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Beats on Revenue and AEBITDA; Catalysts Loom

Jushi reported 4Q23 revenue of $67.8 million, which was ahead of consensus of $65.4 million. This represents a 3.7% increase Q/Q and 11.7% decline Y/Y. Gross margins were 40.1%, a decline of 3.4% sequentially and an improvement of 11.4% Y/Y. Total revenue was helped by a 30% sequential and 19% Y/Y increase in wholesale revenue. Jushi launched 175 new SKUs in 4Q, including the debut of a new vegan line of troches in Pennsylvania. These gains were partially offset by increased competition in Nevada, Pennsylvania, and Illinois. 4Q adjusted EBITDA of $11.3 million exceeded consensus of $10.4 million. Adjusted EBITDA increased 16.4% Q/Q and 88.3% Y/Y. The large Y/Y difference was affected by asset impairment charges in 4Q22. Cost controls have been a major focus for Jushi and SG&A declined 2.0% sequentially and 35.6% Y/Y. AEBITDA margins were 16.6%, which remains below Tier 1 averages, but represents a 1.8% increase Q/Q and 8.8% improvement Y/Y. Margins were helped by increased sell-through of Jushi-branded products in its own stores. Vertical sales were approximately 53.4% of total retail revenue in 4Q23 across the company’s five vertical markets. Jushi’s net loss dropped to $18.0 million, which is a 12.6% gain Q/Q and 87.1% Y/Y. Again, the large Y/Y difference was affected by asset impairment charges in 4Q22. Operating cash flow was $4.5 million, an improvement of 82.8% sequentially and a drop of 12.29% Y/Y. Jushi has several potential adult-use catalysts on the horizon. The company is heavily levered to potential reform in Pennsylvania. Jushi has 17 of the approximately 128 MSO-owned stores in Pennsylvania and the most exposure on a number of stores/enterprise value basis. Retail is complemented by a ~123,000-square-foot cultivation facility in Pennsylvania. Jushi has six of the 22 MSO-owned doors in Virginia, another key market that may start adult-use sales in 2025. The company is also vertical in Virginia, with ~93,000 square feet of cultivation. Ohio is expected to begin adult-use sales by September 7, 2024, and Jushi currently has one store and a small ~3,000-square-foot grow. Under the new regulations, the company is potentially allowed to expand cultivation to 15,000 square feet, and add adult-use to its existing medical dispensary and one additional adult-use only store.