Debra Borchardt
TILT Holdings Inc. (NEO:TILT) (OTCQX: TLLTF) reported its financial results for the third quarter ending Sept. 30, 2022. Revenue fell from last year’s $53.4 million to $40.5 million in the 2022 third quarter. Tilt attributed the drop to lower sales volume in the company’s inhalation business, partially offset by continued growth in the company’s cannabis operations.
Tilt delivered a net loss of $15.7 million versus last year’s net income of $1.0 million. The company said the increase in losses was due to lower gross profits, tax expenses, and a revaluation of warrant liabilities.
The company also lowered its 2022 outlook to $175 million-$180 million. The company blamed the lowered outlook on “the evolving macroeconomic environment, inflationary impacts on consumer spending, and lower cannabis wholesale pricing in Massachusetts and Pennsylvania.” The forecast for the adjusted EBITDA is between $5 million-$6 million.
“The macroeconomic challenges facing operators in the cannabis sector have been well documented over the course of 2022,” CEO Gary Santo said. “Macroeconomic 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.”
The company also made some senior management changes, effective Dec. 6.:
- Dana Arvidson, chief financial officer
- Brad Hoch, chief accounting officer
- Chris Kelly, chief revenue officer
Balance Sheet
The total cash balance on Sept. 30, 2022, was $16.6 million versus last year’s $7.0 million on Dec. 31, 2021. This cash balance included restricted cash of $10.0 million, compared with restricted cash of $2.7 million at the end of 2021.
Tilt also noted that it amended its senior secured promissory notes totaling $9.6 million to extend the maturity date from Nov. 14, 2022, to Dec. 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 and junior notes due in April 2023. The company said it expects to enter into a definitive agreement and close by the end of the year.
“By year-end, we expect to have over 145 brand partner product offerings in the 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.”
The company did not give an update on the New York market. This past summer Santo said he thought the Shinnecock tribal dispensary would open in February and that ground had been broken on the building. Since then, it seems the focus has mostly been on Pennsylvania. That medical-only market has cooled since neighboring New Jersey began selling legal adult-use cannabis in stores.
