Jushi Hldgs Inc Cl B

Good afternoon. My name is Alicia, and I'll be your conference operator today. At this time, I would like to welcome everyone to JUICY's Holdings Second Quarter 2026 Earnings Conference Call. Today's call is being recorded. I'll now turn the call over to Trent Woloveck, Co-Chief Strategy Director. Thank you. Please go ahead.

Good afternoon, and thank you for joining us today on JUICY's Second Quarter 2026 Earnings Conference Call. My name is Trent Woloveck and I am the Co-Chief Strategy Director at Jushi Holdings Inc. With me on today's call are Jim Cacioppo, our Chairman and Chief Executive Officer, Michelle Mosier, our Chief Financial Officer, and John Barrick, our President and Chief Revenue 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 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. 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 Form 10-K and other periodic filings and registration statements. which 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 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 begin with a high-level review of our second quarter financial performance and the key drivers of our results. I will then discuss the impact of our medical cannabis rescheduling and the investments we are making to prepare for adult use sales in Virginia. I will also provide updates on our corporate initiatives and key regulatory developments before turning the call to Michelle for a detailed review of our financial results. Beginning with our financial results, second quarter revenue increased $6.3 million or 9.6% to $71.3 million compared with $65 million in the prior year quarter. The quarter included two notable performance milestones, record third party wholesale revenue and record total revenue in Virginia. Wholesale revenue increased 68% year over year to an all-time quarterly record of $9.4 million, the first time we have exceeded $9 million in third-party wholesale sales in a quarter. Our wholesale performance was driven by improved product availability and quality together with expanded distribution across our wholesale footprint. We experienced revenue growth across all of our wholesale markets except Nevada, which remained relatively flat. Massachusetts led the growth with third-party sales reaching approximately two and a half times their prior year level. Ohio, Pennsylvania, and Virginia also performed strongly with third-party sales in each market exceeding one and a half times their prior year level. A key driver of this performance was the continued expansion of our wholesale distribution network. During the quarter, we expanded into 20 new dispensaries, including eight in Pennsylvania and seven in Massachusetts, further increasing the availability of juicy products across our wholesale footprint. At the same time, ongoing improvements in product quality continue to shift our sales mix toward higher value products with flower foundry and hijinks Gaining share in both revenue and unit sales. Flower Foundry delivered mid to high single-digit year-over-year growth in both revenue and units, reflecting continued consumer demand for our premium flower offerings. We also continue to broaden our product assortment, adding 501 new unique SKUs during the quarter and increasing our total assortment across markets by 19% year-over-year. During the quarter, we also broadened our product portfolio with the launch of Van Golden for Live Resin in Pennsylvania. These product expansions support our effort to provide patients and consumers with a relevant mix of value, core, and premium products. Operational execution remains central to our strategy. Across our grower process and footprint, we continue to improve product quality, consistency, and production performance. These improvements supported the significant increase in wholesale volume help offset a substantial portion of the pricing pressure in our retail channel. Those same operational improvements also supported continued growth in our retail business. Retail revenue increased approximately 4% year-over-year to $61.9 million from $59.4 million in the prior year quarter. Retail units sold increased 11.4% year-over-year, demonstrating continued consumer demand across our markets, while average selling prices declined due to ongoing pricing pressure and promotional activity. Ohio was the largest contributor to retail growth, supported by the addition of our Mansfield, Parma, and Springdale dispensaries since the end of the first quarter of 2025. as well as the continued maturation of our broader Ohio retail footprint. We also believe the implementation of our Ohio hemp restrictions which became effective in March of 2026 has benefited the state license regulated market with enforcement now occurring at both the state and federal levels. Publicly available market data indicates weekly retail sales have increased an estimated 10% since the law took effect reflecting consumers returning from the unregulated channels to state licensed dispensaries. As I mentioned earlier, Virginia achieved record quarterly revenue driven by strong same store performance across our six store network. These increases were partially offset by lower retail revenue in Massachusetts, Illinois, Pennsylvania, and Nevada. We were also encouraged by our performance around the 420 holiday where same-store units sold increased 11% and same-store retail revenue increased modestly versus a prior year period. Including contributions from new stores, retail revenue increased 7% and units sold increased 16%. Gross profit increased to $31.5 million or 44.2% of revenue compared to $28.9 million or 44.5% of revenue. Gross margin was broadly consistent with prior year period. Margin performance reflected continued progress in lowering production costs on Juicy branded products together with the realization of operational efficiencies across the business, supporting profitability across both our retail and wholesale channels. These benefits helped offset ongoing pricing pressure and increase promotional activity across our retail footprint. Gross profit also benefited from the contribution of new dispensary openings in Ohio since the end of Q1 2025. Adjusted EBITDA was $13.3 million, representing an adjusted EBITDA margin of 18.7%. compared to $13.7 million or 21.1% in the prior year quarter. The prior year period included 4.0 million of employee retention credit income that did not recur in the second quarter of 2026. One of the most significant developments during the quarter was the federal rescheduling of state licensed medical cannabis from schedule one to schedule three which became effective on April 28th, 2026. As part of that action, qualifying state-licensed medical cannabis operators are no longer subject to the deduction allowance, disallowance under Section 280E for their state-licensed medical cannabis activities. In addition to reducing our ongoing income tax expense, we recognized a one-time discrete income tax benefit of approximately $6.4 million during the quarter related to the reassessment of certain deferred tax balances following the change in federal tax treatment. Total income tax was a benefit of $976,000 for the second quarter compared to an expense of $9.9 million in the third quarter, primarily reflecting the elimination of Section 280E for our qualifying state-licensed medical cannabis operations. Based on the period following the April 28th effective date, medical cannabis rescheduling reduced income tax expense and related uncertain tax positions by approximately $3 million during the second quarter. Having a similar quarterly run rate for the remainder of 2026, we estimate that the change could reduce additional income tax expense and related uncertain tax positions by approximately $9 million during the second half of the year. Looking ahead, we continue to monitor potential guidance from the U.S. Treasury regarding retrospective tax relief. While the current rules became effective on April 28, 2026, the final order encourages Treasury to consider providing relief from Section 280E for prior taxable years in which a state licensee operated under a state medical cannabis license. The final order does not specify how far back any potential relief could extend. However, one potential outcome discussed within the industry is that relief could apply beginning in 2023 when the US Department of Health and Human Services formally determined that cannabis has a currently accepted medical use and recommended that it be moved to Schedule 3. If Treasury were to provide relief for the full 2026 tax year, we estimate that it would result in release of approximately $3 million on certain tax positions relating to our qualifying state-licensed medical cannabis operations. If relief for state-licensed medical cannabis operations were instead applied beginning in 2023, We estimate that approximately $50 million of uncertain tax positions and related interests, including amounts recorded during the first quarter of 2026, could ultimately be released. No guidance has been issued, and the timing, scope, and effective date of any potential relief from this remains uncertain. However, these estimates illustrate the potentially significant financial impact that retrospective relief could have on our business. We have also submitted applications to the DEA seeking federal registration for our state-licensed medical cannabis and dual-use operations. Related facility inspections are underway and have been constructive, with a focus on security, dispensing procedures, inventory controls, and product accountability. These interactions are helping both Jushi and the DEA prepare for implementation of the new federal framework, and in our view, represent another Step toward the normalization of state regulated cannabis. Beyond the positive federal developments, we are equally excited by the progress in Virginia, which we believe represents one of the most significant long-term growth opportunities for Jushi. During the quarter, legislation establishing a regulated adult use cannabis market in the Commonwealth of Virginia was enacted through the state's biennial budget. We are excited for the commencement of adult use sales on July 1st, 2027. This legislation makes Virginia the first southern state to establish a regulated adult use cannabis marketplace representing a landmark moment for both the Commonwealth and the broader region. We would like to congratulate and thank Governor Abigail Spanberger, Senator Lachris Aird, Delegate Paul Krzyzik, and the leadership of the Virginia General Assembly for their vision and commitment to creating a safe, well-regulated cannabis market that expands consumer access, creates jobs, generates meaningful tax revenue and continues to displace the illicit market. We believe that Virginia opportunity is substantial. Today, Virginia's regulated medical Thank you for joining us. to enter the adult use program through a payment of a $10 million conversion fee, which we expect to pay over a three-year period. We anticipate the regulatory framework will be finalized early next year and look forward to applying for adult use license so we are prepared to begin serving consumers on July 1st of 2027. Given the expected demand and limited cultivation capacity across the market at launch, We believe Virginia could experience supply constraints during the first 24 to 36 months following adult use implementation, further reinforcing the importance of the investments we are making today. As a result, our primary capital investment priorities preparing our Virginia grower processor operations to support the transition to adult use. Later this year, we expect to complete the next phase of our cultivation expansion with the addition of two new indoor flowering rooms, increasing our existing indoor canopy by approximately 33%, while also adding hydrocarbon extraction capabilities to broaden our portfolio of higher value concentrate products. Looking further ahead, we are advancing plans for the next phase of our Virginia expansion, which we expect would increase our current indoor flowering capacity by approximately 110% by the end of 2020 To support this investment, we are evaluating more traditional financing alternatives with commercial banks that offer a lower cost of capital than private credit providers. We also expect to refinance our Arlington mortgage, which matures early next year as part of our broader financing strategy. In addition, we are in the process of finalizing a lease for a 10-acre agricultural greenhouse property in that includes approximately 20,000 square feet of greenhouse space. We believe this represents a highly attractive return on investment opportunity by providing a reliable source of biomass for extracted products, including vapes, concentrates, edibles, and other infused products, while requiring significantly less capital than comparable indoor cultivation expansion. Importantly, our retail infrastructure is already well positioned for the transition to adult use. Our six Virginia dispensaries were intentionally designed as superstore locations years ago in anticipation of eventual adult use legalization with large footprints, more than 50 parking spaces at most locations, and sufficient sales floor capacity to support additional terminals. As a result, we expect only very modest incremental retail capital investment will be required to support adult use sales while continuing to provide the high level of service our medical patients expect. Based on public available market data from New Jersey's transition to adult use and subject to product availability, we believe our six Virginia dispensaries are well positioned to generate annualized retail sales comparable to those achieved by New Jersey dispensaries during the initial transition from medical to adult use. While Virginia represents our largest current growth initiative, we continue to advance disciplined expansion opportunities across our other core cultivation markets. In Pennsylvania, phase one of our grower processor expansion is nearing completion, which involves converting a legacy flower room into three modernized flowering rooms, effectively creating new productive capacity. Phases two and three could increase total canopy by approximately 40%. But we are staging capital deployment pending greater visibility into adult use legislation and market timing. In Ohio, the potential warehouse expansion remains in the design phase and any decision to proceed will depend on market conditions and the cost of capital. Turning to retail and brand execution. We ended the quarter with 42 stores across our footprint compared to 40 stores at the end of the second quarter of 2025. The change reflects the addition of Parma and Springdale in Ohio and Little Ferry in New Jersey and the closure of our Las Vegas store in May of 2025 and our Peoria, Illinois location no longer be included in our operating results beginning in January of 2026. Subsequent to quarter end, we continued advancing the relocation of our Johnson Pennsylvania dispensary to Bell Vernon, Pennsylvania. The new location is expected to open in the near term. We believe this location provides improved visibility, accessibility, and long-term growth potential within the market. We continue to evaluate an additional three to four relocations intended to improve profitability in Pennsylvania and Ohio. Turning to our corporate initiatives, we've made significant progress on our previously announced redomiciling. On June 24th, 2026, our shareholders approved the redomiciling of our parent company from British Columbia, Canada to the state of Nevada as part of our ongoing efforts to optimize our corporate structure. The transaction is expected to become effective on July 30th, 2026. We believe redomiciling will better align our legal structure with the location of our primary operations, streamline our organizational and regulatory framework, enhance our long-term strategic flexibility, and better position the company for future capital markets opportunities. With our corporate initiatives continue to advance, we also remain encouraged by the broader regulatory momentum across several of our key markets. Beyond Virginia, we continue to see encouraging regulatory progress across our footprint. In April 2026, Massachusetts enacted landmark cannabis reform legislation, increasing the retail license ownership cap from three to six licenses per operator. We believe this change creates a significant opportunity for established operators such as Jushi to expand their retail footprint, achieve greater scale, and capitalize on future consolidation opportunities within the Commonwealth. In Pennsylvania, cannabis reform remains under active consideration. SB 49 would establish an independent cannabis control board to oversee the existing medical cannabis program, transfer regulatory authority from the Department of Health, and strengthen enforcement against unrelated intoxicating cannabinoid products. The bill initially fell short on final passage in the Senate in June, but the vote was subsequently reconsidered leaving the legislation eligible for further action. Separately, SB 120 would establish a comprehensive framework for regulated adult use cannabis market in Pennsylvania. The bill remains in the Senate Law and Justice Committee, although a resolution was recently introduced seeking to advance it from the committee. While neither proposal has been enacted, we continue to monitor both measures closely as discussions around cannabis regulation and adult use legalization progress. In Illinois, the state took a significant step toward regulating intoxicating hemp products and directing consumers back toward the licensed cannabis market. On July 12th of 2026, Governor J.B. Pritzker signed SB 3222 into law. immediately prohibiting the sale of intoxicating hemp products to individuals under the age of 21. Beginning in November 2026, these products will also become subject to additional requirements under the Cannabis Regulation and Tax Act, including stronger packaging, labeling, marketing, and consumer protection standards. The legislation also reduces regulatory requirements for licensed operators by eliminating the requirement that dispensaries contract with third-party security providers and allowing use of qualified in-house security personnel. We expect this change to provide greater operating flexibility and the potential for modest cost savings across our Illinois retail operations. In Ohio, the recent performance of the regulated cannabis market following the state's restrictions on tax-getting hemp reinforces our view that consumers migrate back to the licensed operators when unregulated channels are curtailed. Encouraged by our experience in the Ohio market, we continue to monitor developments related to the intoxicating hemp loophole created under the Farm Bill. We believe the federal closure of this loophole would support a more balanced competitive environment across regulated markets. We remain actively engaged in opposing efforts to weaken or delay the existing statutory language and continue to believe the current framework will remain in place with enforcement expected to begin in November The anticipated implementation timeline, which precedes the important holiday selling period, could provide a meaningful tailwind for regulated operators. Finally, at the federal level, we continue to await the outcome of the administrative proceeding regarding the proposed rescheduling of cannabis in full from Schedule 1 to Schedule 3. The evidentiary hearing concluded earlier this month, and we were encouraged by the evidence and testimony presented by the federal government in support of broader rescheduling. With qualifying state licensed medical cannabis already placed in Schedule 3, we believe the government's position during the hearing represents continued progress toward a more rational federal cannabis framework. We now await the administrative law judge's recommendation and the ultimate final determination by the DEA. Overall, the second quarter reflected solid execution across our key priorities. We delivered strong year-over-year revenue growth, achieved record wholesale revenue, expanded distribution, and continued to improve product quality and availability across our growth processor footprint. In retail, higher unit volumes and growth in Ohio and Virginia helped offset continued pricing pressure across several markets. We believe this progress provides a strong foundation as we continue to improve our core operations, prepare for adult youth sales in Virginia, and pursue disciplined growth opportunities across our footprint. With that, I will turn the call over to Michelle for a detailed review of our financial results.