Vext Science Inc

Thank you for standing by. This is the conference operator. Welcome to the VEX Sciences fourth quarter and fiscal 2023 financial results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal on operator by pressing star then zero. I would now like to turn the conference over to Jonathan Ross. Please go ahead.

Thanks, operator. Good morning, everyone, and thanks for joining us today. VEXed's fourth quarter and fiscal year 2023 financial results were released earlier this morning. The press release, financial statements, and MD&A are available on CDAR+, as well as on the VEXed website at vexscience.com. We would like to remind listeners that portions of today's discussion include forward-looking statements and that forward-looking statements are included in today's filings. There can be no assurance that these forward-looking statements will prove to be accurate or that management's expectations or estimates of future developments, circumstances, or results contained therein will materialize. Risks and uncertainties that could affect future developments, circumstances, or results are detailed in the MD&A and VEX's other public filings that are made available on CDAR+. and we encourage listeners to read those risk factors in conjunction with today's call. As a result of these risks and uncertainties, the developments, circumstances, or results predicted in forward-looking statements may differ materially from actual developments, circumstances, or results. This call also includes non-IFRS financial information, and such non-IFRS financial measures are subject to the disclosure and reconciliation included in our press release disseminated earlier today. Forward-looking statements made during this conference call are made as of the date of this call. VEX disclaims any intention or obligation to update or revise such information except as required by applicable law. VEX financial statements are presented in U.S. dollars, and the results discussed during this call are in U.S. dollars. I will now pass the call over to Eric Offenberger, Chief Executive Officer of VEX.

Thanks, John. Good morning, everybody, and thank you for joining our fourth quarter and four-year 2023 financial results conference call. Today, I am joined on the call by Trevor Smith, CFO of VEX. I will start by providing a brief overview of our progress during 2023 before turning it over to Trevor for an update on our financial performance. 2023 has been a challenging year to navigate from a macroeconomic perspective with sustained inflation and rising interest rates leading to a pressured consumer. On top of these pressures, in Arizona we faced industry-specific hurdles such as overproduction and falling wholesale prices. BEX has demonstrated remarkable operational strength despite this backdrop as a result of our focused blocking and tackling to drive traffic into our stores, maintain gross margin in a tough market, and drive efficiencies every day. 2023 was a preparation for VEX, and with Ohio adult use expected to come online during 2024, we are well positioned for significant growth. During the year, we enhanced our balance sheet flexibility, positioned our Arizona operations for long-term growth and profitability, and built out our footprint in Ohio. We generated revenue of $34.8 million for the full year 2023 and adjusted EBITDA of $5.5 million. Considering the ongoing challenges in the Arizona market, as outlined earlier, and the yet to be realized potential for Ohio's adult use program, I am satisfied with our financial performance both in quarter four and in 2023. Our ability to continue to deliver profitability and positive cash flow during a very tough year for the Arizona market and for consumer-facing companies overall underscores the effectiveness of our go-to-market strategy and consistent efficiency measures. From an operational perspective, it was a busy year. In Ohio, we now have two operating dispensaries and an operating Tier 1 cultivation and manufacturing facility. In quarter four, we took steps to add two additional dispensaries, which we expect to close on during 2024. We are already seeing increased sales in our wholesale channel, validating our investments in the states. Our vertical position will enable us to capture market share and generate significant cash flow as the market turns to adult use. We also expect to have the potential for three additional adult use licenses based on proposed new dispensary caps in Ohio, which would give us the opportunity to operate a total of seven dispensaries in the state. Exiting the year, VEX is in a strong position despite ongoing market pressures. We have a solid balance sheet that gives us the flexibility to execute both our plan and and opportunities as they arise. We also strengthened our leadership team and board during the year, ensuring that we have the insight and experience we need as we look to capitalize on the platform we have built across Arizona and Ohio. Diving into the Arizona market, cannabis sales reached more than $1.4 billion in 2023, the second consecutive year of sales growth since the launch of recreational sales. A slight increase in total dollars spent was offset by an additional 12 dispensaries launching operations. This translated into lower sales in the overall market on a per-store basis. In addition to the new dispensaries, the market witnessed a decline in overall pricing as a result of the overall economic factors and oversupply in the market. By our calculations, revenue per store overall for the state is back to roughly the level it was at just prior to recreational legalization. Despite these headwinds, BEX remains focused on leveraging the efficiencies available through our vertically integrated footprint to ensure that our cultivation footprint matched demand within our own retail footprint, while executing to drive throughput and doing everything possible to expand baskets, even from lower recent levels at retail. Our Arizona dispensaries continue to outperform the state average. Through 2023, Herbal Wellness Center locations recorded improved customer traffic, transactions, and unit sales. We attribute this to the store management recognizing changing customer patterns and targeting promotional discounts to meet this. We anticipate continued hangover for 2023 challenges into 2024. We see the potential for some price recovery toward the end of the year and into 2025, as cultivators and processors without their own retail doors exit the market and bring supply and demand back into balance. Our view is that there is more shakeout needed in the market. We don't anticipate pursuing any opportunities to add to our retail doors in Arizona in the short term, as vendor expectations are still higher than what the market conditions would justify. We do believe that as the exit of weaker players continues, additional opportunities may arise and we will look at those with the price and timing we've sent. For now, we would prefer to allocate incremental capital to the Ohio market. Turning to Ohio, 2023 was a milestone year with voters endorsing the adult use initiative during quarter four. Per the ballot measure, we expect adult use sales to commence by quarter three, 2024. Despite well-telegraphed early market choppiness, including additional dispensaries coming online and reduced medical card activity, Ohio is projected to become a $4 billion market by 2028, as reported by MJBizDaily. We were early to identify the state's potential and expect Ohio to be a big driver of growth for us over the next several quarters. We have been preparing for the rollout and have taken several important steps during 2023 to solidify our position in Ohio. in preparation for the launch of the adult use program. Upon completion of the Ohio expansion transaction, which is expected to occur in 2024, BEX will have an operating Tier 1 cultivation facility, an operating manufacturing facility, and four dispensaries in the state. The transaction is progressing on track. From a retail perspective, 2023 marked the first full year of operations for our Jackson dispensary. and we are pleased with its performance. In early 2024, we completed the acquisition of our Columbus, Ohio dispensary. Furthermore, in March 2024, we acquired real property associated with a Canada dispensary in Athens, Ohio, which gives us the future optionality that comes with owning our own real estate. We saw revenue and lift in Ohio propelled by wholesale and ownership of the Jackson dispensary. We expect this growth to persist over the next two years with the introduction of adult use before it eventually stabilizes at a much higher level. Having successfully navigated markets from entry to maturity, we are prepared to generate profitability and cash flow at each point in the cycle. In closing, I am pleased by our team's performance during a particularly challenging period for consumer-facing companies. With the closing of the pending acquisitions, and the launch of adult use sales in Ohio, we will be a larger diversified operator with fully vertically integrated footprints across two limited license states with significant potential. While we cannot control market forces, Arizona has the potential to return to more balanced conditions, likely in late 2024 or early 2025, which would be a positive driver to cash flow, just as Ohio is really starting to ramp up. We are very well positioned to derive results over the next several quarters. With that, over to Trevor for a quick review of the financials. Trevor?