Vireo Growth Inc

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to Vireo Growth Inc. 2024 Results Fall. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. I would now like to turn the conference over to Sam Gibbons, Vice President of Investment Relations. Please go ahead.

Thank you, Dani, and thanks to everyone for joining us. With me on today's call are our CEO and Interim CFO, Josh Rosen, and our President, Amber Shimpa. Today's conference call is being webcast live from the investor relations section of our website. Dial-in and webcast details for the call have also been provided in today's earnings release, which is also available on our website. Before we get started, we'd like to remind everyone that today's conference call may contain forward-looking statements within the meaning of U.S. and Canadian securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could differ materially from actual events and those described in such forward-looking statements. For more information on forward-looking statements, please refer to cautionary note regarding forward-looking statements in today's earnings release. Now I'll hand the call over to Josh.

All right. Thanks, Sam. And thanks, everyone, for joining us this afternoon. I'll begin today's prepared remarks with a review of our second quarter and recent business highlights on slide three of today's presentation, which should be available in the quarterly results and events and presentation section of our Investor Relations website. Our second quarter results reflect continued solid performance across our core markets, and the ongoing commitment to executing our cream and fire strategy with continued strength in margin performance and one of our best quarters of operating income in company history. As a reminder, the cream and fire strategy name refers to the famous phrase, cash rules everything around me, and our focus on producing fire cannabis products that delight our customers with quality and value. Total revenue, excluding discontinued operation and New York, increased 42.5% year over year to $22.5 million. supported by continued tailwinds in Maryland following the commencement of adult use sales last year, as well as same-store sales growth in Minnesota, where we've continued to improve efficiency of operations and quality of product. Margins expanded both sequentially and year-over-year, and while we don't always focus on year-to-date results in our prepared remarks, it's worth noting that the consistency of our execution in the first half of 2024 also helped drive our strongest year-to-date financial performance in company history. even as we work through what's remained a challenging set of circumstances in New York. As Amber will discuss momentarily, during the third quarter, we will begin the anniversary, the launch of adult youth sales in Maryland, as well as the early progress that was made in the initial phases of our cream and fire strategy. So year over year comparisons on key performance indicators will likely become more challenging. However, we are cautiously optimistic about our improved operations and our ability to navigate our most seasonally challenging summer weather environment in our greenhouses in both Minnesota and Maryland, and we're continuing to compete effectively in Maryland's maturing adult use market. As we mentioned last quarter, we were very excited about our recent launch of two new brands of hemp-derived beverage products in Minnesota, and during the second quarter, we secured distribution agreements with both local and national distributors of hemp and alcohol products. For those of you who are not aware of Minnesota's unique regulatory framework for hemp-derived beverages, we've had a front-row seat watching this market evolve and become pervasive across bars, grocery stores, restaurants, and events. The development of our high AF and boundary water beverage brands was a low-risk, capital-light endeavor, which allows us to seed some of our adult-use-leaning brands in market before the launch of adult use. And while speculative at this point, these beverages could become meaningful value drivers if they gain and sustain market traction as we take them on the road. Those of you who know me well know that I am not one to be overly promotional without tangible results. While we don't plan to focus investor attention much on our beverages at the moment, I'm excited about the approach we've taken and the team we've assembled. It's also been fun to watch the excitement across our team and the overall fit with our commitment to cream and fire. In New York, we received our ROM license in July and have begun wholesaling to the recreational use market with vape and edible products and expect to begin selling flower products through the wholesale channel later this quarter. We're also continuing to work through our ongoing divestiture process in New York, although the process is taking longer than we anticipated. Fortunately, Our announcement last week about our 30-month debt extension has given us increased flexibility to optimize this outcome. To be clear, we are still planning on divesting the asset, but now we are doing so with much less pressure. The improved regulatory environment in New York is certainly part of the calculus on this, and it is great to see the state making progress in allowing for a more robust regulated market. We are continuing to work most closely with Ace Ventures as the potential acquirer for New York, although we are doing so without exclusivity as we look to optimize outcomes for Vireo shareholders. To wrap up our review of second quarter and recent business highlights, we were particularly pleased to announce last week that we amended and extended our credit facility with our senior secured lender. The maturity date on our loans was extended to January of 2027. At Chicago Atlantic, our lender also chose to voluntarily convert all of the outstanding convertible notes, which were issued in April of 2023. This was a big milestone for Vireo, and while we still have a lot of work in front of us, speaking for myself, I'm excited to be dedicating even more of my time to building our business, and I was particularly pleased Wichita Galvanic's decision to voluntarily convert their convertible note, saving us both cash interest and future dilution, and solidly cementing themselves as our largest shareholder. Please turn to slide four of today's presentation, where we summarize our strategic objectives for 2024. These objectives mostly reflect continued execution of the key tenets we outlined of our cream and fire strategy. But our focus in 2024 is as much about preparing for 2025 as it is on continued improvement supporting our current operations. As I've said in the past, we're fortunate that these goals largely support one another. We also continue to pursue a positive outcome in our ongoing litigation with Verano. We discussed this at length during last quarter's conference call. I would like to remind investors that stock prices themselves and our market capitalization are irrelevant to the analysis of damages in this situation. It's the damages analysis to our company, not directly to our shareholders. And as is often the case in these circumstances, I believe this kind of cash flows become the most robust choice for such value determinations. It is very clear Verano has a more advantageous cost of capital than we do, let alone access to capital. We believe Verano was calculated with their decision to wrongfully terminate our agreement, and by claiming our breach, they avoided entering any substantive settlement conversations. I believe they did this knowing we had become acutely financially vulnerable through the summer of 2022, with obvious debt maturities on the horizon and the consequences were harsh for virial stakeholders. Next up in this litigation is a hearing on whether our case is suitable for a summary trial as opposed to a full trial. While we believe a suitability finding is justified on the merits and is our preferred outcome, we know it is not guaranteed under the circumstances, which is why we are simultaneously making preparations to support a full trial if needed. We've seen our peers invest significantly to prepare for the adult use activations in Minnesota and New York, while our balance sheet has been compromised. Fortunately, last week's credit disability extension gives us more breathing room to continue executing our cream and fire strategy on a solid, independent path. As our team knows, we have much work left to do And while the debt extension, early debt conversion, and our second quarter results all represent steps forward, we're focused on realizing our long-term potential to capitalize on the opportunities in front of us. That's with prudent capital allocation and investing in and trusting our talent. This industry gets more competitive every day, which means we must also keep improving on a daily basis. That concludes my prepared remarks, and I'll now pass the call over to Amber for some additional highlights from the quarter and a review of our key performance indicators.