Curaleaf Holdings, Inc.

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

Good afternoon, everyone, and welcome to Curiously Folding's second 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 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 risk and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements on a certain material factors or assumptions that were applied in drawing the 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 the 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 in the company's filings and press releases on CDAR and EDGAR. During today's conference call, in order to provide greater transparency regarding Curiously'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 pure 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 measure under the heading Reconciliation of Non-GAAP Financial Measures in our Earnings Press Release Issue today and available on our investor relations website at ir.curely.com. With that, I'll turn the call over to Chairman and CEO Boris Jordan. Boris?

Thank you, Camillo. Good afternoon, everyone, and thank you for joining us to discuss our second quarter 2025 results. Over the past 10 years, we've strategically built Pureleaf into a global cannabis leader, now operating in 17 U.S. states plus 15 countries worldwide. With our infrastructure in place and our asset base established, we're sharpening our focus on product quality, customer service, and supply chain excellence. to ensure every customer receives the best possible experience every time in every store. From the outset, rapidly growing the business has been central to my vision, recognizing that scale would be essential to navigating the inevitable volatility of the cannabis industry. While current pricing pressures are affecting the entire sector, subscale operators are bearing the brunt, exiting markets and shedding assets at an accelerating pace. This ongoing industry rationalization strengthens our long-term position as we continue investing in growth initiatives and capitalize on emerging opportunities. In the second quarter, we generated revenue of $315 million, up 1.5% compared to the first quarter, consistent with our guidance for low single-digit growth. Price compression across most of our markets kept domestic sales roughly flat compared to the first quarter, while our international segment continued to impress with another solid quarter of 17% sequential growth. Adjusted gross margin of 49% decreased 130 basis points from the first quarter due to higher levels of promotional activity, particularly around 420 holiday compared to the first quarter. We generated $66 million in adjusted EBITDA, resulting in a 21% A EBITDA margin, with international and health accounting for 260 basis points of margin drag. For now, we've made the strategic decision to keep those two businesses consolidated as momentum around federal reform and potential 280 relief from rescheduling continues to build heading into year end. That said, if meaningful reform fails to materialize, we are prepared to pursue alternative paths such as spinning out these businesses to unlock significant value that we believe is not currently reflected in our valuation as neither of these businesses are subject to 280E. We ended the second quarter with cash of $102 million after paying $47 million in interest and principal debt payments and generated $9 million in operating cash flow from continuing operation. In the U.S., our primary focus for the past few quarters has been to manage pricing headwinds and stabilize the domestic business through an unrelenting pursuit of producing consistent, high-quality flour, improving customer service levels, enhancing our marketing and branding, and optimizing our supply chain. In the second quarter, we achieved stabilization as sales were essentially flat compared to the first quarter. Sequential growth in Massachusetts, Ohio, Florida, Pennsylvania, and New Jersey was offset by pressure in the balance of our network. Continued gains in our cultivation facilities were offset by an underwhelming and promotional 420 holiday that landed on Easter impacting the results. That said, we made meaningful advancements in our product portfolio. April was a pivotal month for Cureleaf Innovation Engine, marked by the launch of several strategically developed products aimed at enhancing our competitive position and fueling long-term growth. In New York, we introduced ACE, our proprietary aqueous cannabis extraction oil, which has received exceptional early feedback. Unlike traditional distillate oils, ACE is the next evolution of oil that delivers an ultra-clear, ultra-pure product with minimal plant material, offering a smoother, more refined consumer experience. We view this as a disruptive advancement in the cannabis oil category, and we expect strong consumer adoption as awareness and trial increase. In parallel, we rolled out Anthem, our new cylindrical-style pre-roll line, across six major markets, New York, New Jersey, Florida, Arizona, Massachusetts, and Illinois. Anthem is already outperforming expectations, and we are accelerating production to meet surging demand while scaling to add additional states. According to Hoodie sell-through data, Anthem is the fastest-growing pre-roll brand in New York. Building on the strong brand momentum, We are expanding Anthem into a full-scale pre-roll line with a clear goal of establishing it as a national market share leader. As part of this expansion, we will launch Anthem Bold, our new line of infused pre-rolls, in late September across key markets including New York, New Jersey, Illinois, and Arizona. Our innovation pipeline is backed by industry-leading R&D and continues to reinforce our brand leadership. Select remained the number one vape brand in the U.S. during quarter two. while Grassroots, our premium flower offering, was a top three flower brand, according to BDSA. These gains reflect ongoing improvements in our cultivation practices supported by our genetics program. Specifically, over the past 15 months, we have overhauled our genetics library to deliver high-quality, consistent flower across our state footprint. The acquisition of Dark Heart Nursery, a highly regarded West Coast genetics lab, we completed a couple of years ago is bearing significant fruit in our gardens. In quarter two, we saw overwhelming success in the markets where we first began harvesting these genetics, states such as New York, Florida, Arizona, and Utah. As these strains continue to roll out across additional markets in quarter three, we see strong momentum building ahead. Flower remains the cornerstone of the cannabis category, and we are laser-focused on ensuring Curaleaf delivers the best-in-class quality, consistency, and assortment. Our progress to date gives us confidence in our ability to win in this critical product segment, and we're just getting started. Operating as a fully legal medical business, Cureleaf International functions much like a pharmaceutical company, giving us greater flexibility to capitalize on the strategic investments we've made over the past four years. This structure continues to deliver scale advantages and brand momentum, as clearly demonstrated by robust second quarter results in which the segment generated $41 million in revenue and a 17% sequential increase, a 62% year-over-year growth driven by robust demand in Germany and the U.K. In Germany, we continue to see healthy patient growth one year after the government passed the Kenji Cannabis Act, removing cannabis as a narcotic and streamlining patient access. Official data from the German regulator shows that 43 tons of dry flour was imported into Germany in quarter two 2025, a four-fold increase over quarter two of 2024. While pricing pressures become more prevalent in the market, the team has navigated these dynamics well by leading with our premium 420 flour brand, complemented by our mid-tier and value offerings. Last year's introduction of Koala, our value flour brand, is performing above expectations, and in the second quarter was boosted by addition of new strain options. In the U.K., the team did a fantastic job of adding new patients to our platform through our CureLeaf clinic, where we focus on delivering high levels of service and product quality to our patients. In addition, the U.K. business benefited from the new wholesale partnerships and ensuing orders. Cureleaf International achieved three significant milestones this quarter that further solidify our global leadership position. First, we completed the buyout of our minority partner and now own 100% of Cureleaf International. This move simplifies our structure, increases operational flexibility, and reinforces our long-term commitment to global expansion. We thank our partner for their collaboration and continued support of Cureleaf's vision. Second, we are pleased to announce we have received a license to enter Turkey. providing us a first-mover advantage in the country's nascent medical market. Turkey, with a population of 87 million people, represents a large and underpenetrated opportunity. Subject to the finalization scope of the secondary regulations, we aim to commercialize our brand portfolio in the market within 2026. We will provide more detail as rules and timelines become clear. Third, we achieved EU medical device registration certification for our world's first medically certified liquid cannabis inhalation device. This is a significant regulatory breakthrough that establishes a new standard for inhaled cannabis medicines in Europe. Designed to deliver consistent metered doses, the device is currently the only handheld solution legally permitted under EU medical device regulations. We're launching the device in the UK this month with plans to expand into key European and Australian markets as regulations evolve. This innovation positions Cureleaf at the forefront of a differentiated pharma-grade delivery platform that addresses growing global demand for precision cannabis therapies. Our international strategy continues to deliver results driven by disciplined execution and a focus on scalable high-growth markets. Recent milestones, including new market entries, product launches, and regulatory wins, are not just symbolic. They translate directly into near and long-term revenue opportunities. In fact, Curaleaf International's current total addressable market, including the U.K., Germany, Poland, Australia, New Zealand, and now Turkey, rivals that of the U.S. While these are primarily medical markets that are earlier in their development curve, the long-term growth potential is significant. To support the momentum we're seeing today, we're expanding cultivation capacity through a more asset-light model than in the U.S., prioritizing leased infrastructure over owned assets to maintain flexibility and maximize returns on invested capital. Curaleaf International is now on pace to be one of our top three revenue contributors by year end. We expect this segment to play a significant and growing role in our long-term value creation strategy. Our hemp business continues to gain momentum driven by a clear strategy focused on expanding distribution and increasing access to low-dose, sessionable products that resonate with both core consumers and new entrants to the category. This quarter, we successfully launched Formula X in brick and mortar retail and made it available on DoorDash, further broadening our omnichannel reach. In addition to Total Wine and DoorDash, we deepened our distribution footprint across key markets, including Connecticut, Indiana, Kentucky, New Jersey, Georgia, Ohio, and Illinois. We're also optimizing our supply chain by bringing beverage fulfillment in-house at our Kentucky facility, an initiative that enhances production control and expected to drive stronger margin capture moving forward. I'd like to provide an update on our upcoming debt refinancing. Over the past several months, we've engaged with a broad range of investors, including public and private credit funds, as well as regional banks. The initial response has been highly encouraging with strong indicative interest and constructive dialogue. We remain focused on securing the most favorable outcome for Curaleaf, aligned with our long-term capital strategy. We are on track to complete the refinancing by year-end and are confident it will enhance our financial flexibility and support our growth priorities. This earnings call marks my one-year anniversary as CEO, and I'm proud of the meaningful progress we've made through our Return to Our Roots program. Over the past 12 months, we've laid critical groundwork to strengthen the business, resetting garden yields, elevating flower quality across our network, expanding gross margins, reducing costs, and fueling growth in key areas, including international New York, Ohio, and our hemp business. While price compression remains a headwind in many of our markets, driven in large part by the rapid expansion of the loosely regulated hemp sector, which benefits from interstate commerce, low operating costs, and freedom from the 280 tax burden, we remain confident in the long-term trajectory of the cannabis industry. That's why... we continue to invest in the five core pillars of sustainable success. People, product quality, R&D, distribution, and customer experience. Domestically, we've upgraded cultivation facilities, improved our flower quality, implemented automation, and made meaningful progress on our retail buildups. Internationally, we've expanded production capacity, entered new markets, and broadened our brand portfolio. To support this next phase of growth, we've also made key additions to our leadership team at the corporate level. Recently, we welcomed four senior executives who bring deep experience from best-in-class consumer and retail organizations. Rahul Pinto joins us as president in our newly created role overseeing revenue, innovation, and brand, critical drivers of top-line growth. He brings a strong background from Albertsons, PepsiCo, and Bacardi. Scott Crawford, our new head of merchandising, comes to us from Valder Foods, Fresh Direct, and Whole Foods, offering deep expertise in category management. Justin Miller, now leading brand marketing, brings brand building experience from Diageo and William Grant & Sons. And Helen Chen, our new head of digital, joins us from Pernod Picard USA, PepsiCo, and McKinsey with a mandate to enhance consumer engagement and drive our digital transformation. These hires reflect Our discipline focused on leadership excellence and positioned us to execute with great precision, drive margin expansion, and unlock long-term shareholder value. Global consumer demand for cannabis is not only robust, it's accelerating. With the right team, strategy, and infrastructure in place, Pureleaf is uniquely positioned to lead and capture the next wave of industry growth. With meaningful momentum building around federal reform and the potential for rescheduling, combined with many strategic initiatives underway at CureLeaf, I have never been more confident in our future as we enter the next phase with a stronger foundation made possible by the relentless dedication of our 5,000 global employees. To our entire team, thank you. With your continued focus and execution, I believe CureLeaf is exceptionally well positioned to lead the next era of chemists. With that, I'll turn the call over to our CFO, Ed Kremer. Ed?