Verano Hldgs Corp

Good day and thank you for standing by. Welcome to the Verano Holdings Third 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 hand the conference over to your speaker today, Juliana Pateri.

Thank you and good morning, everyone. Welcome to Verano's Third Quarter 2021 Earnings Conference Call. I'm joined today by George Arkos, Chief Executive Officer and Founder, Brian Ward, Chief Financial Officer, Darren Weiss, Chief Operating Officer and General Counsel, and Erin Miles, Chief Investment 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 considerably 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 for the three and nine months ended September 30, 2021. In addition, throughout today's discussion, Toronto 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 are available at investors.durano.com, which also includes the reconciliation of these measures to the most comparable IFRS financial measures. Please note the financial information we are reporting today is on a pro forma consolidated basis that includes the AltMed companies for the nine months of 2021, as if the acquisition closed on January 1st, 2021. The financial statements we filed on CDAR are in accordance with IFRS and account for the ultimate companies beginning on February 11th, the actual date of the acquisition. As a result, the IFRS numbers filed with CDAR will differ from the pro forma consolidated numbers reported today. Lastly, all currency is in U.S. dollars unless otherwise noted. I'll now turn the call over to George. Please go ahead.

Good morning and thank you everyone for joining us today. I'll kick off the call by sharing an update on our business and highlighting key areas of focus, followed by a deeper look at some of the most significant opportunities for Verano moving forward. After that, Brian will provide highlights from our financial results and discuss our capital position in more detail. Today, we reported results from another strong quarter, underscoring an extremely active and successful three months for our company. We continue to invest in both organic and inorganic opportunities that position the company for long-term, sustainable top-line growth. Additionally, our proven ability to operate the business efficiently has allowed us to continue driving bottom line growth even as we scale, as evidenced by our industry-leading margins and profitability. I am so proud of the many Verano team members across the country and wish to publicly thank them for their incredible contributions. I believe we employ some of the industry's most dedicated and diligent professionals, and our ability to leverage this talent has contributed to our performance. I am pleased to report a decisive improvement in margins, while maintaining steady top-line performance in the quarter. In Q3, we continued our core focus on people, process, and product, integrating and refining operations across our footprint. We continue to invest in our business, adding accretive assets to our platform through M&A, while expanding cultivation capacity nationwide and driving organic growth by opening new retail doors. In addition, we believe efficiencies in production driven by our investments in automation will help build incremental value going forward. This was another productive quarter with tremendous executional pace. We maintained positive free cash flow while self-funding capex and improving margins. Strong fundamentals remain a central theme in the Verano story, which we feel are now more important than ever. We remain intently focused on the bottom line and operating an efficient and profitable business as demonstrated by our EBITDA growth in the quarter. Turning to the results from the quarter, we achieved revenue of $207 million, representing 106% growth year-over-year or 4% growth quarter-over-quarter. Given the complexity of evolving market dynamics, we believe there was an imperial impact to revenue in the quarter due to several challenges, which included regulatory setbacks across Pennsylvania, Massachusetts, and New Jersey, severe weather events across the East Coast impacting Florida, New Jersey, and Pennsylvania, notably shutting down one of our highest volume dispensaries in the Philadelphia market for over a month, and the shutdown of telehealth in Florida slowed new patient growth, which overlapped with soft summer months in snowboard states of Florida and Arizona. Fortunately, we have already seen this trending back in the right direction. With respect to our key performance metrics from the quarter, we achieved significant margin expansion. underscored by a 64% gross profit margin, which equates to $133 million, or 33% growth sequentially. In addition, we generated an industry-leading 54% adjusted EBITDA margin, or $111 million, up 36% from the prior quarter. On an unadjusted basis, we reported 52%, or $107 million. Going forward, with uncertainty around the timing of several significant externalities, We anticipate some fluctuation in these metrics, but remain confident in our ability to operate and grow the business with a low 40s target for our adjusted EBITDA margin profile. In the current environment, strong fundamentals in financial health are more important than ever. We maintain flexibility to position the company for success ahead of market growth, given the conservative nature in which we evaluate our capital needs. Remaining unencumbered by sale leasebacks is a signature focus of the company. as well as responsibly tapping into the debt markets only to the extent necessary to support strategic growth initiatives. Last month, we announced the upsizing of our credit facility by $120 million at one of the best rates in the industry at a non-dilutive basis, with the opportunity to upsize by an additional $100 million. We are proud of our responsible management, and we will continue to be disciplined stewards of capital. Next, I want to point out some recent operational achievements. One item that I'm excited to highlight is the expansion of our executive leadership team, including the recent hiring of Destiny Thompson as Verano's chief people officer. The company has sustained tremendous growth this year, and we look forward to Destiny's contributions to future successes and value creation for our employees and shareholders by further integrating a people-first culture across our organization and expanding our already impressive talent pool. In addition, longtime Verano veteran Darren Weiss recently stepped into the Chief Operating Officer role. His work will prove critical given our company's emphasis on operations. Moving on to M&A, we believe the execution of our acquisition strategy has helped set the tone for broader industry consolidation and will remain inquisitive when and where it provides accretive value to the Verano platform. To provide a brief recap of our M&A activity, we closed on the Mad River Remedies transaction in July maxing out our Ohio footprint at five stores with one of the state's highest volume dispensaries in Dayton. We closed on the agrikind and agronomic transactions early in the quarter, unlocking vertical integration and enhancing our dispensary footprint in Pennsylvania. We announced the Sierra Welles acquisition in July, which will expand our Nevada supply chain and will provide us with strategic retail coverage in the northern part of the state with dispensaries in Reno and Carson City, plus a 10,000 square foot cultivation and production facility in Reno. Last week, we were very pleased to announce three accretive acquisitions in Connecticut, including two active dispensaries and one of just four licensed cultivation and production facilities in the state. At 217,000 square feet, the state-of-the-art cultivation facility has propelled CT Pharma to establish a dominant share of the market today and positions Verano for long-term growth by entering Connecticut with vertical integration ahead of the state's forthcoming adult-use transition. Since Q2, we have opened or added nine new dispensaries. including closed and pending acquisitions, broadening our footprint in Pennsylvania, Florida, Ohio, Nevada, and Connecticut. In West Virginia, we anticipate opening our first store by the end of the year in a highly populated college town. Also under development is a state-of-the-art cultivation and production facility in West Virginia. Following this activity and the completion of pending acquisitions, we will have 90 active dispensaries and over 1 million square feet of active cultivation and production capacity nationwide. To summarize, this was a successful quarter with respect to foundational development. We believe in the top-line potential of our platform. We remain principally focused on bottom-line performance as a means of value creation for our shareholders with confidence that top-line revenue potential will come as a result of our foundational strength and as both internal and external catalysts materialize. 2021 is a defining year for us on many levels. Since taking the company public last February, we laid out our strategies to drive sustainable top-line growth while at the same time delivering industry-leading margins. I am proud to say that we have been successful in executing on our vision. Looking ahead, we anticipate that with continued investment in infrastructure, including people, processes, and products, and holding steadfast in our commitment to our strategy and broader mission, we will realize the full potential of this organization heading into next year. With that, I'll turn it over to Brian to review our financial results in more detail.