Good day, and welcome to the Green Thumb Industries 4th Quarter and Full Year 2024 Earnings Conference Call and Webcast. 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. On today's call, management will provide prepared remarks, and then we will open up the call to your questions. To ask a question, analysts may press star, then 1 on your touchtone phone. if you are using a speakerphone please pick up your handset before pressing the keys and to withdraw your question please press star then two please note this event is being recorded i would now like to turn the conference over to shay capelis director of communications for green thumb please go ahead thank you besties good afternoon and welcome to green thumbs fourth quarter and full year 2024 earnings call i'm here today with founder and CEO Ben Kobler, President Anthony Georgiatis, and Chief Financial Officer Matt Faulkner.

Today's discussions and responses to questions may include forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. These risks and uncertainties are detailed in the earnings press release issued today, along with the reports filed with the United States Security and Exchange Commission, and Canadian security regulators, including our most recent annual report filed on Form 10-K. This report, along with today's earnings release, can be found under the Investor section of our website. Green Thumb assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. Throughout the discussion, Green Thumb will refer to non-GAAP financial measures including EBITDA and adjusted EBITDA. A reconciliation of non-GAAP financial measures, the most directly comparable GAAP measures, is included in our earnings press release and SEC and CDAR funds filing. Please note that all financial information is provided in U.S. dollars unless otherwise indicated. Thanks, everyone. And now, here's Ben.

Thanks, Shay. Good afternoon, everyone, and thank you for joining our fourth quarter year-end 2024. It's been an interesting start to the new year as the new administration takes office in D.C. There were high hopes for federal reform under Biden that did not materialize despite favorable conditions for a change to cannabis regulations. With the new administration, Trump's recent picks are not inciting optimism for progress. Yet, THC demand is on the rise, hitting record highs. As we've said from the beginning, though, we have set ourselves up to succeed regardless of what does or does not happen at a federal level. Our North Star continues to be the American consumer. A 2023 study saw that nearly 43 million Americans reported THC consumption in the last 30 days, which is a new high and makes the S-curve of adoption begin to go vertical. these trends are the lifeblood of our business and the reason we know cannabis in america is big and getting bigger despite the out-of-touch dea and their goal of limiting access to well-being for americans and the dea is clearly asleep at the wheel but the green thumb team is wide awake focused on the factors we can control to grow our business over the long term and tuning out the noise. A quick note on the math of pricing pressure. Remember, if pricing is down 20%, the team has to deliver 25% more units to break even, and that math is tremendously powerful. So with that backdrop and in the face of pricing pressure, the Green Thumb team continued to deliver. You would not know it looking at the stock price, which is hovering at a 52-week low, but in the fourth quarter we achieved record revenue of $294 million, dollars, record adjusted EBITDA of 98 million, that's a 33 percent margin, and our full year 2024 cash flow from operations was 195 million after paying 131 million in taxes. These numbers are quite an accomplishment to which I credit our team and senior leadership. I have been fortunate to work alongside an incredibly smart and loyal team with leaders who have been together for many years, and that consistency and longevity matters. We win because of the team, and we believe in the direction Green Dumb is heading and our bright future ahead for several reasons. Our focus on cash flow and disciplined capital allocation has been critical to executing our strategy. Our cash flow and balance sheet allow us to sleep well. We ended 2024 with a strong balance sheet that gives us the optionality to maximize shareholder return through thoughtful CapEx, share repurchase programs, and strategic M&A. In 2024, we engineered a historic industry-first $150 million syndicated bank loan, which helped us retire $225 million in senior secured debt that was due in April 2025. With new financing in place, we delevered our balance sheet, maintained our cash interest expense, and added duration, another five years to execute our growth plan. The interesting reality is that is only $150 million of leverage on what was just $370 million of EBITDA. second our ability to innovate and evolve rapidly to seize opportunity in a dynamic environment today's most successful companies are masters of reinvention who see both disruption and new trends emerging simultaneously they move quickly to capitalize on opportunities while others are dangerously complacent we have tried to model green thumb in that way as we do not want to be the ostrich and stick our heads in the sand and miss something instead we focus on what is best for the american consumer because after all we are the american as consumers we clearly see the trends that can propel green thumb forward and we're positioning ourselves to benefit the changes in alcohol consumption versus cannabis consumption are too dramatic to ignore we have all discussed the potential harmful effects of alcohol before and on january 3rd the surgeon general advised the public on the now established link it's no surprise alcohol consumption rates continue to decline especially with younger generations meanwhile we are seeing more consumers turn to cannabis products as an alternative recently we invested in agrify the owner of senorita the award-winning best tasting thc beverage on the market we've been in the thc beverage space for years and bringing senorita into the portfolio of brands is a great example of how we were able to act quickly when something makes sense like thc beverages we are excited about our investment in Agrify as we believe tens of billions of Americans will become THC consumers in the coming years who are not today. One example to reach many of these new consumers is the Incredibles partnership with Magnolia Bakery. Not only do we sell these products at dispensaries around the country, but we sell the same product made from hemp on the Incredibles website and by local delivery in 23 markets across the United States through DoorDash. E-commerce and home delivery are changing the game by offering new, convenient ways for customers to access product and allowing our brands to reach new markets and consumers. Turning to our traditional offerings, Rhythm continues to be the premier choice for cannabis consumers across the country, and we are always looking for ways to bring the premium cannabis brand to more consumers. We launched a first-of-its-kind partnership with Chicago's renowned music venue the salt shed to showcase the rhythm lifestyle then you host around 150 music shows a year drawing over 600 000 people in addition to showcasing the rhythm brand the partnership includes our new on-site retail experience rise at salt shed which offers thc products from bebo incredibles and seniorita in addition seniorita is the venue's exclusive thc beverage available for purchase at all venue bars so you can legally buy the best tasting THC drink on the market at chicago's recently awarded best music venue we are excited to continue exploring the potential of similar concepts to connect even more consumers to our brands through unique experience and quality products lastly let's talk about something we all have in common sleep according to the recent Harris poll, 71% of adults 21 and over wish they slept better. The survey also highlights the popularity of cannabis infused edibles as a sleep aid. Our incredible Snoozeberry line is among the nation's best-selling cannabis products for sleep because we know that when you snooze, you win. It has been a very busy and productive year over here at Green Thumb.

Thanks to each and every one of our 4800 plus amazing team members who show up every day to work hard and share their passion for the plant we are right on target doing what we said we would do maximize the assets we have in place to generate long-term value for our stakeholders now i'm going to turn the call over to anthony to cover our operations anthony thanks ben as you just heard despite facing significant challenges our team delivered another exceptionally strong quarter closing out a record setting year for green gum let's highlight some of the key achievements from both the quarter in the year expansion in q4 the company opened three new stores in florida minnesota and nevada throughout 2024 we invested 80 million in capex opening 10 new stores and bringing our total store count to 101 by year end we also made additional wholesale investments in new jersey virginia connecticut and florida markets with significant growth potential brand performance our award-winning brands including rhythm dog walkers incredibles and bebo continue to perform exceptionally well we are particularly proud of our market share gains in ohio florida illinois new jersey maryland minnesota and pennsylvania our commitment to operational excellence product quality and innovation, combined with our focus on the consumer, has led to improvements in distribution and brand performance. Ohio launch. Our successful adult-use launch in Ohio was a major highlight. The cross-functional collaboration between our retail, CPG, and corporate teams was inspiring, and the results were even more exciting. Green Thumb brand of products have quickly become the market leader in Ohio, and with dog walkers set to launch there at some point this year, We're confident about our prospects in the Buckeye State for 2025. Team execution. Finally, our team executed nearly flawlessly throughout the year. On the CPG side, in addition to brand performance, we operationalized two large-scale facilities in Virginia and New Jersey and made substantial investments to upgrade and expand our cultivation, extraction, and production capabilities. In retail, we invested into our omni-channel offering, launched a new consumer-facing website, and began a comprehensive review of our physical asset infrastructure, including store locations that will guide a large part of our 2025 retail capex spend. Two months into 2025, and in many ways, it feels like deja vu in the cannabis industry. One, we remain skeptical about the timing of any significant federal reform as a reminder we've been left at the altar the past two years first with safe banking in 2023 and then with rescheduling last year at the moment it's hard to think anything anything will fundamentally change given the new administration's appointees who seem to be descendants of the just say no campaign of the 80s and early 90s two we anticipate continued price erosion in many of our markets Combination of supply-demand imbalances, competition from unregulated and or farm-bill-compliant products, and the current state of the consumer leads us to believe that pricing and margins will remain under pressure throughout 2025. Despite these concerns, we are confident in the following. First, in our team's ability to navigate these regulatory and price-related challenges. Second, consumer demand for THC. Although it's difficult to measure aggregate cannabis consumption with the proliferation of farm bill compliant products, it's undeniable that the demand for THC in the U.S. is both robust and growing. Couple this with the recent negative press and decline in outhaul consumption, and the setup is there for THC to take center stage with the U.S. consumer for the next decade. Looking ahead to 2025, our overall capital plan is expected to closely align with the $80 million we spent in 2024 the majority of our 2025 retail spend will be directed to renovations and relocations across minnesota virginia ohio and pennsylvania as well as a select number of new store openings in nevada ohio and florida additionally we intend to continue making targeted investments in our wholesale business via additional cultivation capacity and automation initiatives in terms of strategy within cpg we plan to continue to invest into our new jersey new york and connecticut facilities innovate and expand our brand and product portfolios leverage strategic partnerships to build to build visibility and grow share with new audiences and focus on driving operational efficiency and product quality In retail, we plan to continue to invest into our RISE retail brand, further refine our omni-channel business and strategy, and push ourselves to optimize the consumer experience with a focus on where and when consumers shop for cannabis. Additionally, we have already started our prep work for the launch of adult-use sales in Minnesota, which is expected to commence before year end. Our success in executing these strategies will be determined by our relentless focus on the consumer. our ability to strengthen our competitive market positions, our commitment to investing capital and projects that maximize shareholder returns, and our ongoing investment in our team, who are the foundation of our organization and central to everything we do. With that, I'll turn the call over to Matt and review our financial results.

Thanks, Anthony, and hello everyone. In the fourth quarter, we delivered over $294 million in revenue, a six percent increase compared to the prior year period revenue is primarily driven by overall retail revenue increased one percent reflecting continued growth in existing markets of new york florida and maryland the addition of adult use sales in ohio and the opening of 10 incremental rise dispensaries the increase was mostly offset by continued price compression and many of our markets fourth quarter 2024 comparable sales for stores open at least 12 months, decreased 2.6% on a base of 84 stores. Super packaged goods net revenue for the fourth quarter 2024 increased 22%, driven by continued growth in existing markets in New York and New Jersey and the addition of adult-use sales. Looking forward, we expect first quarter sequential revenue to be down mid-single digits as we anticipate seasonality and pricing decline. Gross profit for the fourth quarter was $158 million, or 54% of revenue, up from $143 million or 51% of revenue a year. Operational efficiencies helped offset turning the HopEx selling general administrative expenses to $101 million or 34% of revenue compared to $92 million or 30%. Total expenses increased primarily due to SG&A, excluding depreciation, amortization, one-time transactions, compared to its normalized operating costs, approximately $71 million. The increase year-over-year is mainly attributed to the 10 incremental retailers. The company generated net income of $13 million or four cents per $0.03 million or one just EBITDA. Along with continued pricing challenges, we plan to continue to invest in our brand. This, in turn, will push adjusted EBITDA into the fourth quarter of the strong balance sheet and working capital to $200. Cash flow from operations for the year came in at $191 million after paying $131 million. In conclusion, we are pleased with our team's outstanding performance in 2024 and appreciate their ongoing commitment and confidence.

Together, we remain committed to driving long-term growth while ensuring prudent capital allocation encourage shareholders and with that we will now begin the question and answer session to ask a question you may press star then one on your touchtone phone if you are using a speakerphone please pick up your handset before pressing the keys if at any time your question has been addressed and you would like to withdraw your question please press star then two we ask that you please limit yourself to one question At this time, we'll pause momentarily to assemble our roster. The first question today comes from Matt Bottomley with Canaccord Genuity. Please go ahead.

Good evening, everyone. Thanks for the question. I'm just wondering if you can provide a little more color in whatever level of detail you can at this point with respect to the distribution model or the potential for increasing hemp-derived THC products. So you've had some of your peers, whether, you know, U.S., even some of Canada, that have kind of, you know, started to maybe crawl before they walk in that space. And it's something that you guys have alluded to already in your prepared remarks. But, you know, there's obviously the Circle K relationship in terms of, you know, what was originally planned in Florida. You mentioned Agrify a little bit. And I'm just curious if you think, you know, this is something for maybe investors to be a little more cautious about or if you think the ability for growth in this sector through channels other than just the state by state, you know, traditional THC regulation, you know, if this is something that maybe has some legs to it in the coming years here.

Sure. Thanks, Matt. It's Ben. I can attempt to take that. I'm not positive exactly the specific question, but look, the product is available via DoorDash. So if you're in 23 markets across the U.S., you can get from Incredibles Chocolate Bar, which is the best tasting chocolate cannabis bar, arguably the best tasting chocolate bar around pay attention to that would be silly we can deliver it we can sell bebo online we're developing memberships and all sorts of things uh and basically the whole reason for this that's the output of people want the product it's safe they're demanding alternatives and market forces are coming true so we are heavily focused on the demand and the consumer and making life better for the consumer that's what we're up to so you don't want to have to drive somewhere far away and go

through a production in a parking lot and all kinds of things there are many many easier ways you can go to specs abc binnies total wine and you can get the product there so it's a pretty exciting time if you're in the cannabis supply space and you understand the consumer got it um i'm wondering if i could just ask quickly on on the capex of 80 million that you guys mentioned so obviously the the sector overall is kind of star for capital and if you look at some of the capex projections you know within you within the industry they're significantly lower and i think some of that is probably just a function of others not having the capital to do it. But just in terms of return on investment of those dollars, you guys are in pretty good shape from a cash flow yield perspective. And it's not really a commentary on whether that's too much relative to the size of your operations. But just given how limited it seems to be in the industry, is that really just a function of others not having the capital, given that your sort of guided number is somewhat hire?

Yeah. I mean, look at the last few years. I think we've been a massive majority of the CapEx in the business, which is propelling the business because we got the right product that people want on the right brand. Like it's a full circle situation. I do not understand where other companies are going to get the money to invest in their business when they don't have the money to pay taxes or interest, let alone invest in growth. So it's a real has and have not situation. It's pretty stark. It's pretty dire. And we're going to invest the money bottom up on where we can get the returns with a long-term focus on continuing to invest in the business that we have it's really awesome spitting out cash and go play you know offense while we defend what we have but you're totally right and you know this is a stat we've been calling out for years if you don't invest in your business you can't grow and if you don't pay taxes you become okay thanks guys i'll leave it there next question comes from aaron gray with alliance global partners Please go ahead.

Good evening, and thank you for the question. I just want to talk a bit about the margin profile. I believe you mentioned Primark's potential for it to fall below the long term of 30% temporarily. It had a very strong 4Q, both in terms of gross margin as well as EBITDA margin. So just dive in a bit deeper. As you've done a great job of offsetting some of the broader pricing pressure, as you look forward to 2025, do you see potential with that pricing pressure to worsen, getting some of the troubles that your competitors have, or are you potentially seeing opportunity to play offense as disregarded then to get more aggressive, to drive growth while others are struggling with their balance sheet, may not have the ability to do so? So any color, that would be appreciated. Thank you.

Thanks for the question, Aaron. So I think, you know, when you think about pricing pressures, you know, we've seen double-digit declines where we're anticipating similar results for for 2025 and you know the industry is is feeling the pressures uh you know across pretty much every state that similar trends it clearly varies depending upon some of the the markets but we do expect that to continue and then going to have an impact of the top line there. So, you know, hard to predict where it goes, but we definitely have braced ourselves for it.

Okay, great. Thanks for the detail. I'll jump back in with you.

Next question comes from Eric DeLauria with Greg Havel. Please go ahead.

Great. Thank you for taking my questions and congrats on the very strong CPG growth and overall efficiency management. My question is on marketing expense increases. You know, It certainly makes sense, your guys' ability and willingness to sort of play offense as others are stepping back here. I'm just wondering if you could expand a bit more on sort of your plans for marketing in 2025. Is this just kind of, you know, more advertising, more dollars towards DoorDash and the like, more partnerships? Just wondering if you could provide a bit more color. I mean, it certainly seems like a winning strategy at this time. And so I'm wondering if you have any more to share.

Yeah. Hey, Eric, it's Ben. Sadly, I don't think we have much more to share. Not crazy to go give you the plans. I'd rather you see it and be impressed and surprised and excited. Look, the country is turning to weed. We need to show them with a credible way how to do it. We need to educate and we need to do it with people with influence that people look up to and respect and show everybody that cannabis is real and it's out there. It's healthy and it's a better way. And lucky for us, lucky for our shareholders, we've got the balance sheet. We've got the cash. And we're ready to go put it to work. And we've figured out how to work in this weird environment of how to get money out there and have it be clean and not tainted and operate in a cannabis, non-cannabis, cannabis world, which is really quirky, but we're pretty good at it. So we're really, really excited about what's ahead as we can drive major, major awareness around the country's, you know, best cannabis brands. And we're excited to get behind them.

Great. Thanks for the call. Congrats again.

The next question comes from Frederico Gomes with ATV Capital Markets. Please go ahead.

Hi. Congrats on the quarter. Thanks for taking my question. Just a question on Minnesota, given that I think that's the only state starting out of use this year. Could you remind us about your expectations for the size of that market, the competitive environment once out of use sales start later this year?

Yeah. Great question. Anthony here. Look, I'll say the crystal ball is not showing us a lot right now. minnesota you know zoom out what you have here is you have a you have a medical market with two operators you've got a population of six million plus and you've got massive consumer demand for cannabis um it's unclear how that market is going to unfold in terms of timing and structure you know we're all kind of sitting here waiting we know the state is working hard on the regs as we speak and working on the plan but i'll tell you right now this one is very murky for us and so in terms of the prep i'll just kind of tell you some of the prep work that we've done we've tried to get the stores ready for hopefully increased traffic and we just continue to refine our product line and our product quality in the state to get ready for um for adult use uh we've got great rhythm flower in there i'd say you know across the board we've got some some one buddies in the market it's a hell of a hell of a market to be a patient in and uh we're excited for for adult used to start whenever that may be in 2025.

Thank you very much.

The next question comes from Pablo Zuanic with Zuanic and Associates. Please go ahead.

Thank you. Anthony, just going back to the hemp derivatives, can you explain why are you doing the drinks outside of Green Sam via Agrify? And in the case of edibles, you are doing it apparently through Green Sam on the deal with Magnolia Bakery.

I'm just trying to understand the logic of how you're managing that things sure i mean i can take that paulo it's been uh you know the landscape is forming as we go we're trying to optimize every dollar for shareholders and we're keeping maximum flexibility but in a fully legal business it makes no sense not to do it on a nasdaq listed company that can show how great the growth is going to be uh in this country with thc uh you know why do it in the canadian company where really no institutional investors have the ability to buy the stock and so So we're trying to be opportunistic for shareholders. We see this as a massive opportunity for green thumb holders and a not yet fully understood market that soon will be more understood. So we think we're in the right place ahead of time and a good spot to be for shareholders.

But on that point, I mean, the opportunity, whether it's hemp edibles or hemp drinks, is just as good? Or do you think that one is better than the other?

It depends. It depends. It depends on the cash. It depends on a lot of things that happen. We think both are material opportunities, you know, billions and billions of dollars of opportunities. To quantify those has a lot of ifs. But if something is going to go from zero to billions, we want to be there. One is already well off and started, and the other isn't.

Got it. Thank you. Just to follow up, of course, congrats on the 20% growth in wholesale. You know, that's amazing in the current environment. Specifically regarding New York, right, we're seeing a lot of new stores open, maybe more, you know, AR risk there. just talk about how you're managing that it seems a lot of your peers in New York did not expand on time so I mean great opportunity but I'm just trying to understand how you're managing the risk to a lot of new stores opening I think 200 now some may be weaker customers are there how do you manage that thanks yeah Pablo yeah another really good question um I mean look we're we're becoming tremendously excited about New York we started to see some um some real kind of real growth starting in the back half of last year and we're starting to really invest into it um

you know uh anecdotally uh we're hearing that our flower is some of the top in the state not a lot of folks have indoor capacity so it's kind of a competitive advantage that we're really leaning on as we speak um but looking ahead we've got we've got big plans for new york and 25 and beyond um we're going to build this thing from the ground up it's going to take some time and i would say you know we're just going to do it in our methodical process where you know we just look for incremental gain month after month quarter after quarter week after week it's the same playbook we've run in other states we're pretty excited about um about the possibilities given the uh the population and tourism in that state that's great thank you look at ben if you don't mind i'm going to add one more i mean obviously you you have to plan based on what you can control

i understand that but compared to some of your peers i mean you sound a lot more negative on reform front i mean some people are talking about you know promises made promises kept the two social tweets by uh by the president other people are very excited about kennedy jr being the hhs secretary maybe just help me you know connect that disconnect right i mean other people are quite positive you sound a little more negative i mean pablo we've seen things differently than our peers for a long time i think it shows up in the balance sheet and the cash flow and net income, and we are not optimistic on changes from D.C.

Look at the appointees and look at Kennedy's total 180. You can troll into massive growth markets where nobody else is. So it's exactly where you want to play. I mean, it's the setup, if you zoom out, to look back of exactly the right time to go very aggressive into a market. We are flush with cash. We are spitting out cash and everybody is you know we're not we love the product we love the brands and we think the people in dc are out to lunch we think the dea is corrupt and misguided and out to lunch so you know it's not a popular opinion it's controversial but it guy so being on an island away from our peers is welcome over here no problem got it thank you and congratulations the next question comes from bill kirk with ross capital partners please go ahead

Good evening, everybody. Ben, I would love to take a step back, and rather than try to handicap those regulatory scenarios, could you spend maybe a couple minutes on what your dream federal scenario among those reasonable possibilities would be? Because the way I see it operationally, the existing scheduling setup seems to suit you quite well. You can see it in the results. However, the capital markets perspective, you don't get credit or full credit for it, so some change there would obviously be welcomed. So what is or what would be your ideal best federal treatment for Green Thumb, balancing those considerations?

It's a great question. Thanks, Bill. You know, I think you're right. I don't know. I mean, my candid answer, and I don't mean to be flippant, is I just don't spend a lot of time dreaming. I mean, it's like, look at the cards you've got and play the game that's out there. So we understand Farm Bill being closed. We think that this product that is dangerous for kids should be regulated, obviously. And so we go with a common sense approach, bottom up on every single thing to go in and try to change the scheduling, the tax regime and, you know, add a cannabis branch to the federal government and figure out a federal surcharge tax and handle all. Like, it's not a place that we spend a lot of time in a dream scenario. It's sort of like what's in front of us, safe banking or not, farm bill or not, reschedule, deschedule. I mean, remember that discussion, like, obviously, this thing should be rescheduled, obviously. And obviously, the product should be available for U.S. veterans that are at the ultimate moment choosing to kill themselves every day without access to cannabis. I mean, just common sense approach with a little empathy, not 100 acronyms in D.C. to figure out who's going to regulate or what. So I think it's a very good question, but pushing on a string and playing in Fantasyland is not our game. We understand we want the product available for consumers that want it. That's our ultimate. it. So we want when people are going out everywhere they're drinking a beer or they can smoke cigarettes safely outside, they should be able to smoke a joint, buy a joint, buy a cannabis drink and be able to consume because we think that's a better America. That's a better tomorrow. That's more well-being, less hangovers, less fights, less problems. The evidence shows that it's just going to take the country several more years, if not a decade.

Thank you. I like that answer and good luck.

Thank you.

This concludes our question and answer session.

I would like to turn the conference back over for any closing remarks so thanks it's been head over to senorita drinks.com buy these drinks check them out I guarantee you're gonna like them if you don't send me an email code cold or 25 for 25% off on a big order send pictures posted we got a lot of good things going on here thanks for joining we'll talk to you guys in 90 days the conference is now concluded thank you for attending today's presentation you may now disconnect