TILT Holdings Inc.

Good afternoon, everyone, and welcome to TILT Holdings' fourth quarter and full year 2021 earnings conference call and webcast. Today's call is being recorded 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 call over to your host today, TILT's head of investor relations and corporate communications, Lynn Ricci. Please go ahead.

Thank you, Sean Lee. Good afternoon, everyone, and thank you for joining us. Earlier today, we issued our fourth quarter and full year 2021 earnings press release. The press release, along with our quarterly financial statements and MD&A, will be available on CDAR as well as on our website at www.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 law. 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 12 months ended December 31st, 2021 and 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 other 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 adjusted EBITDA, working capital, and gross profit and margin, excluding changes in the fair value of biological assets and inventories. 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. 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 are TILTS CEO Gary Santo, CFO Brad Hoke, and COO Dana Arvidsson. Following our prepared remarks, we will open the call for Q&A. With that, I will now turn the call over to Gary.

Thank you, Lynn, and good afternoon, everyone. 2021 was a transformational year for Tilt as we embarked upon the first full year of the brand partner B2B strategy that we introduced in late 2020. That strategy was based upon our belief that over a 12- to 18-month period, the wholesale cannabis marketplace would ultimately shift from bulk flower and distillate sales to to more traditional consumer packaged goods. Edwin's in the wholesale market during the second half of the year accelerated this shift, testing the agility of the Tilt team to transition its operations from bulk to packaged goods. I'm proud to report that the team was up to the challenge. And while we are still in the early stages of that transition, our ability to quickly activate the brands we signed during the year was nothing short of remarkable. Whether activating Her Highness within 30 days, Old Pal within 60 days, or Aero within roughly 90 days of signing, the team adapted quickly, modifying standard operating procedures live time, and by year end, branded product sales neared 20% of total wholesale revenue despite limited initial production runs. To do this meant putting our brand partner products on equal footing with our own products in terms of allocating biomass, production cycles, and in the case of our stores in Massachusetts, shelf space. This is a key attribute of our strategy, separating tilt from other operators in the space. More importantly, we have not experienced the softness in those branded sales that we and others in the marketplace have seen in their traditional wholesale business. This was our original premise when we first launched our strategy, and while the sample size is still small, we could not be more pleased with the results. With predominantly the same assets for most of the year, the company experienced strong organic growth, posting record revenue of $202.7 million for an increase of 28% year over year, as well as record adjusted EBITDA of $22.5 million for an increase of 33% year over year. And we did all of this while only increasing our cash-based operating expenses by 3%, demonstrating the scalability of our business. To put this in perspective, Historically, our wholesale cannabis mix was made up of 20% brands and 80% bulk flower. With the progress made in 2021 and brands ramping in 2022, we are targeting a brand-to-bulk mix closer to 80% brand and 20% bulk over the longer term. And the response from our brand partners has been nothing short of humbling, with Tilt quickly becoming the partner of choice for independent brands looking to scale their businesses. Turning towards operations, while Dana will provide more details regarding the significant improvements made during the fourth quarter of 2021 into the first quarter of 2022, a few words about each of our business lines. Beginning with our inhalation and accessories division, Jupiter Research, we were excited to be part of S'mores' annual strategic planning process for the first time. As you may remember, S'more is the largest vaporization hardware manufacturer in the cannabis space through their line of premium C-cell products, of which Jupiter is the largest U.S. distributor, having close to two times the C-cell market share of its nearest competitors. This represented the latest step in a renewed commitment between Tilt and S'more to grow C-cell's already dominant position in the market through the development of next-generation technologies designed to address a vape market that is transitioning from traditional concentrates towards higher terpene extracts. At the same time, our in-house R&D team, together with Jupiter founder and chair of our board, Mark Scatterday, have a number of proprietary products in various stages of development, with the potential for some to debut in late 2022 or early 2023, pending successful QC and QA testing. The market has mistakenly labeled Jupiter as nothing more than a distributor of third-party products. And in 2022, we look to change that misconception by demonstrating our full set of capabilities, which, when coupled with our cannabis operations, make Tilt a true full-service partner to all in the cannabis space. Speaking of our cannabis operations, on the plant-touching side of our business, we doubled our canopy in Massachusetts and now hold both medical and adult-use cultivation and manufacturing licenses in the state. We also launched medical and adult use sales in our Brockton dispensary in early Q4 and added adult use to our existing Paunton dispensary by year end. Our Cambridge dispensary is awaiting final inspection in order to commence medical sales sometime this summer. As I mentioned earlier, we continue to take a unique approach to our retail operations in that we choose to showcase brand partner products as well as those of our best MSO customers, helping them extend their shelf space while solidifying our role as a supporter of their businesses and not a competitor. In Pennsylvania, we are experiencing tremendous improvements in our gardens, both in terms of available strains and potency. But our value add to our brand partners is no more evident than in the ability of our corporate development team to find ways to navigate a challenging product approval process. This core competency has allowed Tilt to launch a number of branded SKUs for Old Pal and Arrow that have taken off in 2022, resulting with our wholesale business in the state up 30% from Q4. With the acquisition of Standard Farms Ohio, we entered our third limited license market, and Standard Farms is quickly becoming a robust launch platform for brand partners such as 1906 and Timeless Refinery. who are both in the midst of initial production runs that will allow them to introduce their first products to the state through their partnership with TILT. We are excited to unlock the growing Ohio market for additional brands possessing unique products and formulations in Q2 and beyond. And of course, we cannot move on from cannabis operations without mentioning our entry into a fourth market through our historic partnership with the Shinnecock Indian Nation of New York. This first of its kind partnership establishes Tilt as a social equity leader in the indigenous community, offering the company a very affordable entry into what many experts believe will be a top two cannabis market in the United States in the years ahead. We are currently working with both New York State and the Shinnecock Nation to allow for wholesale trade outside the sovereign land and are hopeful to have the Southampton dispensary operational before year end, with the new cultivation coming online in 2023. This replicable business model allows TILP to create great value for our shareholders at the same time as providing an exceptional opportunity for economic growth for the Shinnecock Nation. As I've stated in the past, the Indigenous community has been left out of most social equity conversations in cannabis, and we are proud to be at the forefront of enabling prosperity for so many in their great community. With that, I will turn the call over to Brad to review our financial results before coming back for closing remarks. Brad?