TILT Holdings Inc.

Good afternoon, everyone, and welcome to Tilt Holding's third quarter 2024 conference call and webcast. Today's call is being recorded for replay purposes. A replay of this 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, Tilt. Head of Investor Relations and Corporate Communications, Lynn Rickey. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us. Earlier today, we issued our third quarter 2024 earnings press release. The press release, along with our report on Form 10-Q, is available on the U.S. Securities and Exchange Commission's website at www.fcc.gov. on CDAR Plus at www.cdarplus.ca and our website at www.kiltholdings.com. Please note that during this 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. as a result of various factors which we disclose in more detail in our most recent 10-K filed by TILT with the SEC and on CDAR+. 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 law. As of Today's call, we are presenting our financial results in accordance with the United States Generally Accepted Accounting Principles, or GAP. During the call, management will also discuss certain financial measures that are not calculated in accordance with GAP. We generally refer to these as non-GAP financial measures. These measures should not be considered in isolation or as a substitute for TILT financial results prepared in accordance with GAP. 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 CDAR Plus today and can be found in the Investor Relations section of our website. Joining on today's call is our CEO, Tim Ponder, and our Interim CFO, Brad Hokes. Following the prepared remarks, we will open up the call for questions. During today's prepared remarks, we may offer metrics to provide greater insight into our business and or our 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 Ponder.

Thank you, Lynn, and good afternoon, everyone. The cannabis sector is under an extreme amount of downward pressure. In order to address market challenges and to continue to navigate the challenges within our own operations, we must focus. In order to focus, we are seeking to narrow the scope of our business. In our press release earlier today, we announced that we are exploring a range of potential actions, including divestitures, partnerships, and other strategic alternatives related to our plant touching assets. which will enable us to focus on the largest segment of our business, Jupiter Research. We believe these plant-touching assets hold true value as we have undertaken a great deal of work to reduce our cost structure, refine our product portfolio, and invest in differentiated areas like solventless production. However, our continued investment will cause additional strain on our balance sheet and limit our ability to grow our inhalation hardware business. We need to explore paths to continue to restructure our balance sheet, address our debt stack, and ultimately grow our business. We believe that focusing on Jupiter alone will give us the best opportunity to do this. Over the past year, we have undertaken an aggressive transformation process, dramatically reducing costs while making incremental investments into neglected maintenance capex in our plant touching assets, and several other changes previously discussed. That process is still underway, and at this point, addressing our balance sheet has become paramount to continuing our efforts. Exploring strategic alternatives for our plant touching assets will likely have the added benefit of further reducing our op-backs. As a reminder, in 2022, TILT executed sale leasebacks of its properties in Massachusetts and Pennsylvania. The capital raised was used to pay down senior debt at the time, but had the adverse impact of increasing monthly operational expenses by nearly half a million dollars. In the current cannabis environment, this creates an untenable cost structure given our current market position. We hope that by exploring strategic alternatives for our plant touching assets, we will be able to unlock the value of Jupiter. In addition to our operational efforts within CAC and Standard Farms, we have also worked to evolve our operation at Jupiter to regain market share and better leverage our long-standing customer relationships and product development capabilities.