TILT Holdings Reports First Quarter 2022 Results, Announces $55 Million Non-Dilutive Capital Raise

May 16th, 2022 16:31 EST

sale leaseback transactions with iipr include massachusetts and pennsylvania facilities net proceeds from both transactions expected to reduce existing debt by up to 50% phoenix may 16 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 ended march 31 2022 all financial information is provided in u s dollars unless otherwise indicated “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 improvments 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 ” “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 ” “today we are also announcing two sale leaseback transactions totalling $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 ” q1 2022 financial summary revenue was $42 4 million compared to $46 8 million in the year ago period the decrease was primarily driven by lower sales volume in the company’s 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 gross profit before fair value adjustments was $9 4 million or approximately 22% of revenue compared to $13 5 million or approximately 29% of revenue in the year ago period the decrease in gross margin was primarily driven by customer mix in the company’s inhalation business and lower cannabis wholesale pricing for legacy house brands and bulk wholesale operating expenses less non cash adjustments for stock compensation depreciation and amortization and impairment charges were $10 4 million compared to $7 9 million in the year ago period as a percentage of revenue operating expenses less non cash adjustments totaled approximately 24% in the first quarter of 2022 compared to approximately 17% with the increase driven by change in headcount attributed to headcount additions to support expanded retail locations as well as building out our corporate team and costs associated with becoming an sec registrant adjusted ebitda was $1 5 million compared to $6 2 million in the year ago period the decrease was driven by the aforementioned lower revenue and gross margin as well as higher operating expenses cash provided by operations was $4 0 million compared to $2 6 million in the year ago quarter driven by the sell through of jupiter stock inventory and collection of accounts receivable cash and cash equivalents at march 31 2022 was $9 2 million compared to $7 0 million at december 31 2021 working capital was $38 2 million compared to $41 1 million at december 31 2021 total debt at march 31 2022 was $88 0 million compared to $86 6 million at december 31 2021 subsequent to quarter end the company completed a sale leaseback for its massachusetts facility and signed a purchase and sale for its pennsylvania facility to pay down its outstanding corporate debt additional details of the transaction are below q1 2022 operational highlights signed a new brand partnership with timeless refinery which is also one of the company’s inhalation clients to initially launch products in ohio signed a multi state agreement with toast™ which will initially launch in massachusetts this summer in the first quarter of 2022 brand partner revenue more than doubled over q4 2021 and in the pennsylvania market alone brand partner revenue as a percentage of wholesale tripled sequentially planted 25 new strains across our massachusetts and pennsylvania facilities to improve strain diversification recent operational highlights in april the company’s inhalation business booked its second strongest month of sales orders in its history announced two sale leaseback transactions totalling $55 million which will enable the company to reduce a portion of its senior and junior corporate debt that was set to term within the next twelve months by nearly 50% announced exclusive partnership with social impact driven brand black buddha cannabis to launch products in both massachusetts and pennsylvania later this year filed form 10 registration statement to prepare for alignment with u s reporting standards and further improve shareholder transparency 2022 financial guidance tilt 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 iipr sale leaseback completed and signed purchase sale for pa tilt’s subsidiary commonwealth alternative care inc “cac” completed the previously announced acquisition of its facility located in taunton ma the “taunton facility” and the acquisition the “taunton purchase” concurrently cac closed on the sale of the taunton facility the “massachusetts sale” and with the taunton purchase the “massachusetts transaction” to innovative industrial properties inc nyse iipr “iip” the purchase price for the property in the massachusetts sale was $40 0 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 concurrent with the closing of the massachusetts sale iip entered into a long term triple net lease agreement for the taunton facility with cac the lease agreement is for a term of 20 years with two 5 year extensions exercisable at the tenant’s discretion in addition to the massachusetts transaction the company announced it has entered into a definitive purchase and sale agreement between tilt’s subsidiary white haven re llc and an affiliate of iip providing for the sale and leaseback of tilt’s cultivation and production facility in white haven pa the “pennsylvania transaction” in exchange for $15 million cash the pennsylvania transaction is subject to various closing conditions including standard property title inspections and appraisals and is scheduled to close in the coming weeks in accordance with the terms of the pennsylvania transaction tilt’s subsidiary standard farms llc “sf” will also execute a long term triple net lease agreement with substantially the same terms as the lease pertaining to the taunton facility    cac and sf anticipate no disruption to their operations as a result of the transactions 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 may 16 2022time 5 00 p m eastern timetoll free dial in number 877 705 6003international dial in number 201 493 6725conference id 13729376webcast tilt q1 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 about tilt tilt helps cannabis businesses build brands through a portfolio of companies providing technology hardware cultivation and production tilt services brands and cannabis retailers across 36 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 instagram @tiltholdingstwitter @tilt_holdings forward looking information this news release contains forward looking information based on current expectations forward looking information is provided for the purpose of presenting information about management’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes forward looking information may include without limitation anticipated performance of the company for the remainder of 2022 expected expansion of product offerings and additional brand partners anticipated closing of the pennsylvania transaction the expected use of net proceeds from the massachusetts transaction to pay down the company’s outstanding corporate debt by almost 50% and the concurrent anticipated improval of tilt’s capital structure expectations regarding 2022 revenue and adjusted ebitda guidance the opinions or beliefs of management prospects opportunities priorities targets goals ongoing objectives milestones strategies and outlook of tilt and includes statements about among other things future developments the future operations strengths and strategy of tilt generally forward looking information can be identified by the use of forward looking terminology such as “plans” “expects” or “does not expect” “is expected” “budget” “scheduled” “estimates” “forecasts” “intends” “anticipates” or “does not anticipate” or “believes” or variations of such words and phrases or state that certain actions events or results “may” “could” “would” “might” or “will be taken” “occur” or “be achieved” these statements should not be read as guarantees of future performance or results these statements are based upon certain material factors assumptions and analyses that were applied in drawing a conclusion or making a forecast or projection including tilt’s experience and perceptions of historical trends the ability of tilt to maximize shareholder value current conditions and expected future developments as well as other factors that are believed to be reasonable in the circumstances although such statements are based on management’s reasonable assumptions at the date such statements are made there can be no assurance that it will be completed on the terms described above and that such forward looking information will prove to be accurate as actual results and future events could differ materially from those anticipated in such forward looking information accordingly readers should not place undue reliance on the forward looking information tilt assumes no responsibility to update or revise forward looking information to reflect new events or circumstances unless required by applicable law by its nature forward looking information is subject to risks and uncertainties and there are a variety of material factors many of which are beyond the control of tilt and that may cause actual outcomes to differ materially from those discussed in the forward looking statements for additional information regarding forward looking statements and their related risks please refer to the “risk factors and uncertainties” section in the annual information form of the company for the year ended on december 31 2021 which is available on the company’s sedar profile at www sedar com   non ifrs financial and performance measures in addition to providing financial measurements based on international financial reporting standards “ifrs” the company provides additional financial metrics that are not prepared in accordance with ifrs management uses non ifrs financial measures in addition to ifrs 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 ifrs financial measures are ebitda adjusted ebitda and working capital and gross margin percentage  management believes that these non ifrs 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 ifrs financial measures enable investors to evaluate the company’s operating results and future prospects in the same manner as management these non ifrs 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 ifrs 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 ifrs 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 ifrs ebitda and adjusted ebitda ebitda and adjusted ebitda are financial measures that are not defined under ifrs the company uses these non ifrs 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 excludes certain one time non cash or non operating expenses as determined by management including stock compensation expense business acquisition expense debt issuance costs severance unrealized gain loss on changes in fair value of biological assets and fair value changes in biological assets included in inventory sold working capital the calculation of working capital provides additional information and is not defined under ifrs the company defines working capital as current assets less current liabilities this measure should not be considered in isolation or as a substitute for any standardized measure under ifrs this information is intended to provide investors with information about the company’s liquidity other businesses in the company’s industry may calculate this differently than the company does limiting usefulness as a comparative measure a reconciliation of working capital to ifrs measures can be found under the “q1 2022 financial condition including liquidity and capital resources” section of the management discussion and analysis of the company for the three months ended on march 31 2022 supplementary financial measures the supplementary financial measure presented in this news release is gross margin percentage representing gross margin as a percentage of revenue reconciliations of non ifrs financial and performance measures adjusted ebitda is reconciled to net loss below as well as the section labelled “reconciliation of net income loss to non ifrs measures” in the management discussion and analysis of the company for the three months ended on march 31 2022 which is available on the company’s sedar profile at www sedar com   company contact lynn ricci vp of investor relations corporate communicationstilt holdings inc [email protected] com investor relations contact sean mansouri cfaelevate [email protected] ir com 720 330 2829 media contact juliet fairbrothermattio [email protected] com 631 338 5343 table 1 condensed interim consolidated statements of operations     in us$ thousands unaudited              three months ended $ thousands  mar 31 2022dec 31 2021mar 31 2021revenue $42 352 $54 057 $46 780 cost of goods sold  32 929  42 801  33 327 gross profit before fv adj   9 423  11 256  13 453 gross margin % before fv adj   22% 21% 29%gain on fv of bio assets  11 941  12 103  14 720 fv of bio assets in inventory sold   8 111   5 969   13 400 gross profit after fv adj   13 253  17 390  14 773 gross margin % after fv adj   31% 32% 32%total operating expenses  16 631  54 375  13 108 income loss from operations   3 378   36 985  1 665 total other income expense    5 597  1 433   16 683 income tax expense recovery   94  5 876   477 net loss before non controlling interest $ 9 069 $ 29 676 $ 15 495 less net loss attributable to non controlling interest  5       net loss attributable to tilt holdings inc  $ 9 064 $ 29 676 $ 15 495 ebitda non ifrs   211   26 611   7 495 adjusted ebitda non ifrs $1 535 $4 801 $6 195  table 2 reconciliation of non ifrs measures     in us$ thousands unaudited            three months ended $ thousands  mar 31 2022dec 31 2021mar 31 2021net loss attributable to non controlling interest $ 9 069 $ 29 676 $ 15 495      add deduct impact of     interest income    18   6   603 finance expense  2 894  2 872  2 597 income tax expense recovery   94   5 876  477 depreciation and amortization  5 888  6 075  5 529 total adjustments  8 858  3 065  8 000      ebitda non ifrs  $ 211 $ 26 611 $ 7 495      add deduct impact of     share based compensation  1 226  1 398  882 severance     159     gain loss on sale of assets   1   20  67 lease restructuring costs      117   14 deferred rent adjustment         548 legal settlement        2 unrealized gain loss on investment in equity security  45  62  705 change in fair value of financial instruments  2 163   8 783  13 916 loss on loan receivable  517  4 562    derecognition and impairment loss  697  39 306    foreign exchange gain loss          one time bad debt expense     137    one time adjustments  929  842    unrealized gain on changes in fv of bio assets   11 941   12 103   14 720 fv changes in bio assets included in inventory sold  8 111  5 969  13 400 total adjustments  1 746  31 412  13 690      adjusted ebitda non ifrs  $1 535 $4 801 $6 195       table 3 condensed interim consolidated statements of cash flows    in us$ thousands unaudited          three months ended  march 31 2022march 31 2021net cash provided by operating activities $4 009 $2 621 net cash used in investing activities   775   350 net cash used in financing activities   954   747 effect of foreign exchange on cash and cash equivalents     4 net change in cash and cash equivalents  2 280  1 528     cash and cash equivalents beginning of period  6 952  8 859     cash and cash equivalents end of period $ 9 232 $ 10 387      table 4 consolidated statements of financial position select items   in us$ thousands unaudited             $ thousands  mar 31 2022 dec 31 2021 cash and cash equivalents $9 232 $6 952 biological assets  12 031  9 609 inventory  80 456  85 017 total current assets  136 495  140 575 property plant equipment net 60 200  62 360 total assets  405 828  415 183 total current liabilities  98 284  99 482 total long term liabilities  81 354  81 669 total shareholders’ equity  226 190  234 032 working capital  38 211  41 093


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