Greetings, and welcome to the TILT Holdings First Quarter Conference Call. At this time, all participants are in a listen-only mode and this conference is being recorded. Following the initial formal remarks, we will conduct a question-and-answer session. Webcast participants can submit a question directly through the webcast. Further instructions will be provided as the Q&A begins. Hosting today’s conference will be Joe Milton, TILT’s Senior Vice President of Business Development. And now, I will turn the conference call over to Mr. Milton. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Thank you for joining TILT Holdings first quarter 2020 conference call. On the call with me today with prepared remarks are Mark Scatterday, Chief Executive Officer, Tim Conder, President and Chief Operating Officer; and Brad Hoch, Interim Chief Financial Officer. And we will discuss results for the first quarter. Our first quarter earnings release was issued after the market closed today and a copy of that press release can be found on the Investor Relations section and on the TILT’s website as well as on SEDAR. I would like to remind you that during this call, management’s prepared remarks may contain certain forward-looking statements, which are subject to risks and uncertainties. And management may make additional forward-looking statements during the Q&A. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. We refer you to the forward-looking information disclaimer and all risk factors contained in the first quarter press release and in filings with the Canadian Securities Administrators for a more detailed discussion of the factors that could cause actual results to differ materially from those projections and any forward-looking statements. The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances except as may be required under applicable securities laws. Finally, please note, on the call today, management will refer to non-IFRS financial measures such as EBITDA and adjusted EBITDA, in which TILT Holdings excludes certain expenses from its IFRS financial results. Please refer to TILT Holdings earnings release and Q1 filings for a full reconciliation of non-IFRS performance measures to the most comparable IFRS performance measures. At this time, it is my pleasure to introduce TILT Holdings Chief Executive Officer, Mark Scatterday.

Thank you, Joel. Many of you joined us two weeks ago on our fourth quarter earnings call. I'm happy to welcome you back today, as we've reconvened to discuss first quarter 2020. With me today is our President and Chief Operating Officer, Tim Conder and our new Interim Chief Financial Officer, Brad Hoch. Brad enthusiastically supported and expedited our preparation to release first quarter earnings and we feel grateful to have him on our team. We are super excited to report strong financial performance in the first quarter of 2020. First quarter revenue was $42.4 million, up 27% from fourth quarter 2019. The business earned $1.7 million in adjusted EBITDA and $4.2 million in cash flow from operations during first quarter. Underpinning these results was record quarterly revenue at TILT's largest business, Jupiter Research, which generated $32.3 million in revenue during the first quarter, including a best ever month in January. This performance was up 35% sequentially, and was driven by a robust inventory position built in the fourth quarter to prepare for the seasonal uptick in vape demand. This is typical of first quarter's relating to the Chinese New Year supply chain disruption. But we could not have foreseen was the effect COVID-19 would have on the supply chain, which caused some of Jupiter's competitors to become customers during this time as the market wrestled with stock outs. Jupiter was well positioned with inventory to help address this confluence of strong seasonal demand and COVID driven supply shocks, resulting in substantial operating profits and revenue 13% above prior year first quarter 2019. Jupiter's first quarter results were complemented by solid performance at TILT's other business units. Our plant-touching business at Commonwealth Alternative Care in Massachusetts and Standard Farms in Pennsylvania generated $8.1 million in revenue in the quarter, up 5% sequentially and continue to enjoy accretive operating margins. COVID-19’s impact was felt in the latter half of March at Commonwealth Alternative Care, when the state temporarily closed recreational stores. Blackbird was able to successfully adapt to the rapidly changing regulatory and operational conditions in the California and Nevada market to provide mission critical distribution and home delivery solutions for our clients. The strong organic operating results reinforce our conviction in TILT's balanced portfolio of businesses, which offer multiple revenue streams and trajectories for increased cash flow generation and shareholder value creation. And that's position us as an industry leading provider of inhalation technology solutions, Jupiter researchers highly geared operating model provides a foundation of consistent profitability and a wealth of quality client relationships that can be leveraged across other TILT businesses. Blackbird presents powerful upside growth potential as its uniquely comprehensive software and logistics platform provides enterprise solutions to some of the cannabis industries most challenging of pain points. And our plant touching business at CAC and Standard Farms continue to contribute significant cash flow and provide a window into the market for testing and improving Jupiter and Blackbird products and services. I will now turn the call over to Tim and Brad to break down quarterly performance of our businesses in greater detail.

Good afternoon, everyone. As Mark noted in his opening remarks, TILT enjoyed strong sequential gains in Q1. During that quarter Jupiter rebounded from muted Q4 activity levels as marketplace concerns about illegal vape market, the illegal black market vapes receded. Vaporisation remains the second largest overall product category in the cannabis marketplace. Also in Q1, our vertically integrated plant touching CAC operation in Massachusetts and cultivation and production unit Standard Farms in Pennsylvania were deemed essential businesses, allowing them to remain operational, while COVID-19 stay at home orders were in effect. In Nevada where recreational cannabis sales were restricted to delivery only on March 20th, our Blackbird retail delivery business rapidly scaled to provide its clients with an effective comprehensive solution. With all of our operating units running at a high cadence during the quarter, TILT's gross margin increased from 20% to 27.7%. The firm also increased operational cash flow during the quarter with continued tight management of cash operating costs, which decreased to $11 million from $13 million in Q4. These savings were driven in part by cost structure realignment at Blackbird taken in Q4 and continuing through Q2 to respond to a changing market opportunities and accelerate breakeven timeline. As a result of these operational efforts across our portfolio businesses, balance sheet cash increased to $8.4 million at quarter end. We continue to focus on increasing cash flow, and de-risking our operating model, especially important in a period when the capital markets are difficult to access and the macro economic environment continues to present multiple unexpected headwinds. Following Mark’s comments, introducing Brad Hoch, it feels appropriate to let Brad lead the discussion on Jupiter, after the great job he did leading the finance function in that business unit prior to his promotion.

Thanks, Tim, and thank you to the Board for this tremendous opportunity. I am thankful to be part of such a talented management team. It's an exciting time at Tilt, as all of our businesses are finding footing in the time of great growth and opportunity in the cannabis industry. Mark and Tim hit most of the highlights on Jupiter. Its Q1 record $32.3 million performance was up 35% quarter-on-quarter and 13% year-over-year, continue to demonstrate the earnings power of Jupiter's lean centralized operating footprint, which has proven to be durable and accretive to overall Tilt results on an operating basis through a variety of market conditions. Q1 offered a tactical pricing opportunity for Jupiter in monetizing a strong inventory position during a seasonally high demand period, which proved beneficial to gross margins. Also during Q1, Jupiter brought to market the proprietary infinity product platform and Liquid Que POD. We believe these products offer long tailed opportunity for gross margin expansion and reflect Jupiter's focus on providing safe, reliable and unique inhalation technology solutions to help customers succeed in the race to build winning cannabis brands. After initial rush of pantry stocking in mid-March, we began to see our customers take a more conservative stance in reaction to the COVID driven changes in the macro economic climate. This shifting customer inventory positioning, included customized orders, which represented the majority of Jupiter revenue during the quarter. As mentioned on our Q4 call, we see customized revenue, as an indicator of the quality of our customer base as demand for customized products is typically driven by larger, better capitalized clients. As was the case throughout 2019, we continue to experience no material E&O charges or challenges with cancelled customer purchase orders across all the geographies where we operate. At this point, I'll hand it back to Tim to discuss Blackbird and our plant-touching businesses CAC and Standard Farms.

Thanks Brad. On our Q4 call a few weeks back, I provided a full review of the Blackbird business. So I will provide two updates here. First, steps we've taken to optimally align Blackbird's capabilities with changing market conditions related to the onset of COVID-19 in late Q1. And second, a summary of the rollout of our re-release Blackbird go marketplace on the heels of our software integration completion last year. COVID-19 necessitated rapid realignment of our My Blackbird B2B logistics platform for brands and retailers in Nevada and California. When Nevada restricted adult use to delivery, Blackbird achieved best-in-class increases in basket size and volume for clients who outsourced retail delivery with us. Our go forward operating leverage has increased with the adoption of scheduled routing and other efficiencies, enabling our dispensary partners to reposition as micro fulfilment centers as well as retailers. On the wholesale logistics side, we took a cautious approach to resizing our operations to fit the available opportunity in our core expansion market in California. There too Blackbird created savings with scheduled deliveries. We also became more selective with our client base, more conservative with commercial terms, and more efficient with working capital. We revamped pricing for our logistic services to a more dynamic model, driven by data that we collect on each delivery through our proprietary distribution and delivery software. In Q1, we experienced material uplift in the combined impact of revised pricing, scheduled routing, and other operational rationalization. These initiatives coupled with the previously announced $3.5 million Blackbird cost base realignment, have resulted in material gross margin gains and improve unit economics for the business. These efficiencies are major drivers behind TILT's $1.7 million sequential cash operating expense reduction that Brad will review later during the call. We also made headway in Q1 with our Blackbird solutions B2C platform connecting brands and retailers to end consumers. The new version of BlackbirdGo.com released on February 29th, featuring new advertising functionality, has been well-received by the market with some retailers and brands seeing click-through rates over 20%. We are validating the assumption that Blackbird will be able to drive revenue for brands and retailers through our marketplace, and create a new channel of revenue for our partners. This is an important part of Blackbird's omni-channel approach to its goal of supporting brands with supply chain business solutions. Blackbird continues to hold strong upside as we work towards near-term breakeven and the unleashing of its scale potential. With that, let's turn to performance of our plant-touching cannabis businesses. Revenue grew 5% sequentially from Q4 to Q1 in our plant-touching business segment. Commonwealth Alternative Care in Massachusetts and Standard Farms in Pennsylvania each experienced quarter-over-quarter topline growth as well as material gross margin expansion, driven by increased cultivation throughput and focus on higher yielding strain. These gains in sales and productivity were entirely organic without the activation of any additional retail space for the grant of any new licenses. The temporary ban on adult use between March 24th and May 25th in Massachusetts required CAC to make a rapid pivot to curbside dispensary sales and other COVID-19 enhanced safety protocols. While wholesale transactions with adult use manufacturers and retailers represented the majority of CAC revenue in Q1, our medical dispensary in Taunton has performed very well with monthly dispensary revenue doubling during the ban period. Throughout this period, CAC also continued to build wholesale inventory in anticipation of the end of the adult used ban. Consistent with our recent Q4 earnings update on CAC, we continue to anticipate second half activation of the additional 50,000 square feet of Taunton cultivation and production space. We also continued to work with regulators to secure additional retail licensing for Taunton, plus our two locations in Brockton and Cambridge. These extensions of our CAC business are fully funded. During Q1, Standard Farms enjoyed strong increases in sequential top line as well as gross margin economics driven by greater output from its existing cultivation and production footprint in White Haven, Pennsylvania. This upward trajectory reflects ongoing optimization of greenhouse space activated in late Q2 of 2019. TILT continually evaluates available strategic options with respect to these plant-touching businesses in terms of the relative merits of retaining them versus potentially monetizing their value through divestiture. We are fortunate to have well-established businesses with great cash flow dynamics in rapidly growing limited licence state. Beyond these attracted economics, CAC and Standard Farms play a valuable role, serving as a testbed for products and services from elsewhere in our portfolio of businesses. This operator mindset yields unique insights and synergies with benefit, which benefit the product development pipeline at our Jupiter and Blackbird platforms. Most importantly, it affords us a deep firsthand understanding of the challenges faced by cannabis operators. Also on the synergy front, we continue to make progress, leveraging client relationships across our businesses. As Jupiter saw a 54% growth in revenue quarter-over-quarter generated from customers that are also on the Blackbird platform. We expect that number to continue to grow as we look to efficiently deliver our business solutions on an enterprise-wide basis. And with that, I'll turn it back over to Brad.

Thanks, Tim. There are a few Q1 financial highlights I'd like to drill into a bit more, before we take questions. Before adjusting for changes in fair value of biological assets and inventory, the company's gross margin increased from 20% in Q4 2019 to 27.7% in Q1. Primary drivers and gross margin expansion were Jupiter's active role in addressing marketplace, supply and demand imbalances, as well as greater efficiencies and volume growth in our cannabis business, particularly at Standard Farms. We continued to drive down cost during the first quarter to maximize operational efficiency, excluding non-cash items such as stock compensation, depreciation, and amortization, operating expenses decreased $6.7 million or 37% year-over-year. On a quarter-over-quarter basis, this decrease was 13%, or $1.7 million. Of that $1.7 million total sequential decline, $1.3 million was from a 21% quarter-over-quarter decrease in compensation and benefits expense, partially driven by headcount decreases related to realignment of the Blackbird business. Also in Q1, our ongoing focus on balance sheet management yielded a material $6.4 million pay down above outstanding payables. The strong revenue performance, gross margin expansion and greater operational efficiency combined to drive TILT’s $4.2 million in cash flow from operations during the quarter.

Thanks, Brad and Tim. While no one could have predicted the volatile first quarter of 2020, our performance under these conditions illustrates how TILT creates and provide solutions for our customers, regardless of the environment. It is in these moments when TILT nimble, lean and balanced portfolio of businesses, truly shine through. I remain confident in TILT's ability to continually adapt to meet our customers' mission critical needs, while building scale and shareholder value in our gold standard, market leading businesses. Thank you.

Great. Thanks, Mark. We'll now be happy to answer your questions about TILT and our first quarter results. First, the operator will open the line for any equity analyst questions, before we turn to the questions that we've been receiving from shareholders via our open web questions submission system. Operator, are there any questions from our equity analysts.

Yes, we do have questions on the telephone. Our first question comes from Aaron Grey with Alliance Global Partners. Please state your question.

Hi, thanks for the question. And congrats on the quarter, really nice job on improving top and bottom line metrics sequentially. So my first question is around Jupiter, and I see that improvement sequentially. One thing you guys did mention was in terms of there was some selling that went to some competitors during the quarter. So could you help to maybe quantify, how much of that was included in revenue during the quarter? And then, just also want to dig a little bit deeper in terms of some commentary you made in terms of -- it seems like the purchasing orders that you've seen so far in 2Q might have been more conservative. So just if you'd give us some more color in terms of how best to think about that were they stocked up on inventory heading into 2Q and then maybe more slow on replenishing to be expected in the quarter ended June, so just color commentary on that would be helpful. Thanks.

Yes. Yes, so I appreciate that. I'm trying to understand the question, let me handle the first part. I don't have the number specifically, when we talk about our competitors becoming our customers. However, it was quite significant. Our competitors did rely on utilizing Jupiter inventory to satisfy their customers' needs, of which we had pretty deep inventory positions that we can manage, and be able to provide that inventory to the customers. Do you mind, if you -- Aaron can you restate the second part of that question.

Yeah. No problem at all. I think, Brad had mentioned how some of your customers had been a little bit more concerned, I think, is how he worded it, in terms of what we're seeing more to date in terms of the purchasing habits. I think he was referring to Jupiter and potentially sales you're making to MSOs or other manufacturers, just want to see how purchasing trends might have changed as we got deeper into the impact of COVID, after the first quarter ended?

Sure. Thanks, Aaron. Yes, and that really exactly right, it goes more towards Q2 and forward looking. We did see some -- just the uncertainty in the economic market today, I think, there's -- from the buyers out there, we've seen some hesitancy to really fill their normal inventory needs. We're seeing that subside now with the stay-at-home orders, the unemployment rate that where it was I think there was some uncertainty in the marketplace that is starting to subside now.

Okay. Thanks. That's helpful. And then just turning over to the plant-touching assets specifically on Massachusetts, great to see that that both Mass and PA saw sequential uptick in the quarter, but just as we look toward the second quarter again more of the impact from COVID is going to be felt specifically on Massachusetts. I know you mentioned medical sales and dispensary were roughly doubling, but as we look at the wholesale business and the impact that was felt by COVID and then what we're seeing the uptick since some of those quarantine measures were lifted, it looks like when I look at the state data for retail throughput, it's rebounded quite nicely today. So just want to know how much of that is to kind of read-through on the wholesale side, whether or not your customers on the wholesale side were kind of already [plenished] [ph] on inventory and didn't really need to buy more on wholesale market or kind of what trends you're seeing since some of those quarantine measures with Click & Collect and curbside pickup have been eased?

Yes. I can take that one. Thanks Aaron. We appreciate the question. I mean, I guess I would say that the state data is reflective of our own sort of internal dynamics, which was people were sort of holding their inventory positions especially adult use retailers in the state, while the ban was implemented. But with the reopening of the state, we saw that ease quickly, right? And so, there is a drop in revenue for Q2 from a wholesale perspective, but an increase like we mentioned in retail, you know, up that essentially doubling during the period and sort of continuing strong with the reopening of the state. But like we also mentioned on the call, we continue to build our reserve of product, so that we would be ready to facilitate the demand once the state reopened. And that's what we're seeing happen right now.

Okay. Great. Thanks. That's helpful. And then last one for me is just going to be on the Blackbird business. So you guys mentioned kind of uptick you've seen, in delivery also on the wholesale side mid-COVID, just want to know how best to kind of quantify that? Like how big on an absolute dollar basis is that relative to your technology and distribution revenue? So when we see like a notable uptick there quarterly, how much of a magnitude should we think that impacts the top line? And then also any potential margin implications for the delivery business relative to the rest of the portfolio. Thanks.

Yes. Yes. No, absolutely, thanks again Aaron. So during the onset of COVID in the restrictions in the state of Nevada to relegate cannabis purchases to delivery only, we reported in a press release at that time that we saw an uptick of 600% which was real for us at the time. And while, obviously, we've seen that number decrease with the reopening of dispensaries in the state of Nevada, we have not seen it fall all the way back to pre-COVID levels. So not only are we seeing continued increase in top line revenue for that line of business, retail delivery, but also as we indicated in -- earlier in the call, gross margins gains because of how we sort of restructured the delivery and modeled itself. So I would say, those gross margin gains basically took the gross margin from negative into the positive range and top line revenue increased commensurate with the volume increase that's represented in our earlier press release, at least temporarily during the ban. Does that answer that for you, Aaron?

Yeah. Absolutely, super helpful. And I'll jump back in the queue.

Awesome. Thank you.

Thank you. Your next question comes from Bobby Burleson with Canaccord. Please state your question.

Hey guys. Just curious, I appreciate the discipline on spending and the cash flow generation, curious though in terms of investment in the Blackbird business, what, kind of, opportunity you guys see in enabling e-commerce for brands and helping them go direct-to-consumer without dispensary? And, if California is a good market for that, if there are other markets, and is there a lot of investment involved on your end if you're going to engage more aggressively there?

Hey, Bobby, thanks for the question. I think it's a great one. I would say California is a perfect market for direct-to-consumer operations, because of the license class structure, there is a non-storefront retail delivery license, which effectively enables brands to go direct-to-consumer. So I would target California as the perfect expansion state for a direct-to-consumer investment. We are well-situated to be able to capitalize on that direction, which we think the cannabis market overall will take over time. Brands are always looking for new ways to reach consumers directly and through multiple channels. And that's something that, we consider -- we continue to watch closely and be very interested in, we say that our platform is to provide business solutions for brands and retailers, brands obviously being an important part of that. The facilities that we currently have in California, would be able to not only be leveraged as distribution centers, but also house non-storefront retail delivery licenses, so the CapEx expenditure for us to be able to offer that line of business is not large. Hopefully, that answers your question, Bobby?

Yeah. That is great. And then another one for me would be, you guys have a lot of access to data in terms of consumption patterns with your dispensary customers on the POS side or the customer engagement side. Wondering what you're seeing there in terms of consumption mix, is there been any shift away at all from vape, given, COVID and the respiratory concerns there. We do hear edibles companies’ talking about some benefit towards their product format, wondering if you're seeing anything there that's meaningful, as it relates to Jupiter?

Yeah. I mean, I would say, we've seen a significant return to vape, post-vape crisis has been the most material thing that we've -- the most material items that we've gathered from our data, product mix, based on state continues to ebb and flow, right, and in certain states. Yeah, edibles are gaining some ground, but not from vape, at least from the -- what our data shows, but more from other product categories specifically flower. So I think the overall sentiment is consumers continue to want variety, new consumers want to try things and edibles are a low barrier to entry even though they might be pretty potent for some.

Sure. And then, just one last one for me, looking up to Canada cannabis 2.0, what's the opportunity for Jupiter there? Are there any signs that nice market opportunity; things are fairly dynamic I think right now in the near-term in terms of how that's rolling out?

Bobby, I can take one. This is Brad. Yes, we're…

Okay.

…currently doing business. We're currently doing business with quite a few of the big MSOs there with -- we're also talking to a few that are not current clients either, right now. So, there's we're very, very excited about what Canada 2.0 is going to bring, at least on the Jupiter side.

Great. And is that -- I mean obviously, you've benefited as a Tier 1 supplier of hardware solutions. And I think people are more aware these days of either the low end, I mean, is that helping at all in your engagement in prospecting up there?

Yes, Bobby, this is Mark. It definitely has been. I get reports from our -- from the leaders in our -- of our sales team, that that's a lot of where lot of questions and a lot of the attention is, is the Jupiter just being kind of the gold standard and our quality control and all of our practices that exist overseas. So, that's definitely one of the major topics in any really -- in any engagement with our customers.

Great. Thanks.

Thank you. There are no further telephone questions at this time.

Great. Thank you, Bobby and Aaron, for all the questions and thanks operator. We will turn now to some of the questions that came through the webcast. Mark, first question will probably for you. Couple people asking about S'more, looks like there is a planned IPO and is there any impact there. Does it help or threaten. Can you speak to that please?

Yes. First of all, I'm really happy for our partners and those guys. In China, app S'more, they are planning for an IPO. Jupiter's relationship with S'more truly has never been stronger, their success is our success. Any -- really any and all of the additional resources will only help fuel the innovation between our companies.

Great. Thanks. Next question also for you, how does Jupiter defend its market share? And how is Jupiter different from other big companies or distributors?

You know this comes up a lot, but first and foremost, Jupiter is an innovator, not just a distributor. And it's one of those things that's, probably a big misnomer, people really understanding our business. Our customers really lean on us for quality, reliability, innovation, together with S'more, we have a really strong IP portfolio. And I think we'll be maintaining our leadership position, not only defending our current, intellectual property, but as well as future product advancements and innovation.

Great. Thank you. Tim or Brad, next question is about -- couple more questions on the cash position. And any planned raises that we talked about this two weeks ago, but maybe something has changed.

Yeah. No, I can take this. This is Tim. So, no, we will always continue to evaluate opportunities available to us, but from a capital perspective. But as it stands right now, we don't have any large capital – necessary large capital expenditures. And we generate cash from our current and existing operations. So, we're going to continue to focus on increasing the amount of cash that we generate internally, rather than focus on capital markets. But again, we evaluate all options.

Great. What is the plan for I think you said institutional investors or institutionalizing the investor base?

Yeah, I mean, I think, we've been pretty candid about taking essentially the past year since Mark came on as Interim CEO to stabilize TILT’s business. And, given this quarter's results and our continued focus on operational efficiency and generating cash, I think that like, we feel like the business has been stabilized, and we're going to – and we look to really, reach back out to institutional investors to understand, to help them sort of understand our story and kind of continue to build on what we've been working on over the past year.

Great. And then one or two, just asking, what the main focus is in various ways, where do we see the actual business and how do the pieces fit together?

I mean, I guess, I can kind of sum it up in one sentence you know, TILT is a business solutions provider to cannabis operators, with a deep understanding of plant-touching operations. And that's where we'll continue to allocate our resources, is to be in the best cannabis business solutions provider that we can be in better understanding our customers and clients.

Great. And then, I guess, last question we can end on is. Couple questions on growth, where do we see the biggest opportunity for the next few quarters of the people I think over the next several years, what is the future of TILT’s growth look like?

You know, Tim, I'll go ahead and speak to that. So as we talked about on our last call, you know, we are currently broadening our footprint in the foreign markets. But there's a lot of, you know, there's a lot of opportunities domestically, regardless of where you know the business plan is simple, selling existing products to new customers, as well as selling new products to existing customers. What we won't be doing is selling new products to new customers. That's definitive of a risky start-up.

Thanks, excellent. Well, this concludes TILT’s first quarter 2020 conference earnings call. Thank you to our analysts, who join as well as everyone else, and for your questions that came through. I appreciate it. Thanks guys.

Thanks, everyone. Appreciate it.

Thanks, everybody.

Thank you. This concludes today's conference. All participants disconnect. Have a good day.