Vireo Growth Inc

Ladies and gentlemen, thank you for standing by. My name is Prila, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vireo Growth, Inc. Third Quarter 2024 Results Conference Call. The company would 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 notes regarding forward-looking statements in the company's earnings release. I'll now hand the call over to Chief Executive Officer Amber Shimpa. You may begin.

Thank you, and thanks, everyone, for joining us this afternoon. With me on today's call is Interim CFO Joe Duxbury. I'll begin today's prepared remarks with a review of our third 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. Third quarter results reflect continued solid performance across our core markets and the ongoing commitment to executing our cream and fire strategy. Total revenue excluding discontinued operations in New York increased 6.2% year-over-year to $22.4 million, with performance driven by continued double-digit sales growth in Maryland, not set by lower retail sales in Minnesota. As we discussed last quarter, we anticipated more challenging year-over-year comparisons of financial performance during the third quarter as we began to anniversary the launch of adult use sales in Maryland, as well as the early progress that was made in the initial phases of our cream and fire strategy. Minnesota's medical market has slowed after experiencing very strong growth last year, catalyzed by the introduction of flower products in 2022. This is an expected slowdown as the market anticipates the introduction of adult use in 2025, although we were pleased to drive same-store sales growth of 3%. Despite more challenging year-over-year comparisons of financial performance, we continue to make progress operationally, with improvements in our core market key performance indicators shown on slide four of today's presentation. Harvest yields and flower quality both showed strong improvements as compared to the third quarter of last year. As a reminder, the summer growing season in our Minnesota greenhouses is our seasonally most challenging from an operations perspective. Our hot, humid summers are hard on the plants and our team, and so we're especially pleased to see strong year-over-year performance in these indicators as it reflects the hard work and dedication of our ops teams to drive continuous improvement. Our team is also continuing to advance our hemp-derived beverage strategy, which we launched earlier this year, and now also includes intoxicating hemp-derived gummy products under our High AF and Boundary Waters brands. The launch of High AF and Boundary Waters hemp products is helping seed some of our adult use brands in market before the launch of adult use sales in Minnesota. But we're also excited about the potential for these products nationally, as we've continued to expand our distribution network for both local and national distributors. The development of our High EF and Boundary Waters beverage brands was a low-risk, capital-light endeavor, and while spec you'll live at this point, we've begun to see sales from these SKUs and believe that they could become meaningful value drivers if they gain and sustain market traction as we take them on the road. We were also pleased to recently secure an additional 10 million financing commitment from our lender in the form of a convertible note, which was priced at a significant premium to market at the time of 62.5 cents. This facility reflects continued support by our lender for the long-term success of our business and enables us to continue executing our cream and fire strategy and preparing for the launch of adult use sales in Minnesota. This new capital commitment from Chicago Atlantic follows their other recent decision to voluntarily convert all of their previously outstanding convertible notes, which saved us future cash interest expenses of $1.3 million and solidified themselves as our largest shareholder. Moving on to some additional state market updates on slide five. In Minnesota, we've been reviewing our Minnesota retail location to identify low CapEx opportunities to relocate, or retrofit our stores to support a successful AU launch. We've begun the planned relocation of our Moorhead, Minnesota dispensary, which we mentioned last quarter, and are in the process of finalizing some additional market expansion and retail footprint enhancements during the fourth quarter and into early next year. In New York, we're continuing to work through our ongoing divestiture process, although as we noted last quarter, the process has taken longer than we've anticipated. However, we are under much less pressure with respect to the timing of this divestiture given the improved regulatory environment and recent extension of our credit agreement. And it's been good to see the state making progress in sending signals that it's allowing for a more robust regulated market. Despite our intent to move forward with the divestiture, we did activate some flower rooms at our state-of-the-art indoor facility, which we refer to as Bluebird, and currently have seven flower rooms in this facility in production supporting flower sales through the wholesale channel to the recreational market. In Maryland, we are continuing to grow market share overall and are especially proud of our market share growth in BAPE after discussing throughout the course of this year that we believed we had a strong opportunity to carve out a leading position in manufactured products. According to the state's disclosures, total market sales in Maryland were up about 8% year over year in Q3. Our retail revenue was up 12% and wholesale was up 26%, representing total growth of approximately 7% year over year, 17% year over year. On a sequential basis, the Maryland market was up about 3%, and we were up about 6%. This concludes my review of business highlights from the quarter, and I'll now pass the call to Joe for some brief financial highlights.

Thanks, Amber. We provided our customary financial detail slides for the third quarter on slide six. As Amber mentioned, Year-over-year comparisons were more challenging in the third quarter. We have not had any additional regulatory catalysts or new store openings since the launch of adult use sales in Maryland last year. As a result, we anticipate fourth quarter results to reflect similar trends that we experienced in Q3, with some incremental CapEx expenditures that are supporting the launch of adult use sales in Minnesota next year. Slide seven provides a summary of our core market revenue performance and key financial metrics. For a complete review of state-by-state revenue performance, including non-core markets and discontinued operations, please refer to our Form 10-Q, which will be filed with the SEC later today. Slides 8 through 11 contain summaries of our balance sheet with a pro forma comparison to year-end 2023, following the recent closed $10 million convertible loan, as well as our current debt outstanding, share capitalization, and EBITDA reconciliation table. I'll now turn the call back to Amber for some closing comments.