10-Q: Jushi Holdings Reports Q1 2025 Results: Revenue Declines Amidst Pricing Pressures

Jushi Holdings Inc. reports a decrease in revenue for the first quarter of 2025, impacted by increased competition and pricing pressures in key markets.

Summary

• Jushi Holdings Inc. reported a net revenue of $63.85 million for the quarter ended March 31, 2025, a decrease of 2% compared to $65.46 million in the same period last year.
• The company experienced a net loss of $17.02 million, with a loss per share of $0.09, compared to a net loss of $18.36 million in the prior year.
• Gross profit decreased by 20% to $25.78 million, with a gross profit margin of 40% compared to 49% in the same quarter of 2024.
• Operating expenses decreased slightly by 2% to $27.65 million.
• Adjusted EBITDA decreased by 26% to $9.83 million from $13.35 million in the prior year.
• The company had $27.89 million in cash, cash equivalents, and restricted cash as of March 31, 2025.
• The company issued US$3.72 million principal amount of 12% second lien notes due 2026 and C$2.00 million principal amount of Second Lien Notes in February 2025.
• The company had forty operating dispensaries in seven states as of March 31, 2025, as compared to thirty-five operating dispensaries in seven states on March 31, 2024.

Sentiment

Score: 4

Explanation: The sentiment is neutral to slightly negative. While the company highlights some positives, the overall financial performance shows a decline in revenue, gross profit, and adjusted EBITDA, indicating challenges in the current market environment.

Positives

• Operating expenses decreased slightly by 2% to $27.65 million.
• The company received $2.85 million in employee retention credit claims, including interest, from the IRS.
• Cash flow from operations increased due to factoring certain employee retention credit claims and an increase in cash flow from working capital.
• The company enhanced liquidity by factoring certain employee retention credit claims and issuing Second Lien Notes.
• The overall units sold in our retail channel increased 6.1%.

Negatives

• Net revenue decreased by 2% to $63.85 million.
• Gross profit decreased by 20% to $25.78 million, with a gross profit margin of 40%.
• Adjusted EBITDA decreased by 26% to $9.83 million.
• Retail revenue decreased $525 due to a decline in sales in Illinois, Massachusetts, Nevada and Pennsylvania.
• Wholesale revenue decreased $1,088 due to a decline of $1,263 in Massachusetts.

Risks

• The cannabis industry is subject to significant competition and pricing pressures.
• Continued pricing pressure due to competition, increased cannabis supply or shifts in customer preferences could adversely impact the customer base or pricing structure.
• Strict enforcement of federal law regarding cannabis would likely result in the Companys inability to proceed with the Companys business plans.
• The Company's assets could be subject to asset forfeiture because cannabis is still federally illegal.
• The IRS has taken the position that cannabis companies are subject to the limitation of 280E, a position held by state tax regulators in Nevada, Ohio and Virginia.

Future Outlook

The company believes that its existing cash and cash equivalents and cash from operations will be sufficient to meet its working capital and capital expenditure needs for at least the next twelve months, and may choose to take advantage of additional opportunistic capital raising or refinancing transactions at any time.

Management Comments

• We are focused on building a diverse portfolio of cannabis assets through opportunistic investments and pursuing application opportunities in attractive limited license jurisdictions and capitalizing on such assets through strategic deployment in our day-to-day operations.

Industry Context

The cannabis industry is subject to significant competition and pricing pressures, which is often market specific and can be caused by an oversupply of cannabis in the market, and may be transitory from period to period.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• Comparable companies in the cannabis industry include Curaleaf, Trulieve, and Green Thumb Industries.
• Without specific data on key performance indicators (KPIs) such as same-store sales growth, customer acquisition cost, and inventory turnover, a comprehensive comparison is not possible.
• Industry benchmarks for gross margin in the cannabis sector typically range from 50% to 60%, making Jushi's 40% gross margin lower than the average.
• EBITDA margins for leading cannabis companies often fall between 25% and 35%, while Jushi's adjusted EBITDA margin is lower.

Legal Proceedings

• MJs Market, Inc. filed a complaint in federal district court in Massachusetts adverse to Jushi Holdings Inc. and certain of its subsidiaries.
• On October 24, 2022, Pacific Collective, LLC (Pacific Collective) filed a complaint in state court in California against Jushi subsidiaries TGS CC Ventures, LLC (TGS), and Jushi Inc.

Related Party Transactions

• An entity affiliated with James Cacioppo, the Company's Chief Executive Officer, purchased US$3,719 principal amount of Second Lien Notes for a purchase price of US$3,347, and received 5,810,938 warrants.
• Denis Arsenault, a significant equity holder of the Company, purchased C$2,000 of Second Lien Notes for a purchase price of C$1,800, and received 2,199,688 warrants.
• The Term Loans payable and the related interest expense includes amounts related to the Company's Chief Executive Officer, as well as a significant investor, who each participated as Term Loan lenders in the Company's senior secured term loan refinancing completed in July 2024 in the principal amounts of $9,000 and $7,000 respectively, and also received 3,600,000 warrants and 2,800,000 warrants, respectively.

Stakeholder Impact

• Shareholders may be concerned about the decrease in revenue, gross profit, and adjusted EBITDA.
• Employees may be affected by potential cost-cutting measures due to the company's financial performance.
• Customers may experience changes in pricing and product availability due to competitive pressures.
• Suppliers may face potential renegotiation of contracts due to the company's financial situation.
• Creditors may be concerned about the company's ability to meet its debt obligations.

Next Steps

• The sale of the dispensary in Nevada is expected to be completed within three months from March 31, 2025.
• Beginning August 1, 2025, the Company will commence quarterly principal payments of $1,213 on the first business day of each calendar quarter with a final payment of $42,438 at maturity date, plus a 4% exit premium on such amounts.

Key Dates

Keywords

cannabis, revenue, EBITDA, financial results, Jushi Holdings, Q1 2025, marijuana, dispensaries