Executive Summary / Key Takeaways

• Jushi Holdings is executing a strategic retail expansion ("7-in-7" initiative) and operational efficiency drive to boost revenue and margins, aiming for 14 stores by mid-2026 and improved profitability from cultivation/processing.
• Recent financial performance in Q1 2025 showed a slight revenue dip year-over-year due to competitive pricing pressure, but improved sequential gross margins and strong operating cash flow, partly boosted by Employee Retention Credit (ERC) refunds.
• The company is making targeted investments in its grower-processor facilities and has upgraded its management team, expecting these efforts to yield significant margin increases in the coming quarters by improving yields, potency, and product quality.
• Key catalysts for future growth include potential adult-use legalization in core markets like Pennsylvania and Virginia, alongside the ongoing expansion into Ohio and New Jersey, which could dramatically increase market size and improve profitability.
• While facing industry-wide competition and regulatory uncertainties (including litigation and the Farm Bill loophole), Jushi is strengthening its balance sheet through cash flow generation, ERC factoring, and strategic financing to fund growth initiatives and navigate risks.

Setting the Scene: Cultivating a Niche in a Maturing Market

Jushi Holdings Inc. (JUSHF) operates as a vertically integrated multi-state cannabis operator, strategically focused on retail, distribution, cultivation, and processing across medical and adult-use markets in the United States. Incorporated under British Columbia law, Jushi has built its footprint through opportunistic investments and license applications in attractive, often limited-license, jurisdictions. Its history includes early moves to secure significant retail licenses in states like Pennsylvania and Illinois, laying the groundwork for its current operational base spanning California, Illinois, Massachusetts, Nevada, Ohio, Pennsylvania, and Virginia.

The company's overarching strategy centers on building a diverse portfolio of cannabis assets, capitalizing on them through strategic deployment in day-to-day operations. This involves targeting highly populated medical markets with adult-use potential (like Pennsylvania), markets in transition (Virginia), and fast-growing adult-use markets (Illinois, Nevada, Massachusetts, Ohio, and certain California municipalities). A core component of this strategy is the ongoing "7-in-7" retail expansion initiative, announced in Q4 2024, which aims to significantly grow the company's retail presence by opening 14 stores by mid-2026. This expansion is coupled with efforts to optimize existing locations and enter new markets like New Jersey.

Within this competitive landscape, Jushi positions itself as a mid-tier player, differentiating through a focus on customer experience, a diverse product portfolio (including its own brands like Beyond Hello, Sèche, The Lab, Tasteology, and Flower Foundry), and leveraging its vertical integration. While competitors like Curaleaf (CURLF), Green Thumb Industries (GTBIF), and Trulieve Cannabis (TCNNF) often boast larger scale or deeper penetration in specific markets, Jushi aims to carve out its niche through operational efficiency improvements, targeted market presence, and strategic brand building. Jushi's market share is estimated to be in the 5-8% range across its primary markets, with a growth trajectory slightly below the industry average, highlighting the need for strategic execution to accelerate expansion and improve financial performance relative to larger rivals.

A key element of Jushi's operational strategy and competitive positioning lies in its approach to technology and efficiency. While not detailing proprietary hardware akin to a tech firm, Jushi emphasizes a data-driven retail model and continuous enhancement of its cultivation and processing technologies. The data-driven retail approach supports seamless online-in-store experiences and customer loyalty programs (like the Hello Club app), contributing to potentially faster inventory turnover and improved customer retention compared to less technologically integrated rivals. In cultivation and processing, investments in equipment and processes aim to improve yields, potency, and product quality. For instance, the company is implementing new vape hardware and filling machines from a tobacco-based vape company to drive cost savings in production. They are also focused on improving cloning procedures and reducing waste to enhance efficiency. These operational technologies, while perhaps less visible than consumer-facing tech, are critical to reducing per-unit production costs and improving margins, directly addressing competitive pressures from players like GTBIF who excel in cost leadership. The strategic intent behind R&D and new product development, such as the new genetics and the Flower Foundry brand, is to leverage improved cultivation outcomes (higher potency, better bud quality) to capture higher pricing and margins, enhancing the competitive moat against rivals.

Performance Under Pressure: Navigating Market Dynamics

Jushi's recent financial performance reflects the challenging, yet evolving, cannabis market environment. For the three months ended March 31, 2025, the company reported net revenue of $63.8 million, a decrease of 2.0% compared to $65.5 million in the prior year period. This decline was primarily driven by continued competition and pricing pressure in the retail channel across several states, notably Illinois, Massachusetts, Nevada, and Pennsylvania, despite an overall increase in retail units sold. The impact of lower average price per unit offset unit growth in these markets. These declines were partially mitigated by strong sales increases in Virginia and Ohio, the latter benefiting from the transition to adult-use and the consolidation of managed dispensaries.

Gross profit for Q1 2025 was $25.8 million, resulting in a gross profit margin of 40.4%. This represents a decrease from the 49.4% margin in Q1 2024. The margin compression was attributed to competitive pricing pressure necessitating higher retail discounting and the flow-through of higher production costs per unit from prior periods into the current quarter's cost of sales. However, the sequential improvement in gross profit margin from 38.6% in Q4 2024 to 40.4% in Q1 2025 indicates progress in addressing operational challenges at the grower-processor facilities, particularly in Massachusetts and Pennsylvania, which had experienced yield issues.

Operating expenses decreased year-over-year to $27.6 million in Q1 2025 from $28.2 million in Q1 2024. This reduction was primarily due to lower non-cash share-based compensation expense, partially offset by increased depreciation and amortization resulting from the amortization of business licenses commencing in Q2 2024. The net loss for the quarter was $17.0 million, an improvement from the $18.4 million net loss in the prior year period. Adjusted EBITDA for Q1 2025 was $9.8 million, compared to $13.3 million in Q1 2024. The sequential increase in Adjusted EBITDA from $8.0 million in Q4 2024 to $9.8 million in Q1 2025 was partly driven by payments received from the IRS related to employee retention credit (ERC) claims.

From a liquidity standpoint, Jushi's financial position saw improvement. Cash, cash equivalents, and restricted cash totaled $27.9 million as of March 31, 2025, up from $21.3 million at the start of the quarter. Net cash flows provided by operating activities increased to $7.5 million in Q1 2025, compared to $6.5 million in Q1 2024. This was primarily driven by the factoring of certain ERC claims and improved working capital. The company received $5.1 million in net cash proceeds from factoring ERC claims in February 2025 and $2.2 million in payments on retained ERC claims plus interest during Q1 2025. Net cash used in investing activities increased significantly to $4.4 million, reflecting increased payments for property, plant, and equipment ($4.0 million) and intangible assets ($0.4 million) as the company shifted towards growth-oriented CapEx. Net cash flows from financing activities turned positive, driven by $4.6 million in net proceeds from the issuance of Second Lien Notes.

The company believes its current cash position and operating cash flow are sufficient to meet working capital and maintenance capital expenditure needs for at least the next twelve months. While acknowledging the need for potential future financing beyond this period, Jushi is leveraging its improved liquidity to fund strategic growth initiatives, including retail expansion and targeted GP enhancements. The company's debt structure includes Second Lien Notes, Term Loans, acquisition-related promissory notes, and mortgage loans. Notably, the repayment of $21.5 million in principal related to promissory notes issued to Sammartino is contingent on the resolution of ongoing litigation, classified as long-term debt.

Strategic Execution and Outlook: Planting Seeds for Future Harvests

Jushi's strategic narrative is currently dominated by its aggressive retail expansion and a focused effort to optimize its vertical operations for improved margins. The "7-in-7" retail strategy is well underway, with six of the initial seven planned locations opened since November 2024, including new stores in Ohio (Mansfield, Oxford, Toledo, Warren), Pennsylvania (Linwood), and Illinois (Peoria). The seventh location in this phase, Parma, Ohio, is expected to open in late August or early September 2025. Looking ahead, the second phase includes entry into the New Jersey market with locations in Little Ferry (expected late August/early September 2025) and Mount Laurel (expected Q4 2025), alongside a seventh Ohio store in Springdale, anticipated to open at the end of September 2025. This rapid expansion aims to reach a total of 14 new stores by mid-2026, a 40% increase in retail footprint since Q3 2024, intended to boost revenue, enhance purchasing leverage, and optimize the overall business.

Operational improvements at the grower-processor level are central to the margin expansion story. Jushi has implemented a new grower-processor management team since late Q4 2024/Q1 2025 and is making targeted high-return capital investments in facilities in Pennsylvania and Virginia. These investments focus on adding canopy and dry room space to increase biomass volume and quality, particularly for the medical markets. Management expects these efforts, combined with addressing past efficiency challenges, to yield strong increases in margins in the coming quarters, with the impact of higher prior-period production costs expected to roll off in Q2 2025. Design work is also underway for larger facility expansions in PA and VA to prepare for potential adult-use markets, though construction is contingent on greater regulatory clarity and a lower cost of capital.

Product and brand development continues to be a strategic focus, with 391 new high-margin SKUs launched in Q1 2025, notably under the Sèche and The Lab brands. The successful launch of the new Flower Foundry brand in Virginia highlights the potential to leverage improved cultivation quality for premium offerings.

The outlook is heavily influenced by potential regulatory catalysts. In Pennsylvania, discussions around adult-use legalization are ongoing, with management expressing optimism, particularly as the issue is being discussed alongside the state budget. A bipartisan bill is anticipated, though the legislative process could extend into the late summer or early fall. In Virginia, the November 2025 gubernatorial election is seen as a key event, with a Democratic victory potentially paving the way for adult-use legislation, with a best-case scenario for recreational sales to pass potentially being July 2026. Federal developments, including potential rescheduling and the impact of the Farm Bill loophole, are also being monitored for their significant implications on tax burden (280E) and market dynamics.

Financially, the company's outlook includes maintenance CapEx of $3 million to $5 million for 2025, with growth CapEx anticipated between $7 million and $12 million, dependent on market conditions and regulatory progress. Jushi is also pursuing the sale of non-core assets, expecting to generate approximately $3 million in net proceeds, subject to regulatory approvals. These capital plans, supported by improved operating cash flow and recent financing activities, are designed to fund the strategic growth initiatives.

Risks and Competitive Dynamics: Navigating a Complex Landscape

Despite strategic progress and operational improvements, Jushi operates within a complex and risky environment. Intense competition and pricing pressure remain significant challenges across its markets, as evidenced by the Q1 2025 retail revenue decline in several states. This pressure is exacerbated by market-specific oversupply and the presence of larger, more financially robust MSOs like CURLF, GTBIF, and TCNNF, who can leverage greater scale and potentially lower costs (as seen with GTBIF's operational efficiency) or deeper market penetration (TCNNF's regional dominance) to maintain competitive pricing. Jushi's smaller scale relative to these giants can result in higher operating costs per unit and lower throughput, impacting margins.

Regulatory uncertainty is a pervasive risk. While potential adult-use legalization in states like PA and VA represents significant upside, the timing and specifics of such legislation are unpredictable and subject to political processes. Delays or unfavorable regulatory frameworks could impact growth timelines and investment returns. Furthermore, the ongoing federal prohibition of cannabis creates risks related to anti-money laundering laws, tax challenges (280E, although potential rescheduling offers relief), and asset forfeiture. The unresolved issues stemming from the Farm Bill loophole, enabling unregulated THC products, also pose a threat by impacting industry revenue and creating market confusion, a challenge Jushi is actively exploring litigation to address.

Litigation risks are specific concerns for Jushi, including the MJs Market, Sammartino, and Pacific Collective matters. The Sammartino matter, in particular, involves a significant disputed debt amount ($21.5 million principal) whose resolution is contingent on legal outcomes, adding financial uncertainty. Risks related to the collectibility of remaining ERC claims also exist.

Operational execution risks are inherent in the company's growth strategy, including successfully integrating acquired dispensaries (like those in Ohio), executing planned store relocations, and effectively ramping up cultivation and processing capacity to meet demand and improve margins as expected. Reliance on key inputs, suppliers, and skilled labor, as well as potential supply chain disruptions, could impact operations.

Financially, while liquidity has improved, Jushi still carries a notable debt burden. Although near-term maturities are managed, the need for potential future equity or debt financing beyond twelve months, depending on performance and market conditions, remains a risk, as there are no assurances such capital can be obtained on favorable terms.

Jushi's competitive positioning is a balance of its strengths and vulnerabilities. Its vertical integration and data-driven retail model provide advantages in controlling the supply chain, potentially achieving better retail margins and enhancing customer loyalty. The focus on specific limited-license markets allows for deeper regional presence than some broader MSOs. However, its smaller scale compared to industry leaders means higher operating costs and less purchasing power. Its financial metrics, such as gross and operating margins, while improving, still trail some competitors, and its debt-to-equity ratio is higher than some peers, impacting financial flexibility. Jushi's strategy of leveraging its operational technology to improve efficiency and product quality is crucial for closing the margin gap and competing on value and quality against rivals who may have cost or scale advantages.

Conclusion: A Growth Story Hinged on Execution and Catalysts

Jushi Holdings is at a pivotal juncture, actively pursuing a multi-pronged strategy to drive growth and improve profitability in a dynamic and competitive cannabis market. The core investment thesis rests on the successful execution of its retail expansion plan, operational enhancements at its grower-processor facilities to boost margins, and the potential upside from anticipated adult-use legalization in key states like Pennsylvania and Virginia.

Recent performance in Q1 2025, while showing a slight revenue dip due to market pressures, demonstrated sequential margin improvement and strengthened liquidity, providing a foundation for funding growth initiatives. The company's focus on leveraging its vertical integration, data-driven retail approach, and improving cultivation/processing technology are central to its competitive strategy against larger rivals. Investors should closely monitor the progress of the "7-in-7" retail rollout, the realization of expected margin improvements from GP operations, and the legislative developments in Pennsylvania and Virginia. While risks such as intense competition, regulatory uncertainty, and ongoing litigation persist, Jushi's strategic focus and operational improvements position it to potentially capitalize on significant market opportunities as the industry continues to evolve.