Lowell Farms Inc

Greetings. Welcome to the Lowell Forms, Inc. First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And please note that this conference is being recorded. I will now turn the conference over to Bill Matoulas. Thank you. You may begin.

Good afternoon. And welcome to the conference call to discuss Lowell Farms Incorporated's financial results for the first quarter ending March 31st, 2022. Before we begin, please let me remind you that during the course of this conference call, Lowell Farms Incorporated management may make forward-looking statements. These forward-looking statements are based on current expectations that are subject to risks and uncertainties that may cause actual results to differ materially from expectations. These risks are outlined in the risk factor section of our Form 10 filed on EDGAR and our listing statement filed on CDAR. Any forward-looking statements should be considered in light of these factors. Please also note that any outlook we present is as of today and management does not undertake any obligation to revise any forward-looking statements in the future. This call includes George Allen, Chairman of the Board, Mark Ainsworth, co-founder and chief executive officer, as well as chief financial officer Brian Schur, who will go into detail about the company's financial results for the quarter later in the call. The Q&A portion of this call will be open to analyst questions to provide further insight into the company's performance, operations, and go-forward strategy. For those of you who may happen to leave our call before its conclusion, Please be advised that this conference call will be recorded and archived on our investor relations website page. And now I'll hand the call over to George. George, please go ahead.

Good afternoon. I'm grateful for your time. We will jump right into it. The quarter was a success for Lowell despite sequential revenue decline. Nearly all decline this quarter came from our LFS business, which we had indicated last quarter would be seasonal until we transition our customer base from outdoor into greenhouse. Despite the slowdown in LFS, we exited the quarter a lot more healthy than we came in. Both EBITDA and operating cash burn turned positive during the month of March, despite extremely challenging market conditions. Mark and Brian will get into details, but we continue to be mindful of our cash burn and profitability, and this was our top priority during the quarter. While we still consumed cash during the quarter, our burn declined significantly materially from $9.2 million to $2 million during the quarter. For reasons I referenced below, we are cautiously optimistic that the worst is behind us and that we have the resources we need to retain our independence without incremental financing. However, our liquidity leaves very little room for error. California is teaching us all a couple of really important lessons right now. For those paying attention, it's a cheat sheet on the future of cannabis. At the top of the list is the importance of brands as cannabis involves. Without brands, the trend towards commoditization is going to leave little room for profit as operators churn out products and sell them at marginal cost. There's a big gap between marginal cost and investor return on capital. Wohl is a premium brand with a loyal customer base that consistently demonstrates their willingness to pay a premium. This is why Zippo chose us as a partner to get into cannabis. We grew Lowell Smokes during the quarter, even as we held prices against the backdrop where the average price per flower fell 31% since last summer. This is an illustration of the potential of the brand, that we need to be doing more with the brand, a lot more. Our plans will become more clear later this summer, but we are keenly focused on bringing the new bringing a new Lowell Smokes product to a broader audience. Our new product offerings will be designed specifically to address the 62% of cannabis users who today use cannabis at least once a day. We believe that this consumer consumes 90% of the total cannabis sold in America, and there hasn't been a CPG product that is specifically suited for them. That's something we intend to address. Now, Mark will talk about our operational progress during the quarter, and Brian's going to talk about the financial progress. I want to address, most importantly, how we specifically see our plan to bridge ourselves into self-sustainability. Number one, we made operational cuts during the first quarter, for which we did not get the full benefit. The reductions impacted about two-thirds of our first quarter. Number two, we're seeing a gradual rise in the price that we are realizing for our bulk flour. And currently we are selling bulk flour at prices between 15 and 20% higher than we enjoyed during the first quarter. Number three, our farm is on track to produce approximately 10% more sellable flour this quarter than last, given the seasonal improvement in growing conditions. Additionally, We currently handicap the prospect for cannabis cultivation tax relief in the second half of this year as being more probable than not, which would be a significant tailwind. Now, longer term, our increased profitability will be driven by increased utilization of LFS, an increase in out-of-state activity, and improved CPG wallet share within California, specifically driven by our impending product launches. Now, while our new product launches appear to be speculative in nature and our expectations around share growth could be labeled as conjecture, we've been working on this launch for the better part of two years, and we are highly confident in the data that supports our expectations. Moreover, I don't think the growth case for California is dead. Sales growth in the state, which was at 40% this time last year, has since shrunk to null. But this belies a shift into the illicit markets. This shift occurred because the illicit market reacted much more quickly than the legal market did to the falling bulk prices of cannabis flower last summer. It's impossible to know the weight of this factor in terms of overall impact, but we believe it was significant. Retail flower prices have since fallen at dispensaries, and the correction hasn't been easy on the industry, but I do believe that it is the only way to get consumers back into shops. The anticipated relief from cultivation taxes and excise taxes should work even more so to drive consumers into dispensaries. Ultimately, we are in the brand-building business. We're growing our business in and outside of California, and ultimately I firmly believe that Lowell Brand has all the latent potential to stand in the pantheon among the best of consumer goods. But there's a lot of work to get from here to there, and we are operating within the leanest of margin environments inside California today. With that, I'm going to turn it over to Mark. Mark?