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 and six months ended June 30, 2023. 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.
“I am encouraged by the progress we have made since I rejoined the Company in April. We have instilled a stronger focus on cash management in order to achieve profitability and cash flow generation,” said Interim Chief Executive Officer, Tim Conder. “During the quarter, we identified and executed various cost saving measures and efficiency improvements through vendor rationalization, improved inventory management and decreased waste, and operational rightsizing. These initiatives are expected to result in annualized cost savings of approximately $8 million beginning in the third quarter of 2023.
“In addition to increased financial discipline and rigor, we are also refining our brand strategy to better leverage the strengths within our Jupiter business. Instead of underutilizing this competitive advantage as has been the case historically, we plan to lean into Jupiter’s’ distinct capability set by helping leading inhalation brands expand into new markets through our plant-touching footprint.
“Looking ahead, we are intently focused on cash flow generation and prioritizing the strength of our balance sheet as we work to pay down debt and grow our cash reserves. We will continue to execute on our strategic refinement plan while optimizing our brand portfolio to better align with our core competencies in inhalation. As we progress through the year, we are excited to better unify Jupiter and our plant-touching businesses while building the foundation for profitable growth in 2024 and beyond.”
Q2 2023 Financial Summary
- Revenue was $41.6 million in the three months ended June 30, 2023, compared to $47.1 million in the prior year period, with the decrease primarily attributable to Jupiter driven by lower sales volume as well as a number of orders occurring, but not fulfilled, at the end of the quarter, and lower average price in certain product lines. This was partially offset by growth in the Company’s plant-touching business.
- Gross profit was $4.0 million, or approximately 9.7%, in the three months ended June 30, 2023, compared to $10.9 million or approximately 23.3% of in the prior year period. The decrease in gross margin was primarily due to a one-time write-down of inventory across the Company’s markets. Excluding the write down, gross margin would have been 21.4% for the second quarter of 2023.
- Net loss was $26.9 million in the three months ended June 30, 2023, compared to a net loss of $7.1 million in the prior year period, with the difference primarily driven by $15.7 million of non-cash write down expenses related to inventory, investment and loans receivable in the second quarter of 2023.
- Adjusted EBITDA (non-GAAP) increased to $1.5 million in the three months ended June 30, 2023 compared to $1.1 million in the prior year period. The increase was primarily driven by early progress with the Company’s strategic refinement and optimization initiatives.
- At June 30, 2023, the Company had $4.1 million of cash, cash equivalents and restricted cash compared to $3.5 million at December 31, 2022. Notes payable net of discount at June 30, 2023 was $57.0 million compared to $59.7 million at December 31, 2022.
Recent Financing Update
- In May 2023, the Company closed on an offering of up to $4.5 million in aggregate principal of senior secured promissory notes (the “Bridge Notes”), with an original issue discount of approximately $0.5 million, allowing access of funding up to $4.0 million from its existing secured note holders.
- Simultaneous with the issuance of the Bridge Notes, the Company entered into a Consent, Confirmation, Limited Waiver and Forbearance Agreement with the noteholders of the February 2023 debt refinancing to suspend interest payments on the approximately $38 million in aggregate principal amount of amended and restated secured notes and approximately $8.2 million in aggregate principal amount of secured notes issued in February 2023.
Q2 2023 Operational Highlights
- Appointed Tim Conder, Board member and former President and Chief Operating Officer of the Company, as Interim Chief Executive Officer and Mark Scatterday, founder of Jupiter and former Chief Executive Officer of the Company, as senior advisor focused on the Company’s inhalation business.
- Appointed Brad Hoch, former Chief Financial Officer and current Chief Accounting Officer, as Interim Chief Financial Officer.
- Appointed Arthur “Art” Smuck to the Company’s Board of Directors.
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.
Date: Monday, August 14, 2023
Time: 5:00 p.m. Eastern Time
Toll-free dial-in number: (877) 423-9813
International dial-in number: (201) 689-8573
Conference ID: 13740185
Webcast: TILT Q2 2023 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.
