TerrAscend Corp.

Good afternoon. My name is John, and I'll be your conference operator today. At this time, I would like to welcome everyone to TerraCents' first quarter 2025 financial results conference call. Joining us today is Jason Wild, Executive Chairman, Thea Ghanem, President and Chief Executive Officer, and Keith Stouffer, Chief Financial Officer. Our remarks today include forward-looking statements, including statements with respect to the company's outlook, including the company's expected financial results for the second quarter of 2025, and statements and assumptions relating there to the company's ongoing cost reduction efforts and productivity gains. and the company's expectations regarding its market opportunities, Midwest expansion, and M&A strategy. The expectations regarding regulatory reform and the potential benefits thereof, each forward-looking statement discussed in today's call is subject to risk and uncertainties that could cause actual results to differ materially from those projected in such statements. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. Additional information regarding these factors appears under the heading risk factor in the company's Form 10-K with the Security and Exchange Commission, or the SEC, and subsequent SEC filings, which are available at www.sec.gov on CEDAR Plus and the company's website at www.terrasend.com. The forward-looking statements in this call speak only of today's date, and the company undertakes no obligation to update or revise any of these statements. During today's call, the company 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, and our quarterly report for Form 10Q from the quarter ended March 31, 2025, which you can find on the company's investor relation website or on the SEC and CEDAR Plus websites. I would now like to introduce Mr. Jason Wild.

Please go ahead, Mr. Wild. Good evening, everyone, and thank you for joining us.

Despite a challenging industry environment, revenue performed in line with our guidance, while gross margin and EBITDA margin outperformed our expectations during the first quarter of 2025. While first quarter revenue totaled $71 million, a 4.5% decrease sequentially, as expected largely due to seasonality, gross profit margin expanded to 51.8%, a 160 basis point improvement sequentially. We continue to generate productivity gains and cost reductions in our business. Over the past year, our gross profit margin has steadily increased each quarter from 48% in Q1 of 24 to 51.8% in Q1 of 25. G&A expenses decreased by an additional $1.6 million in Q1, following a $3.6 million reduction in Q4 of 2024, reflecting ongoing G&A reduction efforts to reduce G&A by $10 million year-over-year in 2025. As a result of these efforts, the first quarter we generated adjusted EBITDA of $15.3 million. positive operating cash flow of $8 million, and positive free cash flow of $5.5 million. This marks our 11th consecutive quarter of positive operating cash flow and our 7th consecutive quarter of positive free cash flow. Key drivers of this performance have been our growth and margin expansion in the Northeast. In addition to driving the performance of our existing business, we have been focused on the aggressive pursuit of M&A's. For several quarters, we have highlighted bolt-on acquisition opportunities and possible transformational deals that we are actively pursuing. We believe that Terrasem's targeted approach has put us in a differentiated position to invest in the best geographies and assets at attractive valuations, while others are capped in many of the most attractive states and have turned their focus inward. During Q4-24, we announced the signing of a definitive agreement to enter Ohio, our sixth U.S. state, with the acquisition of Ratio Cannabis, a well-situated and profitable dispensary. We closed on Ratio this week and are fully integrating this dispensary into our existing operations. Our goal in Ohio is to assemble a leading retail footprint by acquiring high-quality stores at the right price, just as we did in Maryland. This will allow us to leverage our existing infrastructure and SG&A to drive higher profitability. In New Jersey, we have expressed our interest in expanding our retail footprint in order to extend our leadership position. Earlier this week, we announced a definitive agreement to purchase Union Chill dispensary, which will bring our total number of dispensaries in the state to four, subject to regulatory approval. Union Chill is a strong performer, generating more than $11 million in annualized revenue. Upon closing, this deal will be immediately accretive to EBITDA and cash flow. We plan to vertically integrate as soon as possible, which will further enhance margins, provide our full array of state-leading products and brands to local consumers, and enhance our leading market share position in the state. We are evaluating multiple additional opportunities in New Jersey and have a robust pipeline, which we continue to work through in a disciplined manner. As we sit today and based upon our discussions, we anticipate that by the end of 2025, we will sign multiple additional transactions in the state. On the topic of regulatory reform, we are closely monitoring the developments at both the federal and state levels. The federal regulatory environment seems to be showing some signs of positive movement, but as we've mentioned many times, we have operated and will continue to operate our business independent of reform. In Pennsylvania, we continue to see progress related to the possible passage of an adult use bill. We support the introduction of this bill as it marks the first milestone towards adult use approval. We will continue to work closely with the legislators across both aisles to refine the bill to its end state. When adult use occurs, we will be prepared to meet the increase in demand as we were in New Jersey and Maryland. Additionally, as previously mentioned, in December, oral arguments were held at the U.S. Court of Appeals for the First Circuit in the David Boies lawsuit against U.S. Attorney General Merrick Garland, which seeks equal treatment for legal state-regulated cannabis businesses. We look forward to sharing further updates as they become available. In summary, as I said before, the cannabis industry is still in the early stages of its development. While Terrasend has only been operating in the U.S. for about six years, our company has made significant progress in many facets of our business. For anyone who has been following the cannabis industry for the last few years, it's obvious that the pain of the capital markets has spared no one. However, I would like to highlight where I believe Terrasend is differentiated. Number one, we have a pathway to growth organically and through M&A due to our deep presence in our existing markets and a wide open map for further expansion. Two, we have demonstrated consistent delivery of positive free cash flow for seven consecutive quarters. Three, we have demonstrated operating efficiency by expanding gross margins by 380 basis points over the last five quarters while reducing operating expenses. Four, we refinanced the majority of our debt clearing the way through 2028. Five, we own $150 million of our own real estate and have no material sale leaseback obligations. And finally, last but not least, we have a capable management team that has been in place working together for several years now. In August of last year, we announced our first ever share repurchase program for up to $10 million worth of stock. Considering the improved performance of our existing business, strength in the balance sheet, $150 million of old real estate with no material sale leasebacks, approximately $30 million in cash, the potential for Pennsylvania to convert to adult use, and multiple attractive acquisition opportunities, we believe that our equity is significantly undervalued. In March, we repurchased our shares during the 15-day open trading window and within the daily purchase restriction limits. We will continue executing on this buyback program while balancing this with other capital allocation priorities, including growth capex investments in both Maryland and New Jersey, as well as further acquisitions. With that, I'll now turn the call over to Ziad to provide an update across our key markets. Ziad?