Earnings call transcript Q4 2022

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Operator

Good morning. My name is Julian and I will be your conference operator today. At this time, I would like to welcome everyone to Jushi Holdings Inc.’s Fourth Quarter and Full Year 2022 Earnings Conference Call. Today’s call is being recorded. I will now turn the call over to Lisa Forman, Director of Investor Relations. you. Thank ahead. go Please

Lisa Forman

you fourth us XXXX quarter call. Thank Jushi earnings for Holdings Inc. and for morning. today joining the conference Good full year

me and Michelle Chief Chief Financial Jim Founder; Joining Jushi. Barack, Mosier, call of Chairman Jon Founder; Officer, and Cacioppo, and President Officer today’s on Executive are

section The a EDGAR release website are our its XXXX are SEDAR. this XXXX. on our unaudited results, morning, financial fourth quarter at This available which on company reasonable reporting process The preliminary information press not yet we preliminary company has completed the as based Investor time. company’s for Relations under results unaudited issued the the the and year QX presented on announcing filed and and full herein estimates to and available

actual company’s finalized not will may audit. results herein from of annual materially be presented results the its the such, As preliminary and until completion the vary

statements all presented results registered any The firm. addition, not condition accounting regarding and preliminary performance of preliminary for financial our by reviewed the are financial public of results financial necessary In understanding unaudited information not company’s company’s present herein operations. the independent do an

been on prepared information GAAP. U.S. The statement financial has based

of the referenced website call in nearest and December the All on section the non-GAAP in EDGAR Additionally, measures and XX, SEDAR. company’s be ended and financial comparable which available whole to on approximate are number. most for report rounded herein reconciled in will be U.S. MD&A XX-K annual company’s year are release, numbers company’s Form the our the XXXX, this the which Relations filed on will on in Investor to earnings directly also the measure GAAP is posted

forward-looking forecasts meaning and and that differ in may assumptions. States of statements the affect be via would be nature, These filings laws like the not upon by forward-looking given of these security certain results remind in forward-looking be Canadian or the materially their from we registration actual to Actual These call that goals, answers those EDGAR matters meaning projections, and United discussed relied could this should with The begin, be and as involve anticipated may and statements. will speak which, information and may periodic detailed results that documents asked future accessed within questions forward-looking in statements risk of events. only constitute securities and estimates, date predictions today’s presentation could SEDAR. Jushi’s Before other listeners statements. of of XX-K factors plans, as laws I to

With that, and Chief I of Officer, like would Chairman Cacioppo, turn Founder over to call Executive Jim now Jushi. the to

Jim Cacioppo

call quarter and achievements. year Thank question-and-answer you, operational Michelle over for opening This full and providing to to review overview morning, comments will I of I an and joining today. provide thank and financial period. will our more before you, the detail everyone, closing fourth results turn in performance XXXX then Lisa, our call our the

for in year as compared of million compared million million $XXX.X $XXX.X XXXX. year both to increased and despite grew challenging QX QX $XX.X record record fourth XXXX of revenue To In a quarter annual begin, and XXXX XXXX. XXXX, of line and year-over-year $XX.X to top to an cannabis million sequentially, the happy growth report quarterly in unquestionably $XX.X a X% XX% industry. to I’m Full to in the million XX% revenue

XXXX compared Michelle discuss fourth Additionally, strong XXXX, quarter later. and QX EBITDA will which in QX adjusted of showed to we the XXXX, of growth

of result of strong million. network of course year the our in as Furthermore, quarter amount the over and of a growth We generated achievements in had cash operational XXXX, the the QX expansion operations Jushi vertical fourth from several positive the and $X.X retail in the flow footprint. XXXX, of including

already These overall industry the chains results. had on face as macroeconomic substantial These many operating of capital slower headwinds, other an mentioned which completion to for some among increased have supply rates, in the pressures, factors pressures However, projects industry, of impact of markets. and disrupted and cost things. Jushi led we peers, included our of pricing and our interest by rising across significant inflationary investment

the our [indiscernible] growth unfortunately These pressures in programs overshadowed Pennsylvania, to implement have such have of developing large especially as the yet primary of potential markets. U.S. which markets Virginia, industry, X

summarize throughout and achievements, operational including will in took quarter that to our XXXX XXXX. those I first, place But first of date the

with in in QX feet from X capacity of the Ohio X of X expanded to the our and accessories in Nevada XXXX. we cultivation [indiscernible] and XXXX retail feet establishment grew square in to of operating Canopy. NuLeaf acquisitions an operational XX,XXX acquisition processing Through operations square vertical and Nevada our X,XXX operation footprint states First, retail and of

to Additionally, busy in with Since the state Cincinnati, XX,XXX square retail our has cultivation exceeded has processing the margin first and and vertical enabling our Ohio, us capture expectations. near facilities. the the store consistently of remained foot quarter XXXX, our store first in opening existing opened

Next, the X course Nevada, few new including retail and Pennsylvania stores across a markets, of were XXXX Virginia. opened over

recently first medical Arlington, Virginia Cincinnati, of aforementioned the the we As location. XX Ohio operating are dispensaries XXXX, dispensaries of nationwide, just and now opened quarter having in

and stores. footprint X medical retail open nationwide in Virginia dispensary total take a Woodbridge, XXXX to will our of additional to which expect in We XX

our footprint retail our In store, network, largest our brick-and-mortar focus our from to BEYOND/HELLO existing e-commerce expanding XXXX, rapidly our wide-reaching platform. shifted optimizing includes which has

progress Virginia. design continue and footage with issues fully the up full potential the to our significant facility’s approximately phase our construction in Virginia second expected processes the mechanical COX of chain on We quarter. and in we are approach supply total made downstream these should feet. Lastly, second a half of in are Virginia, grower-processor more the their second our facilities building are and of in increase XXX,XXX improvements output XXXX, showing square of XXXX, solved. can expansion at as to and meaningful project square Pennsylvania potential in systems dialed the the and also connected was cultivation grower processors and Throughout Pennsylvania like and are In that

purchases in However, to visibility on do final into we this rollout timing a should and in revenue we capacity sight on make market, the we which with multiple million of program state not a phases, or expansion the the or our no this the the have line sales. decision of investment of have medical we for expect of potential will adult-use until current $XXX an support third-party in

leg develop of million split much recently capital, the have our next X the phase at a $XX of expansion cost next Given the into cost. reduced we pieces higher to

biomass for Our XX potency better and market. approximately facility Margins to BEYOND/HELLO third-party yields ramp our represent and potency. improved This efficiencies, bulk of roll dispensaries we which yields purchases, square state’s should new facility improve medical hygiene is Pennsylvania and up XXX,XXX eliminate new foot equipped ample the with genetics. retail now supply is produce XX% delivering our increase out innovative, high-end and as increase flower brand and

note that [indiscernible]. Sèchè had many and would with established value strong offering an I has Jushi unlike operators,

we flower to rolled our newer Virginia square to below X Canopy the rooms. has out can a XX,XXX facility with room market. for feet in. Later However, X high-end additional approximately warehouse in grow flower rooms. market increase the priced and facility with more square we capacity, online and the of is of fully add more premium of offerings foot flower our flower margins XX,XXX of discretionary approximately X running well developed being When at as expected square an feet to [indiscernible] been our for XXXX, dialed total program. XXXX, room requires address is is bringing our the more total investment by offering best in a to be room the CapEx expanded In as XX,XXX flower capital in Canopy the minimal QX market get our part eighth existing current

Our we wholesale equipped as have we opening fully license Virginia are significant is dispensaries significant other met business in yet current grown support holders medical wholesale a facility In demand. business, to XXXX. and have not additional Virginia Virginia, we believe well our wholesale

come EBITDA market. As become a has seeing QX of scaled and are growth we Jushi Beyond/Hello in online expected XXXX. our Virginia X steady Woodbridge to the medical is in to continued in XXXX, positive a reminder, In location

We the total new and service approximately patient is of number approximately X,XXX Jushi’s exclusive adding certifications area our patients are retail a footprint XX,XXX. in month in certified in Virginia date to

new be and XXXX capital. is projects is is $X $X With nondiscretionary facilities most to million, of expenditures approximately of for spend requirements which for our discretionary growth estimated us, capital behind Pennsylvania Virginia million million $XX and our

branded from this XX% yields, efficiencies sales sales Jushi total in This optimization now markets is quality as potency The Jushi sell-through product at vertical QX GP. percent in production Part expanded XXXX the of our in to XX% our and branded in stores. on our XX% company’s XXXX and into retail and QX ‘XX. of optimizing a has vertical our capabilities, QX increased focus includes X products retail of improving maximizing

California, percent of of sales, branded we integrated, a including QX As are total sales. retail where vertically Jushi and products ‘XX Illinois XX% not represent

plan. our cuts reducing employees to with from X,XXX progress approximately total employee our peak efficiency and our total XXXX employees savings made significant have in Throughout we We at have optimization cost X,XXX good cost made headcount approximately XXXX, now.

in are our which our to there of reduction quantify At significant been hours X,XXX the XXXX our have was XX% of corporate a are in nonemployee approximately also from month in more has workforce view. XX%. dispensary average X,XXX XXXX. We labor reduced April to per but hours approximately significant February per hours cuts, level, difficult At retail, by cost in

X, average we that move drive XXXX, seek resulting our improve labor to will savings since model in to total labor estimated model in XX% a will to to result hour continue April approximately dispensary and profitability. of per XXXX, a budgeted to April of X,XXX As expect hour month, labor hours per we

most costs resources we into our formerly on deploying our labor based national grower-processor, rationalizing At rightsizing KPIs team facilities. by shared direct our production are directly of and

this such seek in XXXX We [indiscernible]. as with packaging new also significant process a drove savings to and in packaging XXXX, to shift we’ll continue

example continue throughout through in to in smaller introduction is package hit that has our began will XXXX. Massachusetts carts. Another P&L efficiencies P&L cart fill same X and the our These as and gram a the flow to XXXX of cost to virtually

disappointed of On were the Virginia, implementation we legislative adult in at in the use. slowdown side the

begin growing since for Also, on transition the individuals However, to the hopeful the will in X, regulating is regulatory CCA implementation with legislators and Control medical expected cannabis regulatory adult-use program the that favorable is newly note cannabis-focused table on Authority, in is on serving our very population. back and given XXXX This not body. the that January medical CCA meet Cannabis experience. for is cannabis-specific that Virginia, elected remains patient we XXXX, license a body X, as with transition in program operators to Virginia staffed formally of are our will will legislative CCA, QX continued Virginia’s focus reconsider is known rapidly is the new adult-use popular January legislation. the medical Cannabis I of off when the session. XXXX,

current increases of request in which adult-use adult-use well current in movements licenses, the value the that Shapiro’s In Senate the us encouraged additional budget and gives no it recent Virginia the Governor house. include by are Pennsylvania, meantime, taxing has the to of we interest legislation to market. Governor and Jushi’s Pennsylvania as invest legalization appears progressing In in in the bipartisan XXXX strategic increasing as time cannabis appetite for with

work possible. will reasonably as continue to to industry in of adult with make as Pennsylvania We to reality seek soon the use

we becoming one, to, footprint soon practicable. are positive summary, free shifting grew we asset our strong built more In flow This operationally and base optimizing focus as three, significantly XXXX. cash Two, have efficient year, in our in the generating as XXXX.

and and in sell-through higher us capacity, increased our increase through and worked of production product better on and growing own so this at our production gives have to we hard the cultivation improved techniques wholesale XXXX genetics and ability growing new Our shelves far margins. and year line on that thus

and important most a two We market fast-growing to adult have in have the in Virginia coming path or use year our two. a medical markets

mandatory of As new I projects. million expenditures mentioned $X for earlier, we have only capital

as additional also investments Pennsylvania very potentially ROI and identified high few such have room in a of We Xth grower moving in an an capital adding million very but stores small Virginia. potentially $X

at have capital successfully the should second we lower XXXX cost unique capital creates a strengthen lien second to very structure, provide expect maturity on now at minimize a the first a we position. structure I’ll brief to actions refinancing In will first update secured risk the fourth lien of end refinanced of senior the notes, lien taken quarter XXXX, that lien our the of extending This in XXXX. which level. our help we

potential additional discussions several We financings. are in with commercial for banks

Going assets forward, in but are XXXX the only to that will currently is several of built do have significant were more any not assets modernize take we acquisitions standards. cash expect to value theoretical efficient ago years to developmental

scale feel at need profile of this we own. the and in instead, already growth on our are focused buy important do and efficiency higher markets, assets not our time. Given we optimization to And we the the assets most

investment cash we We free so unexpected. the plan retention non-dilutive flow non-cash capital until hold raise on have to well flow for for sustainable program. taking act opportunity can currently to generating part buffer these We a in selling they positive some as reach as as by off funds assets using employee credit the

our I’m strengthened extremely with dedication the of Director Board of achieving shared of Chair Audit Bill team conclude, as the Directors At to goals. of and of the our and an their Committee. year, proud Independent To the Wafford end our we addition

Shaunna changes Corporate Director. Woloveck Secretary; and to Officer Trent Chief and were Nichole Upshaw to Director; Tobi Patrick Commercial and leadership appointments senior People Lebowitz management including to Additionally, Chief Chief Strategy Chief and to made, Legal Officer;

the like this global experience, years role welcome Hamilton CPG us Michelle over the to Jushi leadership industries. And particularly Brands Mosier, now Beach I’d and at Financial who XX Officer joins in of financial Michelle manufacturing brings assumed from and of Chief year. earlier

We our practices business. Michelle our accounting benefit doubt leadership that have from are we continue I no will across we to pleased on and strengthen to as have significantly the financial team, expertise and our

I’ll Michelle ask to financial that, With review results. our now

Michelle Mosier

Thanks for everyone. and good the morning, warm introduction, Jim,

a like industry. I and to talented and financial that a get family look team I’m work forward highly leadership the contributing cannabis to priorities for Jushi team. Before started, company’s discipline the thrilled such upholding I to we demonstrated while would operational the relentless say execution the of passion with to join alongside the strategic the of

begin me for results operating the XXXX by prior Let reviewing to compared our year.

in to year. to $XX.XX the the $XX.X in revenue revenue in revenue Pennsylvania year-over-year prior and XX% compared for increased in mentioned, quarter the Nevada, Jim is growth primarily to of to million year $XXX.X compared million operations million our and both full increased quarter fourth Full expansion The $XXX.X As to XX% the retail Massachusetts, million. year attributed Virginia.

full revenue wholesale addition, Nevada due Massachusetts, primarily quarter-over-quarter XX% Virginia. In grew and XX.X% to and the year for in growth

including opened as XXXX, operating in the located compared with seven dispensaries of and reopening centrally in and store six XX a store We markets our During markets more XX California year XXXX. ended we stores, the five Palm Pennsylvania. to Springs, in

revenue compared million in XXXX in of million of was fourth of to XX% $XX the profit year. or XX% Gross the quarter revenue or prior $XX.X

$XX.X revenue in million revenue or to compared For was million XX% of or XXXX. the $XX.X profit gross full year, XX% of

by wholesale fourth Virginia, in profit quarter of the significantly for and Pennsylvania includes to XXXX, the benefits realize quarter in significant operations the started in impact as and depreciation impacted both on the expansion we our higher efforts. was of investments gross expansion was our year full While the less which

this We to continue transitional business. we that impact have as scale will the of we side expect a

for by impacted promotional an also increase the margin. year $X inventory gross compression $X markets negatively in affected profit quarter charges price for increased activity is gross approximately the year. for million various and the current Pennsylvania Furthermore, across non-cash of approximately Additionally, million and in

compared $XXX.X On the were $XX.X expenses million expenses to for Operating $XXX.X operating XXXX year a to were full of million. basis, million $XXX.X fourth million. quarter compared

we organization. general flat selling, were expenses administrative to right-size million at quarter-over-quarter approximately relatively as $XX.X and work While the

to to For to the XXXX growth, the full Non-cash in charges $X.X compared million increased of quarter impairment $XXX.X in our million fourth acquisitions. year, due SG&A million expenses were employees to million $XXX.X from investment including ongoing the prior our recent year. support $XXX

non-cash lower-than-expected were compression, of in Massachusetts, the to indefinite-lived due relate full and issues operational charges assets and significant in million. $X.X Pennsylvania, price by year, results states. intangible $XXX.X are operating in economy to Nevada, compared the impairment overall company’s The and operations Ohio impairment the respective million goodwill California, and driven For charges to part

million non-cash $XX.X charges, and loss, fourth inventory the prior year. the for This prior million and $XXX.X quarter million compares The in net in million including was charges for the impairment $X.X to income year and asset net $XXX.X full year. the of quarter

year. adjusted primarily realizing of in For increased operational adjusted and to the the was in the prior quarter, is million compared $XXX,XXX EBITDA efficiencies. sales EBITDA $X to improvement due The benefits the

the the $X.X million compared prior was EBITDA year. in full adjusted million year, to For $XX.X

Moving the with the restricted cash, ended We to and $XX.X balance the million balance on equivalents year sheet. cash cash sheet. of

of versus was down XXXX new and the five $X states of $XX.X stores a included XX, quarter. retail to investments As the million approximately in build-out capital reduction inventory December year million and and for million our Virginia. $XX expenditures our existing prior million, grower-processor were outflows in related across and of Cash versus Pennsylvania $X.X expansions and the prior

and outstanding. $XXX.X amount we December excludes XX, obligations and financing XXXX, leases of principal property, As for of had debt plant equipment. million This

secured $XX.X disclosed, mentioned notes were previously December, a in as completed redeem that financing in we and to million January. Finally, our due previously debt senior

concluding call And the that, to remarks. Jim with turn for back I’ll now

Jim Cacioppo

line see in in earlier the the assets Thank of capital operating a the to savings improvement reiterate, call, laid cash optimization and driving half and we cost financial on implementation year. of second strong efficiency similar our flows will out the to hope With XXXX, in generation further further disciplined Michelle. those highly existing versus to and cash measures, M&A. in operational and To focus growth our discipline from top you, shift flow strategy allocation

I return we shareholders would we And and I dedicated would thank for not building. are continued support for like lastly, would your are passion where maximizing confidence remains what all employees. and core shareholders a that vision, on thank do, today investment our to and be you their priority. we our our hard to our for I in appreciate like without work

ask that, call open the operator the to questions. up I With to

Operator

Securities. Instructions] question from Russell [Operator Beacon go ahead. you. Stanley Our Thank comes from first Please

open. is line Your

Russell Stanley

to thank the taking Good and efforts morning, sell-through. guess, there. optimize on around vertical congrats retail question. for you I And end the and my improved first,

you share, given or of high wondering seeing you’re How as that before what limit your think sacrificing ceiling Just you see take the can you’re to do that effect perhaps what product variety? in markets? effectively you

Jim Cacioppo

Yes. we’re in because you and that markets dynamic the of Thanks, that’s sort of can Russell. Every is. sort far its push it how pretty has some market own in market

For Nevada sell-through approaching example, We’ve is market. vertical XX%. very a Nevada seen in vertical

that As I before In we’re or is to an a we’ve we Virginia, that’s again, Pennsylvania – example, would getting around say, like seen And we’re Pennsylvania, – even then get Yes, – the purchased see then that’s trying there. we but Massachusetts is lower, business. XX%. XX% market XX%, newer. more And the higher XX%, there.

our The Pennsylvania, first. a more there lot right? of is lot There patients they grower-processor, and We retail that’s first selection, Pennsylvania. the to where is and an market a in of were retail diversity been example has are – a strategy of used

them away. Pennsylvania, customers want in we take the think selection to don’t I offer we So and that like our

wholesale And of of shelves. shelf our all market. sort wholesale to people space, just we’re can a in get is with sell as want overall sales. our we there maximizing nice our product, on So Pennsylvania And

Russell Stanley

And maybe color. I could, Virginia. for on if Thanks that

medical focus number wondering, medical immediate a the taken have market, that last the the years. the just of on few market measures over the has obviously, Given opened state

level. to left help are be done order That’s to major accelerate nicely, wondering are to any really what’s other wondering that debottlenecking What done there? required Just initiatives growth if here? just at there or needs growing roadblocks the already be regulatory in but

Jim Cacioppo

Okay.

for So on question the Russell, that. thanks

is regulation Medical Virginia far point. for this very the along think I at

more related efficiencies Our access. – patient was to big operating issue in is versus

from It’s who So has the Virginia, doctor a just or registered need it’s your somebody even a reminder not prescription to a practitioner, the as doctor. a in you listeners, certification.

access for patient so relative a quite us, been And the states. good has to on basis other

a they you you a takes do associated a for without What come of was changes is have the pharmaceutical product but everything great registration, job, variance, costs us of underfunded, are being – we to regulatory get of a with which have part so out slow. body. if They a sort holdup new Product longer.

work more example. in as So it just an inventory creates process

Another increase into led to figuring – and just efficiency, how to two great us was and think consolidated by one did our idea It which patient for terms work Virginia regulations. was experience technology we these Director. We a Retail which see we’re cost platforms of his in timing. he the

reduced quicker, got into an labor saved two store. which cost transaction and the employee per also entering systems So not

about talk stuff, just be way brings want it to the those to increase technical we that are place kind to around the and of down the in don’t new we on think law types and the and of that are some the serve efficient XX, We we patient, really variance doing. So profitability April limitations call. cost the increased things that will brings governor which think down will more the That patients. stuff allows so us I

year about we They and a more as could CCA the think are for they in [indiscernible]. there already speak budget And to you January, are have building year, year budget, this takes – they we the – this more funded, budget no next it. a will over next excuse be healthy is me, what year,

budget, which the to a them regulate allows have us and and have respond there dialogue and efficiency have this concerns. going budget year. They there believe out our next large to allows for we something is XXXX. quite actively already for them to a They they a budget are to So year,

matter continue, added so to It’s will by regulated So sequentially, stores And because lot QX revenue growth, a XX% growing are can potential XXXX their advertise. – growth of these It’s XX% the year QX from is QX of Virginia growth from of reaching getting market, a XXXX, we right, medical. just right, last a we is there. you it’s it more profitable. a saw

store Fairfax, at that and my store in look that think our be store at might to ever adult-use a which own in right? mind, there of like is be I like our the betting store think it’ll you if I only best competitive would best medical pool the final So Jushi one kind like be program four, and

The other they a was newer opened or momentum I’ll store coming online, like just like market before it’s market. growth that continue that last August. like a like really get that getting Woodbridge, to growth. when in in They I it – about that. before and starts they talk new called saw a is stores, this second. But keep Fairfax over Pennsylvania We pedestrian these more more a and it get And years on to path X something in

So – and example. that’s just an

– sort MedMen license and that area then for a each our so of of opened January and Woodbridge the in we’re that’s seeing in brand-new Woodbridge. lost. And had [indiscernible] in Arlington we underserved growth reaches are an opening we’re sort store. in and And then And underserved we store HSA, of where one. curve was All Virginia store that is a – in stores and into a of a then it

the of with be feel I competing best the in store Woodbridge to feel the the best country. with in and we medical some system, So – Fairfax probably

and to that out at regulator, level growth required how governor more And that by is got all figuring us just X, new into already the working July rules again, were X. a lower come April pharmaceutical with rules by our it. and through from regulator X. there. changes think which, January efficient signed effect growth out the we’ve So it the serve We It’s regulations just the figuring

basis. on So that’s an happening ongoing

efficient So the more doing to things we’re three those and profitable. are get

Operator

next Kenric Capital Our from ATB Tyghe go Markets. from comes ahead. question Please

open. is line Your

Kenric Tyghe

margin the this through morning. Thanks, of low and and respect single-digit the more of also in the your And a to EBITDA context double-digit profile. understand just terms speak type the high Jim, us of quarter? to margin to EBITDA Could think the... good evolution about better how you of of margin is EBITDA Can evolution expected kind you in optimization to should expectation? evolution the with the XXXX? through that And we the for margins reasonable importantly, in perhaps here, levers trajectory speak margin

Jim Cacioppo

– mean, not with we’re there going and too want a just and slower don’t slower air I us seem process guidance. highly to regulatory right? weeks, for for It’s inflationary just provide then example, move is the get we sometimes for it’s regulated So the on conditioners, pressures tough can’t XX recessionary to always the very things because Yes. out market. CapEx I in it’s – to a business, difficult

not – are, sound levers but most in call – I we’re I pulling it and Now feel say that, of makes this not it through scared we’re to our levers is the subtle, least. subtle. But terms and would what of

– my a per and going going on if back in prepared go transcript, the basis? force in our our forward, we retail you remarks, So are hours retail, to, the at talked what our about look from call, in store and taking

Michelle Mosier

going XXXX, month February from per from about per to store So X,XXX we’re X,XXX.

Jim Cacioppo

Yes.

still April a we’re the versus That’s of our So This from us, That it’s we’re to over from corporate February a X, X,XXX people XX-hour. deal by and at right, sort by ‘XX, the managed huge going to budgeted corporate, on managed we of person-by-person hours a side course over started the of of packaging new to but to the on last year. isn’t switching us newer sort number. plus, sure. packaging year, for and – number

quite a gets savings, to get used plus over us example. And over the in cost an when more savings is to competitive and I fail a savings month over competitive that mylar widely California to system. to markets say month. mylar We’re as switching which savings like the there And over, million is of the million room $X budgeted out of coming $X labor

that’s So running and somewhat math. conservative based we’re on just over is being expectations the our

not that’s on on finally And of not – in did that’s dramatic. EBITDA two moved to subtle. much not other the So positive QX. going my in we in have place. very other – long floor things That’s put the is very it’s And there. lever GP Because how that’s QX. in like view. not this We very, the to are the up going you reached that’s floor. business second just remember, One then we that a there how – is grow get intuitive it thing Virginia second We to

into efficient that lot We’re a money pretty typically of medical your market, – market especially right, breakeven. that at months for medical you X of dispensaries EBITDA there is dispensary, level, each operating an all get a costs the again, to that in loses in the good aren’t patients go in these Getting number those, capitalized. before

So market, zero which it, have in on we to EBITDA, which grew but quarter-over-quarter I based if us value my was getting asset our view. which didn’t at value mean, positive. if sequentially that XX% getting you you EBITDA us, valuable Virginia, most valued again based you’re nobody as is on

number that’s two. So

taking lot drive. processors. personal of am two as efficiency charge a is and subtle. it I lever to not taken that’s – a have that. is taken, and that again, has be momentum. grow grower-processor our big that I that as think one and There not have QX probably am leadership big personally and ramp-up the been three, of taking is potential changes That’s not – Next, Number has in

and have that the what me, if taking get and running I’m are we’re that for responsibility messing nobody goes where we are means to And CEO, don’t be, not we we blame and be but high around. we full, full there’ll people to there expectations to hard, need – – So further.

need we genetics there about now, the we XX% some and of need facilities need are at levels XX the of square XX% ratios flower grams And have the We facilities, efficiencies. We all now or we’re at and THC. We of out high We XX%. there. between per need testing of getting XX% foot.

as goes because far all I and tell momentum and the not progress, our QX. have We’re a turned I’ve QX, unit, seen significant all far grow – can QX so progress of although our in there – as that quarter expect into I getting then facilities already particularly throughout GPs as we’re positive in We and rooms.

based going to QX I get a come coming of together, full a think should lot the ramp-up starts you’re not that where but be this to upon together. of quarter

hope would closer to much we’re potential. I QX, QX, peak operating

were X like Tier this your X you that’s Tier them in you people stuff, been if X for who back did years, I’ve MSO doing about up. so Three If things a and aren’t head, it CEOs, to the ramp how took how we’re subtle a you think that levers this I hard some to we working that sense of these in talked have of sort we’re works, that track. good of on already. that aren’t and on have momentum go

Kenric Tyghe

Jim. Thanks,

Could on And you of we haven’t in market, great to thoughts also on your California. And speak performance and market that Some operations actually commitment quickly and touched California the just Thank sort yet? perhaps insights. the you. of around just those please. your

Jim Cacioppo

Okay.

four places or by in done losses. this EBITDA operation California – increase three So an your and where you probably decreasing your is we’ve that

very – fortunate that were a we in they were We were extremely acquired we we and California. we trying we were that fortunate much businesses, We and businesses spent were so won to we very didn’t retail. license all acquire so unfortunate time much. very acquire that And fortunate three

look grower most other in ‘XXs, New product people not in people who in On are in probably the dispensaries where of tested Madison I’m it illegal we’re product for people know, in New that’s part, selling Hint So dispensaries York. shelf can’t are is that’s some there money, those as from lot you where money money don’t that the just going. on, to right. California are Avenue, the distributors. on you’ll making They MSOs. but find making that what’s me that a seems that at illegal, are X,XXX whole for the way, doing going it some you okay, sure you are point And processor that to on York and know my if hint, so is make

business, who time I a the and tough are of retail at – running have are we a And and L.A., sell to we pretty plus we getting business or as a assets, the round minus, assets. San nice our for changes it’s would these not not are Obviously, acquire month-to-month, not people it dispensaries, in to call are like Grover So, four-pack Beach. what retail assets, breakeven They are big is nice but It’s license markets, Barbara, deal. it’s a a necessarily we selling that plus basically Santa looking California markets. Francisco.

California we we and twice. would and of the the in likely direction. that making mistakes a that’s lot in so And same real We sort have go – we skill that would learned not say, I

Kenric Tyghe

you. Thank Thanks. Great.

Operator

Burleson question Please next from go from Our ahead. Canaccord. comes Bobby

Your open. is line

Bobby Burleson

relative your basket this what Yes. of is and have I seeing you across the terms you morning. and seeing acted with maybe recovery XXXX? of trends headwinds any in Maybe different sensitivity, geographies in consumer if average But more some Good leveling of or kind to of, behavior kind you look as broad. off the are of consumer are price that kind even guess

Jim Cacioppo

are we I side. so on much don’t been efficiencies for really, we cost it’s really the focused don’t this us, we ton relatively of on flat. But – because think on a focus in

numbers gotten is on have okay. great and are it and you a MSOs transactions where from states. quite shoots, in really had would backing way a looking and note We gone have you and green shoots like the seeing A something right. lot shoot company, market grown trend that’s different have of cautiously has deep because per not green Green you trend that to a numbers say like green in I kind Nevada optimistic. But from we kind margin like as like the the – are word transaction away that’s positive, it’s up would has one and two what they have a to down, dig the is dollars other decline, experiencing. our we not new, are more similar is comments But follow that. stabilized. of that, have like gone in that it’s have changed. stepping competitive to that’s away I seems the to shoot, at seen It’s have the the high Our Virginia, our Massachusetts.

We in of they square in It’s they products One have is Nevada. a wholesale going is are non-cannabis not selling have done, to think facility Flower in raised on gone. XXX,XXX Nevada. an are I out, as what’s prices some feet, example the but the company on they – fully utilized,

sort due have bulk and there to had used upon were done, we push to retail, bulk definitely up get in then to. to it lot work QX, two next Pennsylvania, real ramp-up prices some job So, the weeks. had it get in We QX. in might hard. have based issues, it We harder branded to we shelf our last week purchase buy prices products. flower have in the And around their are was for space than but to much that raised or QX we QX We our had It the a people was at were in we of to there. coming harder able or got

markets where including that where might shoots that be green shoots, are markets some about us there green concerns those people out things see – So, these changing. you of two have

Bobby Burleson

you of that? margin states terms of major there and you in are How that then where year And could of you that the kind you kind would call of as cost cutting work Thanks. improvement. optimization this effort beneficiaries rank doing, out are Great. would see really

Jim Cacioppo

say quite it run just sense with would we like retail to in that retail, I – doing honest it’s is national. centrally that’s a everywhere we you, a through retail we run management the system are system-wide, be

system We online. of call that it our biggest And store so all we have retail. our national a services BEYOND/HELLO online

hours X,XXX store, national per down where in starting April, effort, up that’s And would per to that techniques so – we hours the coming say store that’s but a okay. I are taking X,XXX

the things So, national are efforts. biggest

In terms big improvements, of three we ones. processor have the grower

the So, – was the would and – the was ones left at say three level. operating I a one, Nevada higher

the a too it material it’s all operations get it’s smaller the But in story, It into ramping not here. that’s don’t our three not one. and – Virginia an ramp-up, okay. Massachusetts detail big ones, are much to Massachusetts, to so I is doesn’t want up. Pennsylvania So, overall. improvement

You large Virginia, be And XX, great lot to it Pennsylvania, a all which you Operators upon definitely Pennsylvania, is and like it’s of or a that flip and can just questions are processors the great based they look ask not used like – was hope which easy will operator like based lot We sooner. we as MSOs than you just so when we improvement story. top else’s adult at just an state it, as I one valuable would long will things grower but about upon happen a like Virginia Yes, use. and us it too adult and to be tell in flip standard But and facilities. us in do these inflation, as the this a these of it a facilities. everybody an state world-class more to to the took some higher. eventually of time, building will way they finished it’s well. use,

building an entrenched it. plant already small because make we in that markets you it’s can’t where operator investment coming almost inefficient a So, justify are, these to impossible

be curve. able to cost to going not the down are get You

more about thinking expensive the put investments are where going the in newer build. you more forward and So, markets their the big to much in, plants efficient much market MSOs are

assets I sort speed, positive Pennsylvania grower The there processor. grower at So, and of to up biggest processor do in our major company play the believe Virginia still in this is that getting two of terms the assets that’s in ground, assets. are

Bobby Burleson

color. that for Thanks Great.

Operator

from Our DeCourcey next Please Jon go comes from question BTIG. ahead.

open. Your line is

Jon DeCourcey

always Illinois touch Illinois to of the the kind me and come QX, the taking of question drag lot prepared kind remarks that being that talked we for particularly peers to or out area a exposure. on Thanks One up more Missouri. the else. the St. and call. guys. wanted I guys. as just for benefit real And year surprised [indiscernible] about you have Louis on A Hey it this didn’t But to of been am from your big anything know I a look has of

of kind resetting for this are for How mitigating and there related you what So, kind is that a you there? stores, expectations year assuming seeing of are drag? those

Jim Cacioppo

year-end on cost the on actions are focused and fourth been really here and quarter on have the the we So, focused we side. taking

mid-quarter and was yet, closed it a So, thing. our kind of we haven’t books

have surprised on the want So, on are that QX, we – for stores through so Missouri. Ascent I February in Louis. more much would out have they you One, on And on to our operating what their closer to bit think reasons. refer their say that point had did two – they aggressive product and to would as don’t probably similarly I in we –we happened I was in early had we to in should in it days of February worst see I But of But providing little the I in business. they and And it. QX, good is market, had we February, business I We saw call, today. – reliance XX their was to what we are worst be might that for the sales it get Not no say, February clear affected Missouri sell. in too – and QX. looks decrease, own St. numbers. which us Missouri January, more will this we would a net-net, will lose in go the having still think rec business terms Xth, of of that

the these you your what prices of medical when hoarding a you know kind think goes are on – for months, markets, I in up you going start product. few

who a wrongly, was of to be probably to. naturally it two to which what decision the going is, product Number a was. we market not pricing to with will on react made get of hoarding hard it and So, it or rightly think I allows they we there better knows, sort than and until some knew hit lot

We These they can’t you prices we of our the just hey, how just We – see you yes, let’s said, have a happens. everybody, all not what much happening, same. it product. lot mean were are have. in saw call don’t just – we are week the Missouri. products I companies. So, do don’t have we Maybe private

like our very is Illinois. been because we was and went so product in we appropriate product, vendors have got very, did to what to there vendors. sell supportive, And discounts and they their We

now, am stores live. Missouri. more I things reading offer our competitive right like taxes after than in And So, prices

up. go things. get are up can – on and in to out than either of and you You I have Missouri more that knowledge up go they expected go to are starting Google to prices read can out product these no expected running or go

somebody what is just So, reminded here. me

So, that’s what’s going on.

You higher after because suite can then sales tax is quality now. end, – wild remember, after-tax Google, gummies, different and better low-testing better and not has And buds, a vapes, Illinois all get basis of it’s key, market buy an but selection, more the read flower, basis that on and part it’s especially to anywhere. better pricing more right, right. out then go competitive I on Missouri, right to to And will a things. but these bigger come and hard much our developed mean in Missouri which product in testing,

prices. now, and selection better have right we So, better

And so are it competitive are and we we have we and a on it. monitoring strategy

quite basically. stores half in those labor store cut dramatically, have in We

market. a it on it in have already is I huge I QX cost forward, too. whatever And some we point and have am said Virginia going is would or in at lagging there forward QX. grew we moving focused XX% so from have a is response that, out that – is But XX%, what I was. we – growth

So, that up make that, will and for right. catch up

we great then which store It best Cincinnati, stores, Virginia seems opened in and we January. openings opened in Arlington, a like expectations. happen. exceeded our Virginia, our not in of one two is will store, one that So, And that

basis, So, year-over-year it’s we a on and business our are wholesale we have increasing – Q-over-Q a probably or increasing.

And Peoria. So, another of thing. could open we back we Illinois, getting peak post revenue feel store have we in in good about sort to pretty this

on – margins, which I revenue. XX% it rather in this And we terms we somebody’s not sooner were range, one past that are but happens the little about I clearly again, quarter look And the So, this to would in going Tier think in you tell year didn’t and in size business can’t focused smaller. happens, and XX% say, prediction it about good a peak hopefully of would getting I call right. I feel on – companies bigger say X the about margins are I later. than I bit at case, to answer margins. our our and call.

is the that data that’s we but all much get aggressive somewhat to can detailed is I CEO, focused you, very me, that XX%, oriented target and very, tell margin. and when So, XX%, sustainable be tell and the I I there, our number. think you on known can’t achieving in are very and And the

– and sales the very, were And focused the back I on. So, lost unfortunately, margins will am something get there. But that. very we

Jon DeCourcey

guys. Thanks

Operator

Our question comes Thalmann. Please next go Glenn from ahead. Ladenburg from Mattson

line is Your open.

Glenn Mattson

Yes. Hi. taking Thanks for my questions.

a overview acquisition kind you have facility I that So, to like is capital us can of you now, basically give of talked to what comprehensive you just a what know kind access various about. right the used of the

you and allow markets to that related. do You capital, can about could were mortgage what of the raise or avenues a – this into non-acquisition that or of tap you are unencumbered tap into might that will what thing, give that if kind on you a are general just are the you have year Can that sense that for like looking to potentially you assets that maybe things to put various paths talk that?

Jim Cacioppo

Yes.

focused that, are We on obviously. very

deal for reason the facility, there excess. in acquisitions. no was the terms is we for us no So, the to – of There that so acquisition pay

away of we QX, the And the facility part did of in loan part that, a we open just now. sort refi announced with that’s term facility. the of So, – the as

at the the we wouldn’t it matures end facility. an first XX% that. call lien. So, acquisition it’s term pay, then And XXXX, on the loan and I of think If even that I

unencumbered – will I big to have back asset get we so – the And in what that. the unencumbered the But Virginia. biggest is

We grower our ground have processor. in $XX the million in

And we there. phase are and financial about institutions, banks, We have commercial been documentation that. capital to in talking do including actively

say I want so about And more don’t that. to

others credit have thing partners. is out program, employee to and you Federal example retention some and know point that Terasen competitors other We too. the a which I an U.S. our is some would it hit Government and [ph], saw is program. Sand The of we

we And grant. a it’s Remember, like it’s have more calculations. not of so done a significant capital. It’s it’s We think influx debt. the

wood. feel knock great that, we So, about on

have done is that because don’t – the there we all work the We that little to costs there other and timing, get of is bit into speed to want up, money. ways a that

capital. company. would we I they look – go I the period kind we guys don’t smaller the smaller XXXX XXXX those probably you what internal to – and a which in years, data, is access look the at, past I were of We when at what have got. were, but probably that’s to would you like than look they nice a chunk would time, at say the were And that So, back got. Terasen of and be at would

that’s we – we call have – the that’s shooting are are do are that already. of lot maybe assets we of we we real it company we own in assets don’t including was that flowing can flow what that’s cannabis so think have to on that And and as just for a kind is – talked smaller California a smaller a I or level. free cash I estate non-cash lastly, assets up real am we and that And our near-term. dispensaries, assets money, on non-cash – since flowing estate And those brought about on margins. focused sell then

I that’s might over that period. think sort see continual small – So, a of something XX-month you maybe a deals

that’s We sale. not and that’s have facility Ohio unencumbered for

would to at is million. And At that’s going second the basis, were only some piece So, little when $XXX it could of markets At now million. capital it and at licenses premium here things on Pennsylvania $XX very lien financing. the paper. should to lien in We would that A to a refi that – our And to there go we Virginia back, these safe you very come and we that one some easiest point, first and market. that has of point we right capital there out start that to priced million lien the first of very part protected take control structure capacity lenders well. is to warrants look always as to a are be look would of the very, like safe, attractive. lot system control. be because XX% I $XXX have point,

about are good feel focused we what and capital don’t our that’s EBITDA good we structure, on. we our feel So, margins, about

Glenn Mattson

That’s Jim, Great. much. helpful. very thanks

Operator

Eight from Next Capital. Please question Collin ahead. comes go from Ty

line is Your open.

Ty Collin

the will it wanted are Thanks Hey. because we to question. just keep know to for time around Jim, I in tight XXXX. your one here. clarify I I comments on M&A

up think I Illinois. you just that quarter last it Ohio were was in retail assets about and potentially picking talking

firmly you very the want table consider opportunistically those So, just off to would I if clarify that’s markets? in acquiring or still something now,

Jim Cacioppo

Yes.

in was probably think last last I quarter – November, yes. was call probably

that banking weighs [ph] to So, side. was pretty the safe going

felt maybe but decent up us. thought is that a that, lot really is could felt process. in We any a a mean longer the were was put we Under like I a it was that it plan We that We in associated possibility growth in can no trash we more the that being stock and plan employee were that growth – had happen. growth that optimistic, tore than probability with the Our we had with plan lot we place. and a higher. scenario, and we

doing not are acquisitions positive. cash flow until are we we So, pretty

Our stock is too low.

a and of it’s too consideration. is capital Our not what – that’s even just not I am deals. high doing cost

can licenses, have like deals states Jersey, we with. with licenses are are New we you and associated in there partners working Now, get like

those like will We capital are in where in you But likely in ‘XX. that intensive, have some might you more place things that, see might we something see ‘XX but things aren’t put growth.

through have to to a production don’t growth remember, state assuming we a X like through the at retail million have or or prices network. revenue am any going pretty our where we strategy. our retail a to to at. wholesale Virginia, have we sales. in product our plucks room system compared we our So, something with telling add current million grow where capacity do plus get another network we of close market, just just $XXX right. could sales, for we the lot capacity, you But purchases are I of That’s of That’s and

give find any just unappealing. And that cash to out what you won’t the for that you on in acquisitions getting pay So, margins us flow I relative and ‘XX for is until place. money focusing ‘XX,

Ty Collin

Jim. Got it. Thanks

Operator

Our last question Andrew come will from Markets. from ahead. go Capital Semple Please Echelon

open. is line Your

Andrew Semple

there. inventory for wanted were I the on morning. will question. one added Hi just ask that my to Good here. just adjustments touch this taking I $X.X quarter. of Thanks back to also million

all, this Just understanding correctly. we are sure make of wanted to first

these this be you. should fairly So, impacts through what walk the perspective? signal would bleed from were? into that items could any other kind might those QX be of to seeing then would QX, you maybe And because that Thank expect we operators Secondly, you clean are expectation the be case.

Jim Cacioppo

detailed question. is Andrew, a fairly this

notes. don’t team, some or our to be a be have We on available, you Michelle. I to will those afternoon we to more call is material, I you size, companies CFO will and that this. in shows going this our Inventory we take some calls with I call cannabis But report privately. ask of of it have am would through way for a frustrating already more have for and get this you if and you certain detail. But morning a because very our it’s will up item to us ask

Andrew Semple

Understood. Thank you.

Operator

call I We like Jim remarks. turn any have to over for Cacioppo back questions. no would the closing further to

Jim Cacioppo

team. and to some great follow morning, results up our forward delivering this everybody to and we listening appreciate early We are Great. looking we getting in thank Jushi,

throughout they grower very We and we proud the an both retail be our have and network couldn’t team of for have a some do manager processors and us. Virginia more all in Thank in doing involved things, they gave much. and efficiencies what great getting they example of stepped are great I the the you up.

Operator

today’s participation. you your call. Thank for This conference concludes

disconnect. now may You

Jushi (JUSHF) 31 Mar 232022 Q4 Earnings call transcript