Tilt's Revenue Drops, But Says April Sales Bounced Back

TILT Holdings Inc.  (NEO: TILT) (OTCQX: TLLTF) reported its financial and operating results for the three months ended March 31, 2022. Tilt’s revenue was $42.4 million compared to $46.8 million in the year-ago period. However, revenue fell dramatically from the fourth quarter which was $54 million. Tilt said the decrease was primarily driven by lower sales volume in its inhalation business related to the timing of purchases by certain large customers, as well as price compression for the company’s bulk and house-branded wholesale cannabis products.

The net losses for the quarter were trimmed to $9 million from the fourth quarter’s net loss of $29 million.

“As discussed on our March 30th earnings call, during the first quarter we experienced the effects of inflationary pressure on consumers exacerbated by legacy product mix in our key plant-touching markets, coupled with both customer ordering and regulatory timing delays that affected Jupiter’s performance,” said Gary Santo, CEO of TILT. “Exiting the quarter, the broader market appears to be gaining momentum, with our inhalation business experiencing the second strongest sales order month in its history in April. Furthermore, opportunistic improvements made to our cultivation and processing operations over the past two quarters would appear to be well-timed to these changing market conditions, positioning the Company for a strong second half of 2022.”

Sales/Leaseback

Santo added, “Today we are also announcing two sale leaseback transactions totaling $55 million, the first of which closed earlier today with the second scheduled to close before quarter-end. Delivering on our promise to seek non-dilutive sources of capital, we plan to use the net proceeds to pay down outstanding debt by up to 50%, representing the first two legs of a stool designed to improve TILT’s overall capital structure.”

In addition to the earnings release, TILT’s subsidiary, Commonwealth Alternative Care, Inc. (“CAC”), completed the previously announced acquisition of its facility located in Taunton, MA. Concurrently, CAC closed on the sale of the Taunton Facility to Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR). The purchase price for the property in the Massachusetts Sale was $40 million. The all-cash net proceeds of the Massachusetts Transaction of approximately $27 million will be used by TILT to pay down its outstanding corporate debt. IIP entered into a long-term, triple-net lease agreement for the Taunton Facility with CAC.

Tilt also announced that its subsidiary White Haven RE, LLC, sold the cultivation and production facility in White Haven, PA for $15 million cash to IIP.  TILT’s subsidiary, Standard Farms, LLC, will also execute a long-term, triple-net lease agreement with substantially the same terms as the lease pertaining to the Taunton Facility.

Looking Ahead

“Entering the second year of our B2B strategy, demand from potential brand partners remains strong, with the addition of Timeless Refinery and Toast during the quarter, along with our recently announced partnership with Black Buddha Cannabis, another exceptional brand driven by social impact. With initial revenue attributable to brand partnerships already representing nearly one-third of our wholesale sales, as we continue to activate new partnerships and expand the product offerings for those brands previously launched, we believe the path we have chosen is the right one as we seek to become the partner of choice for independent brands seeking to scale.”

TILT said it continues to expect 2022 annual revenue to range between $255 – $265 million, and adjusted EBITDA to range between $27 – $32 million. At the midpoint, this reflects approximately 28% revenue growth and approximately 31% adjusted EBITDA growth over 2021.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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