Verano Hldgs Corp

Ladies and gentlemen, thank you for standing by and welcome to the Verano Holdings Corp First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to turn the conference over to Mr. Aaron Miles, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Burano's first quarter 2021 earnings conference call. I'm joined today by George Arkos, Chief Executive Officer and Co-Founder, and Brian Ward, Chief Financial Officer. During this call, we will discuss our business outlook and make forward-looking statements, which are based on management assumptions and expectations. Actual events or results could differ materially due to risks and uncertainties mentioned in our filings with CDAR, including our financial statements and MD&A for the fiscal year ending December 31, 2020, and our financial statements and MD&A for the three months ended March 31, 2021. In addition, throughout today's discussion, Verano will refer to non-IFRS measures that do not have any standardized meaning prescribed by IFRS, such as EBITDA, adjusted EBITDA, and free cash flow. These non-IFRS measures are defined in our earnings press release issued earlier today and available at investors.verano.com, which also includes the reconciliation of these measures to the most comparable IFRS financial measures. Please note the financial information is reported on a pro forma consolidated basis. as if the Altmed acquisition had closed on January 1st, 2021, compared to the actual closing, which occurred on February 11th, 2021. As a point of clarification, the financial statements we filed on CDAR are in accordance with IFRS, which includes the contribution from Altmed beginning on the day of the actual closing of February 11th versus our fiscal year on January 1st. With that being said, results will differ between the IFRS numbers filed with CDAR and the pro forma consolidated numbers reported today. Lastly, all currency is in U.S. dollars unless otherwise noted. I will now turn the call over to George. Please go ahead.

Thank you, Aaron. Good morning and welcome, everyone. Before we jump in, I would like to thank you for joining our Q1 earnings call. I am very pleased with our strong results for the quarter. as well as the momentum we continue to gain in solidifying our financial position, while also developing a footprint that supports our ability to deliver on our objective of finishing the year as a top operator in the space. This includes being a top three producer of both revenue and EBITDA, while maintaining industry-leading margins driven by sound operations and strong expense management. In addition to revenue and EBITDA performance, we expect to maintain strong financial health, which includes an industry-leading rate for a non-diluted credit facility. And given our strong positive cash flow, we avoided the need for sale leasebacks as a method of raising capital through the leveraging of our own real estate portfolio. That said, while it's been just a little over a month since we reported 2020 full-year earnings, the rate at which we are progressing has continued. And the momentum we've built, which we touched on during our last call, has not slowed down. However, I want to emphasize that while the pace and volume are relatively unprecedented, every move and decision we've made has been carefully considered and supports our strategic vision for the company. Ultimately, we are accomplishing what we set out to, and we are delivering on our stated objectives. We plan to access capital markets and close on the Altnet transaction, providing an entry into both Florida and Arizona, and we did. After going public on the Canadian Securities Exchange, we gained approval to be quoted on the OTCQX, which allows us to gain exposure and broaden our U.S. investor base. Beyond that, we are preparing and continue to position Verano for inclusion in the U.S. capital markets as consideration for U.S.-based cannabis companies continues to materialize. We also plan to go deeper on our core states, and we did. We made significant strides developing and enhancing our footprint in Illinois, Pennsylvania, and Ohio while establishing a top three position in Arizona. Not including AllMed, we've announced 10 accretive acquisitions since going public and two since our last earnings call, including Agritime, which upon closing will unlock vertical integration in Pennsylvania with an active 62,000 square foot state-of-the-art cultivation and production facility. and Agronomic Biologics, a Phase II approved clinical registrant, which will allow us to build a second cultivation and production facility, plus six new dispensaries, the first of which just recently opened in Chester, Pennsylvania, to conduct medical marijuana research in partnership with Drexel University College of Medicine. We believe these two acquisitions, in combination with our previously closed transactions in Pennsylvania, will enable us to maximize our footprint and secure a true leadership position in the market. Given the number of transactions we've announced, the consideration between physical assets and paper licenses, and for competitive reasons, we have not provided specifics around the 2021 EBITDA multiples paid for each deal. However, I can share directionally that we believe the numbers are in line with or better than market average, which nets out in the mid-single-digit range. Notably, upon closing all announced transactions, and including shares to be issued resulting from the $100 million Canadian dollar bought deal announced in February, we expect total dilution of less than 7.5%. That said, we remain vigilant and focused on the strategic use of our stock as currency, always mindful of potential dilution. We recently announced the filing of our base shelf prospectus And although we have no imminent plans to utilize the shelf perspectives, we believe it provides optionality for us to stay nimble and will give us the ability to capitalize on opportunities as they arise. Lastly, between cash on hand, cash produced, proceeds from going public, the bought deal, and our outsized credit facility, we are adequately equipped to meet the cash requirements for each transaction while also maintaining a strong cash position. Regarding the upsides of our existing credit facility by $100 million, we were able to lower our cost of capital with demonstrably improved terms, including an industry-leading rate for a non-dilutive credit facility of 9.75%, further validating the progress of both Verano and our industry. And finally, we plan to expand our vertical operations, and we did. Pending completion of the AgroKind and Agronomet acquisitions in Pennsylvania and the near-complete construction of our newest cultivation facility in Massachusetts, we will have established vertical integration in nine of our 11 active markets. At the same time, we've invested in the expansion of seven active cultivation and production facilities across our footprint in parallel with increasing sales, growing patient counts, adult use policy adoption, and a general trend of rising demand. Of note, when our potential cultivation capacity is reached in Pennsylvania, in combination with the build-up of our remaining retail locations, which will maximize our footprint in the state, we expect to capture a sizable portion of wholesale market share from existing players. Before providing a current summary of our operating footprint, I want to again highlight the efficient progress we've made this year on the M&A front. With that, our operating footprint consists of 75 total active dispensaries, including two associated with pending transactions, with plans to add 10 or more by the end of the year. Nine active cultivation and production facilities totaling over 800,000 square feet, with the 10th in Massachusetts expected to come online in Q3, which will add approximately 26,000 square feet to our total. I'd like to quickly note that these do not include a second facility which will be developed in Pennsylvania. And vertical integration in nine of 11 active states once Massachusetts cultivation comes online, including all seven of our core markets. Now turning to our strong results from Q1. We continue to differentiate our company by executing a strategy of operational efficiency, driving strong margins and a profitable bottom line. I am very pleased to announce first quarter 2021 revenue of $143 million, top line quarter over quarter growth of 27% and 117% first quarter growth year over year. The split between retail and wholesale revenue was approximately 69% and 31% respectively. New store openings and acquisitions made way for pronounced year over year growth in retail revenue. We expect a positive change on the wholesale side of our business over the next several quarters driven by increased capacity resulting from broad cultivation expansion efforts. The split skewing somewhat heavily toward retail is also influenced by tremendous performance in Florida, where our revenue folds into the retail channel. Going forward, we would anticipate this leveling out slightly once all expanded cultivation capacity comes online. We also generated substantial organic growth with same-store sales increasing approximately 90% compared to the first quarter of 2020. I'd also like to highlight the organic expansion efforts carried out on the retail side of our business during Q1. We brought four new dispensaries online across four states. We also continue to enhance our standard operating procedures across our retail network, which has led to increased throughput. The average number of daily visits increased from approximately 4,000 in the first quarter of last year to more than 10,000 in the most recent quarter, with proven efficiency based on same-store daily transaction growth of 71%. We also experienced improved point-of-sale activity in the quarter as our customers spent on average around 7% more per basket compared to the same period of last year. Given our balanced approach, we drove strong sales growth on the wholesale front, producing over 28% year-over-year revenue growth in the first quarter. The momentum we have gained from our efforts to increase wholesale capacity throughout 2020 and into 2021 provides a sturdy foundation for us to gain market share in strategic states throughout the remainder of the year. Moving on, I'd like to point out what we are most encouraged by from this quarter, which is our performance on the bottom line. Our strong revenue growth in combination with a focus on operational efficiency across all active markets drove positive net income of $8 million, exclusive of biological assets, and $75 million of adjusted EBITDA, or an industry-leading margin of more than 52% of revenue. I am very pleased with our progress and how we are poised to accelerate our national leadership position in the industry in both the retail and wholesale verticals. We will continue working toward closing our pending acquisitions, completing cultivation expansion efforts, and bringing additional capacity online while maintaining our pace in organic retail expansion by opening new doors as planned and continuing to streamline and enhance our operations. With that, I will now turn the call over to Brian to provide more details surrounding our strong financial results, after which I will cover our outlook for the remainder of 2021. Brian, take it away.