers love, by putting it to a new brand because it is a lot better with better, you know, grow techniques and all the different things we've done in the facility to make it better yields and better potencies. So we're offering something better, so we put it in a new brand. So those are the kinds of things that you're seeing us do. And I would say if I had to pick my favorite right now, it would be Flower Foundry. Not only where it is, but where it's going to go. You know, a lot of great genetics in there, and the customer is really liking it.

That's great. Thanks for taking my questions. I'll get back into queue.

Yeah, thank you.

This concludes our question and answer session. I would like to turn the conference back over to Jim Caciopi for any closing remarks.

Great. So thanks, everybody, for joining the call. We appreciate your support, and a special thanks to our employees.

Bye-bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.