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TILT Holdings Reports Third Quarter 2022 Results
- Plant touching revenue increased 8% year-over-year driven by 424% growth in brand partner sales as TILT executes on its strategic vision;
- YTD cash from operations up significantly year-over-year to $8.3 million, compared to cash used of $3.9 million;
- Company extends maturity date for certain senior debt holders and reaches agreement in principle for new debt facility
PHOENIX, Nov. 14, 2022 (GLOBE NEWSWIRE) — TILT Holdings Inc. (“TILT” or the “Company”) (NEO:TILT) (OTCQX: TLLTF), a global provider of cannabis business solutions that include inhalation technologies, cultivation, manufacturing, processing, brand development and retail, is reporting its financial and operating results for the three months and nine months ended September 30, 2022. All financial information is reported in U.S. dollars and prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) unless otherwise indicated.
“The macro-economic challenges facing operators in the cannabis sector have been well documented over the course of 2022,” said CEO Gary Santo. “Macro-economic pressures have affected consumer spending habits and both retail and wholesale pricing volatility has been exacerbated by cannabis supply and demand imbalances occurring in key markets such as Massachusetts and Pennsylvania. However, TILT’s brand partner strategy continues to outperform the market with modest to no declines in our wholesale pricing. While still in the early days of executing a mix-shift in our product offerings, wholesale brand partner sales increased 15% sequentially and now account for nearly 40% of our wholesale revenue mix, contributing to stable gross margin on a year-over-year basis as we continue to scale our CPG business.”
At the same time, we have seen an improvement in the gross margin profile of our hardware business and are excited to be debuting several innovative new hardware devices at this week’s MJBiz conference in Las Vegas. Our renewed focus on innovation has been well received by long-time partners such as Smoore while attracting the interest of new partners as we look to grow our hardware business in 2023 and beyond.
CEO Gary Santo
By year-end, we expect to have over 145 brand partner product offerings in market, which together with our expanded hardware portfolio, should allow TILT to end the year on a strong note as we prepare to enter New York in 2023. We remain Adjusted EBITDA and cash flow positive, and with the agreement in principle for our expected debt refinancing announced earlier today, we believe we are well positioned to return to stronger growth and profitability in the coming year.
Q3 2022 Financial Summary
- Revenue was $40.5 million in the three months ended September 30, 2022, compared to $53.4 million in the prior year period. The decrease in revenue was primarily driven by lower sales volume in the Company’s inhalation business, partially offset by continued growth in the Company’s cannabis operations.
- Gross profit was $9.5 million in the three months ended September 30, 2022, or approximately 24% of revenue, compared to $12.6 million or approximately 24% of revenue in the prior year period. The decrease in gross profit was primarily driven by the aforementioned lower sales volume in the Company’s inhalation business, as well as lower pricing in the Company’s wholesale cannabis operations for non-brand partner sales.
- Net loss for the quarter was $15.7 million in the three months ended September 30, 2022, compared to a net income of $1.0 million in the prior year period. The net loss was primarily driven by lower gross profit, tax expense and a revaluation of warrant liabilities.
- Adjusted EBITDA was $0.6 million in the three months ended September 30, 2022, compared to $5.0 million in the prior year period. The decrease was driven by lower sales volume in the Company’s inhalation business as well as pricing contraction for non-brand partners in the Company’s wholesale cannabis operations, partially offset by lower operating expenses.
- Year to date cash provided by operations was up significantly to $8.3 million, compared to cash used of $3.9 million in the prior year. The increase was primarily driven by the reduction of accounts receivable and conversion of inventory.
- Total cash balance at September 30, 2022 was $16.6 million compared to $7.0 million at December 31, 2021. This cash balance included restricted cash of $10.0 million at September 30, 2022, compared to restricted cash of $2.7 million at December 31, 2021. Unrestricted cash and cash equivalents were $6.6 million compared to $4.2 million at December 31, 2021.
Recent Financing Update
- Entered into amendments to the senior secured promissory notes held by certain senior debt noteholders totaling $9.6 million in principal amount to extend the maturity date from November 14, 2022, to December 31, 2022. In addition, the Company announced an agreement in principle for a new debt agreement with new and existing investors that, when signed and closed, is expected to satisfy and retire the senior notes now due in December 2022 and junior notes due in April 2023. The Company expect to enter into a definitive agreement and close by the end of the year.
- Announced previously that the work with IIPR for the Pennsylvania sale and leaseback of the Company’s White Haven, Pennsylvania facility has been successfully completed and the timing of closing was extended to on or before December 31, 2022, as part of a simultaneous closing with the expected debt refinancing anticipated to occur by year end.
Q3 2022 Operational Highlights
- Launched innovative self-care brand 1906™ to patients across Pennsylvania, as well as lifestyle cannabis brands Toast and Highsman in Massachusetts for both patients and adult-use customers.
- Received approval from the Massachusetts Cannabis Control Commission to commence operations for the medical use of marijuana at the Company’s 5,100 sq ft dispensary in Cambridge, Massachusetts.
- Won multiple awards during the quarter, including the cultivators cup “Best Cannabis Partnership” at the annual Benzinga Cannabis Capital Conference which highlighted the Company’s partnership with the Shinnecock Indian Nation to develop cannabis operations on sovereign land.
Recent Operational Highlights
- Announcing today multiple senior leadership updates, including the appointment of Dana Arvidson to Chief Financial Officer, Brad Hoch to Chief Accounting Officer, and Chris Kelly to Chief Revenue Officer, all to be effective December 6, 2022.
- Launched Black Buddha Cannabis, a black and woman-owned and led, environmentally conscious, social impact cannabis wellness brand throughout Massachusetts.
- Launched purpose-driven cannabis lifestyle brand Highsman to medical dispensaries in Pennsylvania under the brand H by Ricky Williams.
- Introduced CCELL by Smoore Technology Limited’s latest technology release, EVO, through the Company’s wholly owned subsidiary, Jupiter.
- Announced an exclusive manufacture and distribution agreement with Curaleaf International, to bring the Jupiter manufactured Liquid Que™ vaporizer to new territories abroad.
2022 Financial Guidance
Due to the evolving macroeconomic environment, inflationary impacts on consumer spending, and lower cannabis wholesale pricing in Massachusetts and Pennsylvania, TILT is revising its 2022 financial outlook and now expects revenue to range between $175 – $180 million, with Adjusted EBITDA ranging between $5 – $6 million.
Earnings Call and Webcast
TILT management will host a conference call today at 5:00 p.m. Eastern time to discuss its financial and operational results, followed by a question-and-answer period.
Date: Monday, November 14, 2022
Time: 5:00 p.m. Eastern Time
Toll-free dial-in number: (855) 656-0923
International dial-in number: (412) 317-5244
Conference ID: 10172685
Webcast: TILT Q3 2022 Earnings Call
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Elevate IR at (720) 330-2829.
The conference call will also be broadcast live and available for replay in the investor relations section of the Company’s website at www.tiltholdings.com.
TILT helps cannabis businesses build brands. Through a portfolio of companies providing technology, hardware, cultivation and production, TILT services brands and cannabis retailers in regulated markets across 37 states in the U.S., as well as Canada, Israel, South America and the European Union. TILT’s core businesses include Jupiter Research LLC, a wholly-owned subsidiary and leader in the vaporization segment focused on hardware design, research, development and manufacturing; and cannabis operations, Commonwealth Alternative Care, Inc. in Massachusetts, Standard Farms LLC in Pennsylvania, Standard Farms Ohio, LLC in Ohio, and its partnership with the Shinnecock Indian Nation in New York. TILT is headquartered in Phoenix, Arizona. For more information, visit www.tiltholdings.com.
Non-GAAP Financial and Performance Measures
In addition to providing financial measurements based on GAAP, the Company provides additional financial metrics that are not prepared in accordance with GAAP. Management uses non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate the Company’s financial performance. These non-GAAP financial measures are EBITDA and Adjusted EBITDA. Management believes that these non-GAAP financial measures reflect the Company’s ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. Management also believes that these non-GAAP financial measures enable investors to evaluate the Company’s operating results and future prospects in the same manner as management. These non-GAAP financial measures may also exclude expenses and gains that may be unusual in nature, infrequent or not reflective of the Company’s ongoing operating results.
As there are no standardized methods of calculating these non-GAAP measures, the Company’s methods may differ from those used by others, and accordingly, the use of these measures may not be directly comparable to similarly titled measures used by others.
Accordingly, these non-GAAP measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are financial measures that are not defined under GAAP. The Company uses these non-GAAP financial measures, and believes they enhance an investor’s understanding of the Company’s financial and operating performance from period to period, because they exclude certain material non-cash items and certain other adjustments management believes are not reflective of the Company’s ongoing operations and performance. The Company calculates EBITDA as net income (loss), plus (minus) income taxes (recovery), plus (minus) finance expense (income), plus depreciation and amortization expense. Adjusted EBITDA is EBITDA excluding certain one-time, non-cash or non-operating expenses, as determined by management, including stock compensation expense, debt issuance costs and severance.
Please see “Reconciliation of Non-GAAP Measures” below for further information.
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