Curaleaf Holdings, Inc.

Good day, and welcome to the CuraLeak Holdings, Inc. first quarter 2025 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Camila Lyon, Chief Investment Officer. Please go ahead.

Good afternoon, everyone, and welcome to Cure Leap Holding's first quarter 2025 conference call. Today, I'm joined by Chairman and Chief Executive Officer, Boris Jordan, and Chief Financial Officer, Ed Kremer. Before we begin, I'd like to remind everyone that the comments on today's call will include forward-looking statements within the meaning of the Canadian and United States securities laws, which by their nature involve estimates, projections, plans, goals, forecasts, and assumptions, including the successful integration of acquisitions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Uncertain material factors or assumptions that were applied in drawing a conclusion or making a forecast in such statements. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Additional information about the material factors and assumptions forming the basis of the forward-looking statements and risk factors can be found on the company's filings and press releases on CDAR and EDGAR. During today's conference call, in order to provide greater transparency regarding Curaleaf's operating performance, we will refer to certain non-GAAP financial measures and non-GAAP financial ratios that involve adjustments to GAAP results. Such non-GAAP measures and ratios do not have a standardized meaning under U.S. GAAP. Any non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by U.S. GAAP. should not be considered measures of cure-lease liquidity, and are unlikely to be comparable to non-GAAP financial measures provided by other companies. Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable U.S. GAAP financial measures under the heading Reconciliation of Non-GAAP Financial Measures in our earnings press release issued today and available on our investor relations website at ir.curelease.com. With that, I'll turn the call over to Chairman and CEO, Boris Jordan. Boris?

Good afternoon, everyone, and thank you for joining us to discuss our first quarter results. We've been actively executing our return to roots plan to reposition the company for stronger margins and sustained profitability, and our efforts are beginning to deliver results. In quarter one, we reported revenue of $310 million, a 6% sequential decline that was in line with our guidance and primarily driven by seasonality one less selling day year over year, and ongoing price compression. Despite these factors, gross margin expanded by 250 basis points to 50% from the fourth quarter, reflecting an improved efficiencies in our cultivation operations. We generated $65 million in adjusted EBITDA, representing a 21% margin, even after accounting for a 130 basis point drag from our international and hemp businesses. We also strengthened our balance sheet by reducing working capital accounts and ended the quarter with $122 million in cash. Operating and free cash flow from continuing operations came in at $42 million and $26 million respectively. Additionally, we paid down $20 million in acquisition-related debt. Overall, we're making meaningful progress toward achieving our 2025 goals. As expected, our domestic revenue declined 8% sequentially, primarily due to macro factors such as price compression and normal seasonality. as well as deliberate actions to improve the quality and sustainability of our sales, while enhancing our gross margins. In line with this profitability-focused strategy, we made two intentional decisions that impacted short-term revenue. First, we reduced exposure to select accounts identified as higher credit risks. This proactive approach reflected in our improved balance sheet metrics and disciplined receivables management, limited near-term growth, but enhanced the quality of our sales. Second, we aggressively optimized retail inventory by reducing days on hand and eliminating underperforming SKUs, steps that support our transition to a just-in-time inventory model. This shift enables a fresher, faster-turning product assortment, improves the customer experience, and accelerates cash generation. These tightening measures had the greatest revenue impact in New York, New Jersey, Pennsylvania, and Maryland. Importantly, they are already delivering improvements in sales quality evidenced by our significant gross margin expansion. We remain committed to rationalizing our product portfolio, exiting non-core categories, and boosting manufacturing efficiency to support more sustainable long-term growth. The domestic growth drivers we outlined last quarter delivered strong performance in quarter one, led by standout results in New York and Ohio. In New York, revenue grew 24% year over year, with both retail and wholesale contributing to the expansion. Our team executed effectively, driving wholesale account penetration to 61% by quarter end, up from 50% last quarter. While market demand in New York remains solid, we believe there's potential for even greater growth. A recent raid by the OCM on a Long Island distributor highlights a critical challenge, product inversion. illegally imported cannabis often from the west coast undermining the regulated market this practice harms licensed operators local farmers and consumers alike a straightforward solution exists the implementation of a long overdue track and trace system which the OCM was mandated to establish two years ago we continue to advocate for this regulatory action to help ensure a level playing field and protect the integrity of the New York market Ohio delivered robust year-over-year growth of 58% in quarter one, with strong performance from both our two retail locations and our expanding wholesale business. We continue to build momentum in the state, and our third store in Lima is ready to open pending state approvals. Our fourth and fifth locations are on track to open in early quarter three, with additional openings planned for the second half of the year. Given our operational strength and expanding retail footprint, Ohio is well positioned to remain a significant growth engine for Curaleaf. Our international segment continues its strong momentum, delivering 74% year-over-year growth, marking the fourth consecutive quarter of 70-plus percent growth and 14% sequential growth, even despite a 2% FX headwind. Germany led this exceptional performance, with the UK also contributing solid gains. Margin strength was driven by strategic pricing initiatives, improved procurement, and increased operating leverage from higher production volumes in Portugal. As a result, both gross margin and EBITDA margins saw significant expansion. Notably, international EBITDA margins are rapidly narrowing the gap with the U.S. as the total EBITDA margin dragged from international operations was just 70 basis points, the smallest impact to date. Germany delivered outstanding triple-digit year-over-year growth driven by accelerating demand amid a favorable regulatory environment. The successful rollout of cannabis legislation last year and the ensuing market expansion is increasingly seen as a blueprint for effective common-sense cannabis legislation. The new coalition government has given its support for keeping the status quo as is, with likely changes to the timeline on Phase II adult-use rollout. We suspect other countries will follow suit emulating the cannabis market Germany has created. To capitalize on the strong momentum in Germany, we expanded our portfolio late last year by introducing mid-tier and value flower offerings under the Curaleaf and Koala brands, respectively, both of which have been met with strong market enthusiasm, Koala brand emerging as one of the leading value brands in the country. With growing consumer demand and regulatory clarity under the new government, that aims to maintain the status quo, we are exceptionally well positioned to scale our presence and lead the next phase of market development. Meanwhile, the UK delivered another quarter of strong double-digit growth, reinforcing our position as a market leader. Although still in the early stages, the UK market is benefiting from an unwavering commitment to patient satisfaction and operational excellence. We are actively investing in AI and automation to enhance efficiency and throughput, leveraging intelligent warehousing, faster dispatch, and recently incorporated an automated dispensing robot, which increases our capacity and automates four stages of our manual processing to drive innovation and sustainable profitability while elevating the patient experience. Our international segment is off to a strong start in 2025, and we are encouraged by prospects for new market openings that could materialize over the next year. Focus remains on sustaining our leadership in existing markets while actively preparing to enter and shape the next wave of legal cannabis markets across Europe. According to BDSA, we maintained a strong market position holding the number two spot overall while Select remained the number one vape brand driven by our continued focus on innovation. That same innovation engine is fueling momentum across the portfolio as seen in the strong reception of our recent product launches. As we shared in our last call, we began prioritizing our premium flower offerings with the introduction of our all-star strains, further elevating our position in key markets. In March and April, we successfully expanded these strains into 11 key markets, including Arizona, Florida, Illinois, Pennsylvania, New York, New Jersey, and Ohio. Early consumer response has been highly encouraging with noticeable consumer trade-up from mid-tier to premium offerings achieved without any incremental discounting. In addition, Anthem, our new cylindrical-style pre-roll brand that is rooted in American heritage and innovation, launched a couple of weeks ago in New York, Illinois, Massachusetts, Arizona, Florida, and New Jersey. ACE, our proprietary aqueous extraction technology, officially launched in New York, Massachusetts, and Florida this quarter. With strong initial sell-through, backed by five years of dedicated R&D, ACE delivers the clearest, cleanest oil on the market, setting a new standard for purity and consumer experience. Its arrival marks a major milestone, the first time this innovation is commercially available to scale, positioning us to disrupt the traditional distillate market and redefine expectations around cannabis oil quality. We're seeing strong and accelerating demand for these innovations, and our teams are working quickly to ramp up production. Anthem and Ace have already sold out of their initial production run at wholesale in New York, New Jersey, underscoring the market's enthusiasm. Our hemp business had a very productive quarter, highlighted by the launch of Formula X, our new hemp-derived THC energy drink, and the expansion of our beverage distribution into more than 100 total wine stores across nine states. We also broadened our seltzer lineup with new low-dose and flavored options to meet evolving consumer preferences. Last month, we opened our first hemp-only retail store in Florida, offering a curated assortment of beverages and edibles. This pilot store serves two strategic purposes. First, to deepen our understanding of the hemp consumer, their behaviors, preferences, and purchase patterns. And second, to expand our brand reach through a channel with fewer regulatory barriers. Our mission remains clear to provide access to safe, legal, and tested products, whether hemp or cannabis derived, wherever and however consumers choose to shop. With the flexibility Hemp Affords, we're well-positioned to enter new markets quickly and efficiently. We plan to expand into every state that supports compliant hemp commerce, and Florida's favorable legislative stance gives us strong momentum. Expect more from us on this front in the quarters ahead. Since stepping into the CEO role last August, we've completed much of the heavy lifting needed to reposition the business for long-term success. We've streamlined operations, improved key manufacturing metrics, and sharpened our focus on flower quality, evident in the markets like Arizona and Pennsylvania, where we've successfully introduced our high-performing all-star strengths. We've also launched a comprehensive ERP integration project and removed unnecessary layers of management to increase agility and accountability. As we look ahead, our focus will shift to more targeted surgical improvements as Cureleaf enters its next phase of disciplined, sustainable growth. We're off to a good start in quarter one with meaningful progress in both gross margin expansion and cash generation. As we look ahead to quarter two, we remain confident in our strategy while keeping a close eye on external risk factors such as tariffs and shifts in consumer sentiment. In response, we're taking proactive steps, streamlining our product assortment, renegotiating supplier contract, and optimizing logistics to mitigate inflationary pressures and protect our margins. At the same time, We're focused on driving profitability, sustainable growth, while managing expenses with discipline and precision. As we finalize our retail inventory repositioning work, by the end of quarter two, we anticipate stabilization across our core domestic markets, with accelerated growth driven by strategic expansions in New York, Ohio, international, and 12 new store openings this year. Lastly, we will continue assessing retail store tuck-in acquisitions in a few of our larger markets. By controlling the controllables, we're positioning the business to remain resilient and agile in a dynamic environment. I want to extend our gratitude to our team of 5,000 strong for their hard work, resilience, and dedication. In an environment where we're all being challenged to do more with less, your unwavering commitment and adaptability continue to drive our progress and make us better every day. It's your passion and perseverance that fuel our success, and I couldn't be prouder of what we've been building together. With that, I'll turn the call over to our CFO, Ed Kremer. Ed?