Tpco Hldg Corp

Good evening, everyone. Welcome to the parent company's third quarter 2022 conference call for the three-month period ending September 30, 2022. Listeners are reminded that certain matters discussed in today's conference or answers that may be given to questions asked could constitute forward-looking statements that are subject to risk and uncertainties relating to the parent company's future financial and business performance. Any such forward-looking information is based on certain assumptions and is subject to risks and uncertainties that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information, including the risk factors detailed in the parent company's continuous disclosure filing that can be accessed via the U.S. Securities and Exchange Commission website at www.sec.gov or CDAR at www.sedar.com. Forward-looking information provided in this call speaks only as of the date of this call and is based on the plan's police estimates, projections, expectations, opinions, and assumptions of management as of today's date. There can be no assurance that forward-looking information will prove to be accurate, and you should not place undue reliance on forward-looking information. The parent company undertakes no obligation to update such forward-looking information, whether as a result of new information, future events, or otherwise, except as expressly required by actual law. In addition, during the course of this call, There may also be references to certain non-GAAP financial measures including references to the adjusted EBATA which do not have any standard meaning upon the GAAP and therefore may not be comparable to similar measures presented by other companies. For information about both forward looking information and non-GAAP financial measures including the reconciliation and adjusted EBATA to the most directly comparable gap measure, please refer to the company's quarterly report on Form 10Q, including management's decision and analysis available on the SEC's website and CDAR. I would like to remind everyone that this call is being recorded today, Monday, November 14, 2022. I'll now hand the call over to Mr. Troy Dasher, Chief Executive Officer of the Parent Company. Please go ahead, Mr. Dasher.

Thank you, operator, and thanks, everyone, for joining us on today's call. During the call today, I'll provide an update on how we successfully transformed our business in 2022, establishing a strong foundation for us to accelerate our growth plans in 2023. Then I turn the call over to Chief Financial Officer Mike Faisal, who will review our Q3 2022 financial results in more detail. Following Mike, our Executive Vice President of Operations and Wholesale, Roz Lipsey, will provide an overview of the operational optimization that's taking place at the company over the past several months. Then we'll open the call up for questions. Throughout this past year, we've focused on executing our strategic initiatives to address both the significant opportunity and near-term challenges that the California market has presented. I'm really proud that our team has come together and leveraged our strengths, such as a deep pool of diverse talent, our proven brand building expertise, our consumer-centric experiences, to build a stronger business that is positioned for long-term success. The decisive action we've taken is working, and I'm proud to see our company emerging as a California leader. The initial signs of our success are clear. as our third quarter revenue grew 3.5% year over year to $19.6 million. This includes revenue from our bulk wholesale business excluded as we decided to divest that business subsequent to quarter end, with our revenue now primarily focused on our more profitable omni-channel retail operations. As a result of this shift, We also reached our goal of significant improvement in gross margin, which improved to 34% in the third quarter compared to 26% in the third quarter of 2021, and well in line with our stated objective of expanding gross margin to be in excess of 30% by the end of the fiscal year. In connection with our focus on higher margin revenue, we've been steadily increasing the proportion of company-owned brands at our own stores. In the third quarter of 2022, 32% of our sales were derived from our company-branded products, up from 29% in Q2. This improved mix will further drive our profitability, as our in-house brand products generate higher gross margin than third-party offerings. Looking at our brand-building expertise, in September, we hosted the exclusive launch of Recovery at a Coma West Hollywood location. Recovery is a premium cannabis brand co-founded by Norton Shatt, a.k.a. FaZe Brain, a YouTube star and co-founder of the popular esports and entertainment organization FaZe Clan. Recovery was developed by FaZe Brain in partnership with our premium cannabis brand, Cleva, and was created to support a lifestyle focused on wellness and creativity. Our priority as a company is to work with authentic leaders and innovators in this space This was a wonderful opportunity to work with a trailblazer at the intersection of cannabis and gaming, one which has been well received with a tremendous amount of positive feedback following the launch. During the quarter, we were also very excited to share the news of our first out-of-state expansion partnership with Curio Wellness in Maryland. We have brilliantly announced to East Coast consumers that our premier West Coast brands will be available through this partnership with Curio. And we're excited that we're just weeks away from launching, and consumers can expect to begin seeing our brands, a variety of our brands, including Monogram, Galeva, Mariah by Santana, Cruisers, as well as others, at Curio's bar and daughter dispensary soon. Maryland consumers will have a variety of form factors available to them, such as jarred fresh flour, pre-rolls, premium baits, and infused gummies. This exciting launch will also feature signature strains curated by Curio in collaboration with us. We anticipate broad distribution to dispensers across the state to follow in 2023. Looking at our retail footprint, we continue to be focused on delivering innovative and exciting consumer experiences. This includes new in-store initiatives such as immersive bud pot tables, smell-before-you-buy opportunities, curated location-specific product menus, and a new glaze bar where consumers can learn how to roll a joint, dab, understand terpenes, or take a workshop. During the quarter, we completed the acquisition of the remaining 15% equity of our Kalma West Hollywood Distillery following receipt of all necessary regulatory approvals. Completing this acquisition was a fantastic milestone for us as a company, Colma West Hollywood is in a beautiful location surrounded by cultural destinations, church attractions, which boast the best flowers for a man in West Hollywood. We also just announced that we completed the acquisition of Coastal, a retail dispensary license holder and operator founded in Santa Barbara in 2018. Coastal operates six dispensaries located in Santa Barbara, Pasadena, West Los Angeles, Stockton, Concord, and Vallejo with two additional delivery depots. We intend to shutter one of the delivery depots as a part of our delivery network optimization plan. With both of these acquisitions completed, we now own and operate 12 dispensers across California. Our broad retail footprint provides us with a holistic view of the market and allows us to efficiently identify gaps in our product portfolio on a real-time basis to meet consumer needs and desires. This in-depth research has led us to several brand and product-specific initiatives that are currently underway. This includes a new brand lineup that will feature significant value at the lowest price per gram of flour in our entire portfolio. Additionally, we'll be rolling out new infused pre-rolls, gummies, vapes, and flour varieties. Further improvements will include new looks and brand refreshes, as well as the retirement of select underperforming product lines and brand. We're incredibly excited about the innovation taking place right now. We can't wait for consumers to see what we have in store for them. And at this point, I'd like to turn the call over to Mike. We'll discuss the financial results over the quarter. Thanks, Mike.

Thank you, Troy. And good evening, everyone. As a reminder, the results I'll be going over today can be found in our financial statements in MD&A, contained in our quarterly report on Form 10-Q. All figures are in U.S. dollars. It should be noted that we are a U.S. registrant with the SEC, and as such, our financial statements are prepared on a U.S. GAAP basis. Net sales from continuing operations in Q3-22 was $19.6 million compared with $18.9 million in Q3-21. As a result of our transformation, our Q3-22 gross profit improved to 32% to 6.6 million or 34% of sales compared to only 5 million or 26% of sales in Q3 21. With continued growth in our omni-channel retail operations, we expect sustained improvement in our gross profit and gross margin. Total operating expenses for Q3 22 was 36.8 million compared to 30.9 million in Q3 21. Operating expenses for Q3 22 included general expenses of $9.7 million, $9.1 million in salary and benefits, and $2.7 million in sales and marketing, which was flat compared with the prior quarter. Non-cash expenses included $1.1 million in share-based compensation, $722,000 in allowance for bad debts, $1.1 million in depreciation, and $10.4 million in amortization. Adjusted EBITDA loss for Q3 2022 was $15.9 million compared to a loss of $18.4 million in Q2 2022 and a loss of $14.6 million in Q3 2021. We ended the quarter with unrestricted cash and cash equivalents of $107 million. The company has generated to date approximately $8 million in cash through the sales lease back of property and the settlement of outstanding litigation in 22. As for the closing and qualifying transaction, we've invested $54.6 million in acquisitions, $6.5 million in share repurchases, and $140 million in operations to integrate and scale the business. Despite our success in meeting our expense targets set at the beginning of the year, marketing conditions have continued to challenge our ability to efficiently dispose of certain non-strategic assets, and for those assets which we did sell, the proceeds received were less than originally anticipated. In addition to inflation and consumer softness has negatively impacted our ability to generate cash from operations. As a result, the the company may immaterially deviate from its objective of maintaining a minimum of $100 million in cash at December 31, 2022, after considering cash expended on opportunistic partnerships and acquisition transactions. Nonetheless, Roz will discuss shortly that we have made significant progress in reducing our structural overhead costs, optimizing our delivery depot network, and exiting non-core business lines. These initiatives are anticipated to simplify our supply chain, increase gross margins, and most importantly, allow us to invest in the development of our brands and deliver higher quality products to consumers. At this point, I'd like to turn the call over to Roz, who will discuss the profitability initiatives and cost-saving measures that we have undertaken. Roz?