TILT Holdings Inc.

Good afternoon, everyone, and welcome to TILT Holdings' fourth quarter and full year 2023 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 over to your host today, TILT's head of investor relations and corporate communications, Lynn Ritchie. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us. Earlier today, we issued our fourth quarter and full year 2023 earnings press release. The press release is available on the U.S. Securities and Exchange Commission's website at www.sec.gov, on CDAR Plus at www.cdarplus.ca, and 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. Actual results may differ materially from those indicated by such forward-looking statements. We remind you that any forward-looking statements represent our views as of today and should not be relied upon as representing our view 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 law. As of today's call, we are presenting our financial results in accordance with United States generally accepted accounting principles or GAAP. During the call, management will also discuss certain financial measures that are not calculated in accordance with GAAP. We generally refer to these as non-GAAP financial measures. These measures should not be considered in isolation or as a substitute for TILTS financial results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to their nearest equivalent GAAP measure is available in our earnings press release that is an exhibit to our current report on Form 8K that we filed with the SEC and CEDAW Plus today and can be found in the investor relations section of our website. Joining on today's call are CEO Tim Condor, and Interim CFO Brad Hoke. Following prepared remarks, we will open our call for questions. During today's prepared remarks, we may offer metrics to provide greater insight into our business and or financial results. Please be advised that we may or may not continue to provide these additional metrics in the future. With that, I will now turn the call over to our CEO, Tim Condor.

Thank you, Lynn, and good afternoon, everyone. 20.3 was a rebuilding year for TILT, especially Q4. But despite the challenges that come from rebuilding, we made significant headway to right-size our business, eliminating non-core activities and investments, and building systems to prepare for future growth. It has been less than one year since my return to TILT, and in that time, we have made meaningful progress. However, our work is far from done. In addition to refining our operations, we have begun to restructure our debt to strengthen our balance sheet. Certain areas of our business also have room for immediate growth. We must attack those opportunities with precision and execute at the highest level to achieve the goals we have set for ourselves. Our updated strategy has tilled better position to succeed within the current realities of the cannabis industry. It is incumbent upon us to prove that we can execute against that strategy. With a more focused and optimized operation, we can now shift our attention from cost savings initiatives to revenue growth in 2024 and beyond. I'd like to provide more detail on these key accomplishments from 2023 and then have Brad review fourth quarter and full year financial results. First, on operational improvements. We made significant progress on our goal of improving operations and becoming more efficient in 2023. We are positioned differently than other MSOs, and we have worked to refocus our business around our core inhalation competencies, brands, and products. We right-sized our corporate and plant-touching business units, which has led to $8 million of annualized savings. Going forward, our fixed cost base will remain relatively stable. We meaningfully reduced inventory down $20 million year-over-year across our business units as we were running extremely bloated at the beginning of last year, carrying up to five months of inventory at certain points. We are now close to our target of approximately two months of inventory across our business units. Turning to our cannabis portfolio, in Q2, we initiated a plan to refine our brand partnership strategy, focusing on brands that better align with our broader inhalation platform. Since that time, we have optimized our portfolio of brand partners and now have a more concentrated and focused group that we expect to contribute material to TILT's growth in 2024. I'd like to now provide some highlights and updates on our brand partners, starting with Old Pal, which continues to be a bright spot. In Massachusetts, Old Pal has moved from the 25th best-selling flower brand to number seven since the start of 2023. There have been months where Old Pal has performed well enough to earn a top five position. Our in-house brand, Standard Farms, was named one of the best selling brands in Massachusetts and was recognized as the fastest growing brand in 2023 by Headset, a leading cannabis data and insights platform. We are proud of Standard Farms getting the recognition we believe it deserves in the market, and we will continue to grow our brand partner products and in-house offerings with the same level of care and based on market data and consumer demand. As we prepare for adult use in Ohio and anticipate movement in the future on adult use in Pennsylvania, we have begun to both shore up our selection and prepare with our existing partners for rapid market growth. In November, we announced a deal with Edie Parker Flower, a vape and flower brand that has crossed over from fashion into cannabis and is experiencing tremendous growth across its existing markets and expanding into new markets. We anticipate launching their products in Pennsylvania in late spring. Level, the leading press tablet brand on the West Coast, has begun its expansion east, and I am personally excited about supporting their growth in Pennsylvania on Tilt's platform, as they were one of the first brands that I worked with in California. The founders are dedicated cannabis trailblazers focused on making the best possible products for their consumers and patients. We will launch Level in Pennsylvania in April with one of their press tablet lines and expect to expand the product line upon approval from the Department of Public Health. Level will be a direct replacement for 1906, who contributed a good amount of revenue for us in Pennsylvania, but little to no profit. In Ohio, we are working closely with our brand partner Timeless in anticipation of adult use sales. We have seen them execute at the highest level in other state transitions and are preparing to support similar growth in that market. Timeless was one of Jupiter's first customers, and it is rewarding to continue supporting their journey across the TILT platform. We have also been able to leverage our plant touching assets to partner with C-Cell to bring groundbreaking new concentrate closed loop system, the Oxo Roamer, to the market in Massachusetts. This project is in its infancy, but it is showing early signs of success. We are pleased to support innovation in several ways across our platform, especially with an important partner like C-Cell. In addition to these brands, and the other great brands that round out our portfolio, we are continuing to identify new brand partners that fill gaps in our catalog or capture an opportunity in the markets where we operate. And we continue to be opportunistic related to supporting brand expansion with partners utilizing Jupyter hardware.