TILT Holdings Inc.

Good afternoon, everyone, and welcome to Tilt Holdings' second quarter 2021 earnings conference call and webcast. This call is being recorded today for replay purposes. A replay of the audio webcast will be available in the investor section of the company's website approximately two hours after the completion of the webcast and will be archived for 30 days. I would now like to turn the conference over to your host today, Tilt's Director of Investor Relations, Taylor Allison. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us. Earlier today, we issued our second quarter 2021 earnings press release. The press release, along with our quarterly financial statements and MD&A, are available on CDAR as well as on our website at tiltholdings.com. Please note that during this afternoon's webcast, remarks made regarding future expectations, plans, and prospects for the company constitute forward-looking statements within the meaning of applicable securities laws. Actual results may differ materially from those indicated by such forward-looking statements as a result of various factors, which we disclose in more detail in the Risk Factors section of the MD&A for the three and six months ended June 30, 2021, filed with the applicable Canadian Securities Regulatory Authorities, which can be found on CDAR.com. We remind you that any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent date. While we may update such forward-looking statements in the future, we specifically disclaim any obligation to do so, except as otherwise required by applicable law. On today's call, we will refer to certain non-IFRS financial measures, such as EBITDA, adjusted EBITDA, and gross profit and margin, excluding changes in the fair value of biological assets and inventory. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Management considers these certain non-IFRS measures to be meaningful indicators of the performance of our business in addition to, but not as a substitute for our IFRS results. A reconciliation of such non-IFRS financial measures to their nearest comparable IFRS measure was included in our press release issued earlier today. On today's call, our TILT CEO, Gary Santo, our CFO, Brad Hoke, and our COO, Dana Arvidson. Following our prepared remarks, we will open up the call for questions and answers. With that, I will now turn the webcast over to Gary.

Thank you, Taylor, and good afternoon, everyone. As we reach the midpoint of our fiscal year, there's been no shortage of activity here at TILT. We entered 2021 having made a strategic decision to redefine our business-to-business approach to the cannabis industry by leveraging our plant-touching businesses to support MSOs, local retailers, and independent brands seeking to enter the markets we serve. Building off of our legacy of developing strong partnerships through Jupiter, our inhalation, accessories, and technology business, we designed a wholesale strategy that will be able to withstand the headwinds that you have heard a number of other market participants mention over the past few weeks. Many question why, if we were selling through whatever we produced, we would consider sharing some of our margin with brand partners. It is a conversation that I have had numerous times since stepping into my role, and my answer remains the same. But the best time to think about 2.0 is when 1.0 is going well. Hockey enthusiasts call it skating to where the puck is going. Football fanatics call it leading the receiver. I call it good business. Since launching our B2B strategy, have you noticed how many discussions around brands and wholesale are now occurring in the cannabis industry? We continue to believe that as the dust settles, after all of the M&A and rapid expansion this industry is undergoing, in a normalized, legalized cannabis marketplace, MSOs, retailers, and brands will need a partner who is dedicated to supporting their growth, not fighting them for relevance and shelf space. Coke does not like to buy from Pepsi. Apple does not like to buy from Microsoft. Why should cannabis be any different? While we are still in the early days of implementing our strategy, we continue to hear positive feedback on our approach. And while we left a few chips on the table in the second quarter, which Dana will comment on shortly, We continued to execute our B2B strategy with another quarter of record results, and, as you may have noticed, we've had a very active start to Q3. Tilt generated more than 30% year-over-year revenue growth during the second quarter and more than doubled its adjusted EBITDA. This was entirely organic growth, pure and simple, which is a stark contrast from many other companies in the space that have been heavily acquisitive. Our ability to drive synergies across our business segments is bearing fruit through cross-selling and deepening customer relationships. At the end of last year, approximately 20% of Tilt's revenue came from customers accessing the full spectrum of our inhalation, accessory, and cannabis offerings. By the end of the second quarter, that number has increased to over 30%, which tells us that our strategy is working. In addition to driving growth from existing relationships, such as our expanded partnership with Arrow Brands, We have signed several new high-profile partnerships in our cannabis business over the past few months, including agreements with 1906 and Old Pal. The latter is particularly relevant as it represents our business model at full throttle. Old Pal is a lifestyle brand that Tilt did not have a previous relationship with, yet we were able to cultivate that relationship to the point where not only will we launch some of their existing cannabis SKUs in Massachusetts later this week, but we have collaborated on a classic edible that will launch in the weeks to come. Even better, they've agreed to use hardware from our inhalation and accessory business for their vape products in the state. And to top it off, we have already agreed to expand the relationship and bring their products to Pennsylvania later this year. A new customer accessing the full spectrum of our offerings and positively impacting all aspects of our business. We are enabling each of these brands, which have proven success in their Western home markets, to enter highly sought-after, limited-license states at a much lower cost than they could otherwise do themselves. We remain in the early stages of driving growth through these partnerships and look forward to providing updates as we launch their various products, ranging from whole flour and oil cartridges to pills, edibles, and more. As I mentioned last quarter, we have plenty of runway for growth in Massachusetts, Pennsylvania, and Ohio. You have also heard me mention our desire to create a northeast corridor linking our existing states in order to create a nexus where our cannabis operations are all within a few hundred miles of each other. And I could not be more excited to announce another step in achieving that goal through an incredibly unique opportunity to both enter a new market, New York, and simultaneously sponsor a historic social equity partnership. I will discuss this partnership with the Shinnecock Indian Nation in more detail later in the call, as I want to take this moment to shine a light on our recent efforts in Massachusetts, which have been a long time coming. Earlier this month, we received four new provisional adult use licenses from the Cannabis Control Commission, in addition to a final medical dispensary license for our Brockton location. I cannot tell you what a pleasure it is for TILT to be able to say that after seemingly sitting in limbo since the spring of 2019. Over the past two years, the team worked diligently with the Commission to resolve an investigation that stalled our licensure, reaching an amicable resolution that will allow TILP to move forward with its plans to serve many new patients and retail consumers in the greater Boston area later this year. Equally important will be the shelf space that we can offer our customers, MSOs, and brands seeking to expand their reach. The four provisional licenses provide for cultivation, manufacturing, and adult use sales at our Taunton location, which is currently licensed for medical only. They also include the addition of adult use sales in our Brockton location, which, at the same meeting of the Commission, was granted its final license to operate as a medical dispensary. Brockton is fully built out and in the process of hiring staff, adding product to its vault and to its point-of-sale systems, in anticipation of a final inspection and approval to open its doors in the weeks to come. We have already requested final inspections for the co-location of adult use at our Taunton and Brockton dispensaries, and while there will be a few more steps in that process, we believe they will be completed later this year. Our medical dispensary in Cambridge is also fully built out. However, improvements to the exterior of the building by our landlord there have delayed our ability to schedule final inspection by the Commission. We remain hopeful that we will have that location operational in the near to medium term. Needless to say, it's been a busy few months, and the demands on our team have been tremendous given how far we have come in so short a time. While it is to be expected for a company transitioning from being a holding company to an operating company, it is also important to know when to obtain help. To that end, in the past few months, we have continued to deepen our bench with several key new hires, including David Catanzano, our new SVP and head of cannabis operations, who is a former colleague of mine at Columbia Care, and most recently spent the past year at Holistic Industries, where he was in charge of their cannabis operations across nine different markets. Joining David is our new head of cultivation, Sean Kute, who is a military veteran with more than 20 years of experience as a grower and cannabis cultivation consultant to companies throughout the U.S. Most recently, he was head of cultivation at Affinity, which was acquired by GTI earlier this year. Together with our head of processing, Sean Harrison, who helped build and run multiple cannabis companies over the past five years, they will all set the standard for our cannabis operations, ensuring that our capabilities and efficiencies are the same whether at our Massachusetts, Pennsylvania, Ohio, or now New York facilities. Overseeing all of our operations, and last but certainly not least, we added Dana Arvidsson to serve as our new Chief Operating Officer. Before handing the call off to Dana for an operations update, a few quick words about my trusted colleague and longtime friend. Dana and I last worked together eight years ago at the first Marblehead Corporation, where we helped to deliver B2B products and services to the financial services industry. Leading the capital markets and investor relations efforts, together we were responsible for product development, executing financings, and helping grow the company's equity and debt investor base. And at first marvel head, it was not possible to perform those duties without a deep understanding of operations at every level. At TILT, Dana will be instrumental in driving both operational and financial growth across our core businesses, while spearheading market expansion opportunities. We're thrilled to welcome him to the team. And with that, I'll pass the call over to Dana.