TerrAscend Corp.

Good evening. My name is Ina and I will be your conference operator today. At this time, I would like to welcome everyone to the TerraSense 3rd Quarter 2023 Financial Results Conference Call. Joining us for today's call is Jason Wild, Executive Chairman, Zaid Ghanem, President and Chief Executive Officer, and Kit Stauffer, Chief Financial Officer. Our remarks today include forward-looking statements, including statements with respect to the company's outlook, the company's guidance for fiscal year 2023, and estimates and assumptions relating thereto, and the company's expectations regarding its market opportunities, the benefits of its listing on the Toronto Stock Exchange, and other financial and operational matters. Each forward-looking statement discussed in today's call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appear under the heading Risk Factors in the company's Form 10-K filed with the Securities and Exchange Commission, or the SEC, and other findings that the company makes with the SEC from time to time, which are available at www.sec.gov and on the company's website at www.terrasend.com. The forward-looking statements in this call speak only as of today's date and we undertake no obligation to update or revise any of these statements. Also during the call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which you can find on our investor relations site or on the SEC website. I would now like to introduce Mr. Jason Wild. Please go ahead, Mr. Wild.

Good evening, everyone, and thank you for joining us. The third quarter of 2023 was a record quarter for Terrasund. Our results and momentum over the last several quarters continued as we posted our eighth consecutive quarter of sequential net revenue growth, growing in the third quarter at industry-leading rates of 24% sequentially and 35% year-over-year. We exceeded our forecast across virtually all of our financial metrics and KPIs. Importantly, gross margins, which had already eclipsed 50% in Q2, increased sequentially to 53.6% in Q3. Margin improvement and management of operating expenses also led to an 89% sequential increase in adjusted EBITDA from continuing operations to $24.2 million, representing a 27% adjusted EBITDA margin. All of this resulted in our fifth consecutive quarter of positive cash flow from continuing operations and positive free cash flow of $7.7 million for the quarter. These results give us confidence and visibility into the remainder of the year. Therefore, we are raising our guidance for net revenue and adjusted EBITDA from continuing operations for 2023 to $320 million and $73 million, respectively. representing year-over-year growth rates of 29% for net revenue and 87% for adjusted EBITDA. The full year 2023 increase in guidance implies 2023 fourth quarter net revenue of 89 million and adjusted EBITDA from continuing operations of 24 million. We expect our Q4 gross margins to exceed 50% once again, Operating expenses as a percentage of revenue is expected to be below 30%, and free cash flow is expected to be positive. The additional scale provided by our recent Maryland acquisitions has further strengthened our financial results and positioned the company to be sustainably free cash flow positive. With this increased scale, we have an even stronger conviction and urgency to further capitalize on our differentiated wide open map. To that end, we are in multiple discussions to expand our footprint from deep not wide to deep and wide. Due to the challenging macroeconomic environment and license limits in many attractive states, asset prices have become extremely attractive. and we are evaluating multiple compelling opportunities. It is important to add that we will be disciplined in evaluating these deals as we look to go deep and wide on our terms. As evidenced by our Q3 results and updated guidance, we are positioned for success with or without regulatory or legal reform. The absence of reform will not keep us from executing on our plan to be a consistent growth and cash-generating business. In fact, we have the highest 2023 year-over-year revenue growth rate in our industry and expect that trend to continue. The capital markets have not been kind to the cannabis industry over the past few years. However, within this difficult environment, we have taken our destiny into our own hands by uplisting to the Toronto Stock Exchange and materially paying down our debt and reducing our interest expense over the past year. Our TSX listing has resulted in increased trading volume, narrowed spreads, improved custody, and increased interest from institutional investors across the world. While our success is certainly not dependent upon regulatory reform, we would benefit immensely from it. However, rest assured, we are taking action to ensure progress is effectuated not just through the legislative and executive branches, but also through the judicial branch. This industry and its employees deserve to be treated equally on a level playing field with every other business, and we are committed to help deliver this well-deserved change. Any progress would supercharge the strong business that we have built, and we believe that we are closer to reform than ever. In fact, we are planning our growth strategy for a possible Schedule III cannabis world. In closing, I'm so proud of our team, their relentless focus on customers and patients, and their desire to be the best. Now, I'll turn the call over to Ziad to provide an update across our key markets. Ziad?

Thank you, Jason, and hello, everyone. Jason, I share your pride in what our team has accomplished thus far in 2023 and our upgraded outlook as we head into 2024. Our year-to-date financial results in 2023, and particularly in Q3, are a result of multiple factors, including our operational excellence, our attractive lineup of states, and our wide open map. As Jason mentioned, we performed extremely well this quarter across virtually all measures. Let me drill down deeper as to how we achieved these results within each of our key markets. Starting with New Jersey, this state continues to be our largest and most profitable market. According to BDSA, in August, we moved from a number three to a number two market share position. In September, we made further progress, achieving an 18.6% market share only two-tenths of a percent from the number one slot. Based on our team's obsession with delivering the highest quality products to our retail and wholesale customers, the continued strong velocity of our recently launched Juana and Legend brands, as well as multiple new product launches in the coming months, we are confident that we will attain the number one market share position in the near term. On the supply side, our cultivation yields have increased in the state by roughly 50% since January, enabling us to materially grow our wholesale business, which nearly doubled quarter over quarter from an already healthy position. We also now have the opportunity to add additional retail doors given the recent signing by the governor of a bill that will allow existing operators to acquire a stake in up to seven diversely owned dispensaries. This is now a top M&A priority, just as getting to our four dispensary limits in Maryland was in Q2. Speaking of Maryland, this was our first full quarter of adult use sales, and we are thrilled with the results so far. This market is currently estimated to be on an annual run rate of $1 billion and continues to grow. We are leveraging the same strategy in Maryland that we have successfully implemented in New Jersey. With four retail locations, including two of the top performing stores in the state, we believe that we have one of the top retail market share positions in the state. We expect to drive further sales growth once our relocated Parkville dispensary is open in Q1. This new larger 3,900 square foot dispensary will be conveniently located near the White Marsh Mall, a high traffic retail center. Our Maryland wholesale business more than doubled from Q2 to Q3 driven by strong demand for our extensive portfolio of brands and new product introduction, as well as our increased penetration of dispensaries across the state. On the supply side, we are thoughtfully expanding cultivation to satisfy market demand with additional capacity coming online in the spring. With attractive margin and market structure similar to New Jersey, Maryland is generating significant cash flow for the company, and we expect additional improvement from further verticalization in our own retail stores and continued strong growth in wholesale sales going forward. Turning to Pennsylvania, this will be the next market in our portfolio to turn adult use. With a population of 13 million people, compared to 9 million in New Jersey and 5 million in Maryland, PA is already a $1.2 billion medical market. Once PA turns adult use, we expect it to become our number one state. Until then, we are proud to have taken the steps needed to optimize the operation. During Q3, our entire Pennsylvania business returned to growth. Same-store sales grew at our six locations by 6% sequentially and 8% year-over-year, while our wholesale business grew 20% sequentially and 10% year-over-year. Gross margin also improved sequentially, despite operating below capacity driven by sales growth lowered costs, and optimized utilization. In Michigan, our focus has been on gross margin expansion and achieving EBITDA profitability. We have an incredible opportunity in Michigan. With over $3 billion in sales, it is the second largest cannabis state, and it also has the highest per capita consumption in the country. In a historically challenged market from a pricing perspective, we have already improved our gross margins by 1,800 basis points from when we acquired the business, eclipsing 40% in September. These dramatic improvements were driven by reduced discounting, maintaining our premium pricing, increased verticality, a reduction of cultivation and manufacturing costs, and fully operationalizing our state-of-the-art lab, resulting in expanding our product portfolio. Today, we have 19 retail locations, soon to be 20, with the planned opening of our second location in Detroit early in 2024. Now that we have built a strong foundation we are evaluating multiple opportunities to expand our retail footprint to gain further scale and leadership in this unlimited licensed state. In closing, I am thrilled with the progress we have made across all of our geographies, which led to the record performance in the quarter, and I am more excited than ever about how we have positioned ourselves for the future. I would now like to turn the call over to Keith to provide a financial update.