Vext Science Inc

Welcome to VEX Sciences' fourth quarter and fiscal year 2024 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 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Priyam Chakraborty. Please go ahead.

Priyam Chakraborty Thanks, operator. Good morning, everyone, and thank you for joining us today. WEXT's fourth quarter and fiscal year 2024 financial results were released earlier this morning. The press release, financial statements, and MD&A are available on CDAR+, as well as on the WEXT website at wextscience.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 VETS, other public filings that are made available on CEDAR+. And we encourage listeners to read those risk factors in conjunction with today's call. As a result of these risks and uncertainties, the development circumstances or results predicted in forward-looking statements may differ materially from actual development 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, as well as the MDMA. Overlooking statements made during this conference call are made as of the date of this call. Vexed, this claims 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 Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX.

Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer of VEX. Eric Oppenberger, Chief Executive Officer I will start by providing a brief overview of our progress during the fourth quarter as well as 2024. We're turning it over to Trevor for an update on our financial performance. 2024 was a pivotal year for BEX. Despite macroeconomic headwinds and shifting consumer behavior, BEX reinforced its operational strength and solidified its position in Arizona and Ohio. Q4 marked a turning point as a successful launch of Ohio's adult use market began translating into meaningful revenue growth and increased cash flow for VEX. The fourth quarter of 2024 was our first full quarter of adult use sales in Ohio, which helped bolster our overall revenue generated to $10.2 million and adjusted EBITDA to $3.2 million. I'm pleased to share that Q4 of 2024 was our strongest operating quarter in recent years, both in terms of adjusted EBITDA and operating cash flow. This performance was primarily driven by Ohio, with our consolidated retail locations delivering 40% sequential growth in total sales in the fourth quarter of 2024 and driving significant operating leverage. With additional adult use regulations still pending, we see additional upside as the market continues to evolve. While Ohio demonstrated solid performance, Arizona continued to face pricing pressure from oversupply and heightened competition. The key to success in this environment is focusing on retail. We strongly believe that in cannabis, just like many other traditional consumer goods categories, retail drives a significant portion of the economics. You have to be where consumers shop, particularly if advertising is restricted and e-commerce is not the primary channel for your products. Shelf space is paramount. You can't have a brand in this industry without that shelf space. Our view is that consumers choose a dispensary based on location, value, and service. What they walk out with is simply the product available on the shelf. Some in this space may call that branding, but without a vertical integration, in-house brands and a focus on what consumers really want, those operators often struggle to compete. That's why we focused on capturing value at the retail level by controlling shelf space, improving customers' in-store experience, combined with disciplined execution and prudent cost controls. We have spent several quarters investing, and now we are starting to see the returns. For 2024, BEX generated revenue of $36 million, a 3% increase over fiscal 2023, and adjusted EBITDA of $9.2 million, up 66% year-over-year. I'm incredibly proud of our team's ability to retain market share in the challenging Arizona market while efficiently scaling our Ohio operations. Taking a closer look at Ohio, the market has performed largely as we had expected. According to state data, adult-use cannabis sales in Ohio exceeded $2.5 billion as of March this year. Despite relatively solid top-line growth, prices across most product categories have declined, with over half seeing double-digit price decreases. Operating in this market proves a fundamental truth. Price matters a lot. And if you're going after the mass market thinking you'll be a premium price brand, you're going to need to adjust your expectations. We have also always seen this as a value game, like traditional high-low retail. It's all about giving customers value, driving house brand penetration, and mixing back to a higher margin. The price trends we are seeing in Ohio are exactly what we observed in Arizona during its transition period. to an adult use market. And the same story that has played out across other mature markets. We saw this going into Ohio. We even laid it out in our investor materials before the market opened. So we were ready and positioned to drive results. We are in the early phases of market expansion and are well positioned to capitalize on this growth and maintain shares as the market matures. As we previously demonstrated in Arizona, Our disciplined strategy allows us to generate above-market results, even in competitive environments. VEX operations in Ohio have performed exceptionally well with the momentum from Q3 carrying through Q4 and into early 2025. To support this growth, we continue to expand our cultivation capacity, increasing plant counts and improving yields to meet growing retail demand. Trevor will expand on this further in his remarks. Net third-party wholesale sales in Ohio increased by 33% in quarter four, 2024, compared to quarter three, 2024. While wholesale is not a primary driver of our long-term revenue strategy, Ohio's regulations for manufacturing and cultivation create significant opportunities, and we expect to capitalize on the expanding market. Just as we laid out the expectations that price will start falling, We only see wholesale as a short-term driver of the business and have designed our capacity to perfectly match what we think we can sell at market maturity through our own retail doors. Looking ahead, we expect Ohio to remain a key contributor to Beck's growth in 2025 and beyond. The acquisition of the two big perm dispensaries in Athens and Jeffersonville is nearing completion. As announced in our press release this morning, we have received regulatory approval from the Ohio Division of Cannabis Control and expect to complete the transaction imminently. Together with the recently announced Portsmouth location and our 10B allocation, we are on track to reach Ohio's dispensary license cap of eight with new locations set to open throughout 2025 and potentially into early 2026. As a fully vertically integrated operator with the maximum possible license, we will be in the strongest possible position in the Ohio market and anticipate significant revenue, profitability, and cash flow growth from the state in the coming years. Let's turn to Arizona. In 2024, Arizona experienced the sixth worst year-over-year performance of any cannabis market in the U.S., with total statewide sales declining 12.6%. Factoring in the increase in dispensary cap for 2023, the average per store sales declined 25%. Excess cultivation capacity leading to an oversaturated brand landscape continued to create pricing pressures. Despite these headwinds, our team successfully drove traffic into stores Through data-driven campaigns, leveraged improved yields from our Eloy cultivation facility, maintained gross margins in a challenging market, and enhanced efficiencies across the vertical footprint. On a six-month basis, our retail sales in Arizona were up 2.4%, compared to a statewide decline of 6.4%. A solid performance, which positioned us to drive even better long-term results as the market stabilizes, and pricing pressure begins to ease. We do not anticipate pursuing new retail acquisitions in Arizona in the near term, as vendor expectations remain higher than most market conditions justify. However, as weaker operators continue to exit, we expect additional opportunities to emerge, and we will evaluate them when pricing and timing align with our strategy. Long term, we see significant value and additional owned retail where we can add to upstream footprint and leverage that scale. In closing, I am pleased with our performance in 2024. We executed our strategy effectively, delivering strong results across our key markets and establishing VEX as one of the industry's strongest operators relative to our size, positioning us well to drive results over the next several quarters, as cash flow continues to grow and highlights how undervalued this organization is on that basis. As we continue in 2025, our focus is clear. Continued expansion in Ohio, optimizing Arizona's vertical footprint, and generating sustainable cash flow while maximizing value for our shareholders. With that, over to Trevor for a quick review of the financials. Trevor?