TerrAscend Corp.

Good afternoon. I will be your conference operator today. At this time, I would like to welcome everyone to TerraSense Second Quarter 2025 Financial Results Conference Call. I will now turn the call over to Walter Pinto, Managing Director of KCSA, Strategic Communications for Introductions. Please go ahead.

Thank you, operator, and good afternoon. Welcome to the TerraSense Second Quarter 2025 Financial Results Conference Call. Joining us for today's call is Jason Wild, Executive Chairman, Ziad Ghanem, President and Chief Executive Officer, and Alyssa Campbell, Interim 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 third quarter of 2025, and its estimates and assumptions relating thereto. The company's expectations regarding its growth prospects in new and existing markets, such as Ohio and New Jersey, its M&A strategy, anticipated timing and benefits regarding the sale of the company's assets in Michigan, and 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 appear under the heading Risk Factors in the Company's Form 10-K, filed with the Securities and Exchange Commission, and other filings that the company makes with the SEC from time to time, which are available at sec.gov, on CEDAR Plus, and on the company's website at tarasem.com. The forward-looking statements in this call speak as of today's date, and the company undertakes no obligation to update or revise any of these statements. Also during the call, the company may 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 on Form 10-Q for the quarter ended June 30, 2025, which you can find on the company's Investor Relations website or on the SEC and CEDAR Plus websites. I would now like to introduce Mr. Jason Wild. Please go ahead, Jason.

Good evening, everyone, and thank you for joining us. In the second quarter, after an extensive evaluation, we made the decision to exit the Michigan market. Michigan has been an extremely difficult market, and we determined that our resources can be better utilized in our other geographies. Exiting the Michigan market will enhance our financial profile as demonstrated in the strong financial results from continuing operations that we reported for the quarter. Our process to sell all of our Michigan assets is ongoing with plans to use the net proceeds to pay down debt. We expect our exit from Michigan to be substantially completed in the second half of 2025. Second quarter revenue from continuing operations totaled $65 million, a slight decrease year over year, while gross margins improved 150 basis points year over year to 51.1%. G&A expenses for the second quarter were $21 million and 32.3% of revenue down from $22.6 million and 33.7% of revenue in the same quarter last year. All of this contributed to generating adjusted EBITDA from continuing operations of $16 million for the second quarter and adjusted EBITDA margin of 24.6%. We generated positive cash flow from continuing operations of $7.3 million for the second quarter and positive free cash flow of $5 million. This now marks our 12th consecutive quarter of positive cash flow from continuing operations and 8th consecutive quarter of positive free cash flow. Solid performance in the Northeast markets of New Jersey, Maryland, and Pennsylvania were the key drivers of these results. In New Jersey, we maintained our market leadership position according to BBSA. In Maryland, we are on a $75 million revenue run rate with gross profit margins in the high 50s. And in PA, our retail and wholesale revenue grew sequentially as we head towards potential adult use in the state. On the M&A front, we announced a definitive agreement in early May to acquire UnionShield Dispensary in New Jersey, a well-situated dispensary with limited competition within a 10-mile radius, which will bring our total dispensaries in the state to four. UnionShield currently generates over $11 million in annualized revenue and will be immediately accretive to EBITDA and cash flow. We plan to vertically integrate UnionChill after closing, which is expected to further enhance margins, provide our full array of state-leading products and brands to local customers, and enhance our leading market share position in the state. We are evaluating additional opportunities in New Jersey and have a robust pipeline, which we continue to work through in a disciplined manner. As we said today, we anticipate that by the end of 2025, we will sign multiple additional transactions in the state. In May, we closed on the ratio cannabis acquisition, our first dispensary in Ohio, a recently converted, still nascent adult-use state. 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 in SG&A to drive higher profitability. Subsequent to the end of the quarter, we completed a $79 million non-dilutive upsizing to our senior secured syndicated term loan with focused growth. Sixty-eight million of the proceeds were used to retire existing debt across other lenders, and the remainder is designated for future growth initiatives. This financing extends the maturity of all of our senior secured debt until late 2028. It also provides us access to an additional uncommitted term loan of up to $35 million for strategic M&A. This transaction reflects focused growth confidence in Terrasend's vision and strategy, and I'd like to thank our team for their continued support. On the topic of regulatory reform, we are closely monitoring developments at both the federal and state levels. The federal regulatory environment seems to be showing some positive movement, but as we have mentioned many times, we have operated and will continue to operate our business independent of reform. In Pennsylvania, we continue to see support for the possible passage of an adult use bill. When adult use implementation does happen, we will be prepared to meet the increase in demand by bringing additional capacity online at our 150,000 square foot facility. Our Pennsylvania canopy space is larger than the canopy at all of our other facilities combined. Regarding our share repurchase program for up to $10 million. During the quarter, we had 34 trading days in our open trading window. During this period, we repurchased 535,000 shares at a weighted average price of 29 cents USD per share. We will continue executing on this buyback program while balancing this with other capital allocation priorities, including growth capex investments, as well as further M&A. And lastly, before I turn it over to Ziad, as previously announced, Keith Stauffer, our former CFO, recently left the company to pursue a career opportunity outside of the cannabis industry. Upon Keith's departure, Alyssa Campbell, our Senior Vice President, Corporate Finance and Accounting, assumed the title of Interim Chief Financial Officer, reporting to ZEAD. We have initiated a comprehensive search for a permanent CFO and will provide an update in due course. On behalf of the Board and the entire Terrasun team, I want to thank Keith for his leadership and many contributions to support Terrasun's growth over the past five years. He played a pivotal role in strengthening our financial foundation and reporting, driving strategic growth and navigating the complexities of the cannabis industry. He assembled a highly experienced team and implemented industry-leading financial and operating controls to support our future growth. We wish him continued success in his next chapter. I also want to congratulate Alyssa on her new role. Alyssa brings over 20 years of financial experience to Terrascent. She has been a key member of our team for several years and has been instrumental in shaping our financial strategy. Alyssa worked closely with Keith and was integral in building the company's financial infrastructure, including completion of a company-wide implementation of what is believed to be the industry's only fully integrated seed-to-sale ERP system. She has led many areas of financial management at the company, including accounting, reporting, tax, treasury, FP&A, and operations. Her deep knowledge of our operations, supported by a strong team, will ensure continuity as we move forward. With that, I'll now turn the call over to Ziad to provide an update across our key markets. Zi?