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, 2021. All financial information is provided in U.S. dollars unless otherwise indicated.
“TILT’s B2B strategy originated from our belief that the rising supply of wholesale cannabis in multiple markets across the U.S. would require a differentiated approach, shifting away from bulk flower sales towards branded packaged goods,” said Gary Santo, CEO of TILT. “When we launched our strategy at the start of the year, we envisioned that marketplace transition would take 12 to 18 months as new cultivation came online. In the third quarter, we saw that timeline accelerate along with macro-economic pressure impacting consumers.”
“Competition for shelf space is accelerating. Compressing margins are forcing MSOs and SSOs to focus on their own branded products while still maintaining a portion of that shelf space for a curated portfolio of high demand third-party products. This is the space where TILT plays, and although we are still early in scaling our operations to meet brand partner demand, our top-line performance during the quarter demonstrates that by establishing partnerships with the right brands at the right price points, TILT can support retailers while expanding the reach of independent brands.”
“While we expect ongoing improvements in our efficiency and margin profile in our cannabis business as we ramp cultivation, Jupiter continues to lead the way in cannabis inhalation devices with record revenue during the quarter. Our supply chain management expertise has been on full display throughout the year, and while there has been a near-term impact to our margins due to higher freight costs, our ability to strategically deploy working capital to ensure availability of product has benefitted our customers while attracting the business of our competitors’ customers.”
The Company reiterates its 2021 revenue guidance of $205-$210 million, expecting to come in at the lower end of the range primarily as a result of unexpected delays in obtaining new product approvals in Pennsylvania. This, coupled with higher freight costs associated with the Company’s inhalation and accessories business and expanding cultivation in Massachusetts, has resulted in the Company revising its 2021 adjusted EBITDA outlook to range between $24-$26 million, representing a 42%-54% increase compared to 2020.
Q3 2021 Financial Summary (vs. Q3 2020, where applicable)
- Revenue increased 37% to $53.4 million driven by growth in both cannabis and inhalation and accessory revenue. Cannabis revenue increased 19% to $11.2 million and inhalation and accessory revenue increased 42% to $42.1 million.
- Gross profit before fair value adjustments increased to $12.7 million or 23.7% of revenue, compared to $12.2 million or 31.3% of revenue. Gross margins were impacted by higher freight costs for the Company’s inhalation and accessory business, as well as ramping cultivation in the Company’s cannabis business.
- Total operating expense was $16.3 million compared to $14.5 million. As a percentage of revenue, opex improved to 30.5% compared to 37% in the year ago quarter as a result of better operating efficiencies.
- Adjusted EBITDA was $5.0 million compared to $5.1 million. As a percentage of revenue, adjusted EBITDA was 9.3% compared to 13.1%.
- At September 30, 2021, cash and cash equivalents was $6.7 million compared to $7.4 million at December 31, 2020. Working capital increased to $64.9 million compared to $57.4 million at December 31, 2020.
Q3 2021 Operational Highlights
- Received approval to commence medical retail sales at the Company’s Brockton, Massachusetts dispensary; grand opening took place in October.
- Announced partnership with the Shinnecock Indian Nation to enter New York’s cannabis market.
- Expanded partnership with Old Pal to bring select products to market in Pennsylvania.
- Announced partnership with 1906 to launch various products in three key markets: Massachusetts, Pennsylvania and Ohio.
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 15, 2021
Time: 5:00 p.m. Eastern time
Toll-free dial-in number: (844) 826-3035
International dial-in number: (412) 317-5195
Conference ID: 10161687
Webcast: TILT Q3 2021 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 (949) 200-4603.
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.
