Q4 revenue up 9% quarter over quarter to $44.3 million
FY 2022 cash from operations up significantly to $8.6 million, compared to cash used of $8.6 million in FY 2021
Recently completed refinancing of legacy debt, reducing principal debt outstanding by nearly half
ARIZONA: TILT Holdings Inc., 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 twelve months ended December 31, 2022. 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.
“2022 was a pivotal year for TILT and the cannabis industry at large,” said Chief Executive Officer Gary Santo. “Our sector faced headwinds from the overall economic environment and, to a greater extent, the sector itself adapting to cannabis as a commodity more rapidly than expected. Our financial results were not immune to these patterns. We did maintain positive adjusted EBITDA and produced positive cash flow from operations for the year, and we are committed to upholding both these trends in 2023.”
Santo continued, “Operationally, last year we signed six new brand partnerships, launched over 100 new brand partner SKUs, and won multiple awards for outstanding products, including our recent edibles wins at NECANN last week for a newly launched chocolate we produce for our partner CODA and for our own house brand millionaire shortbread. In addition, we outperformed market trends in each of the states in which we operate, highlighting the benefit of our strategy to support brand partners instead of prioritizing our own products. We also brought innovation back to Jupiter with multiple new product announcements and improved distribution terms which drove better margins in the second half of the year.
“Looking back on 2022, while our overall performance may not have been as strong as we had hoped at the outset of the year, we remained focused on implementing and refining our business strategy. We believe our asset-light approach and nimble structure coupled with the now-completed refinancing and debt reduction efforts, allows us to enter 2023 with positive momentum, a stable capital structure, on-going positive cash flow from operations and a team fully equipped to tackle the critical optimization phase of our strategic pivot.”
Q4 2022 Financial Summary
- Revenue was $44.3 million in the three months ended December 31, 2022, compared to $54.1 million in the prior year period. The decrease in revenue was primarily driven by a significant customer order in the Company’s inhalation technology business in December 2021.
- Gross profit was $8.3 million in the three months ended December 31, 2022, or approximately 19% of revenue, compared to $11.2 million or approximately 21% of revenue in the prior year period. The decrease in gross profit was primarily driven by price compression in the Company’s cannabis operations in Massachusetts.
- Net loss was $73.1 million in the three months ended December 31, 2022, compared to a net loss of $20.1 million in the prior year period. The increase in net loss was primarily driven by a $54.6 million goodwill impairment related to current market conditions and its impact on the fair value of our reporting units.
- Adjusted EBITDA (non-GAAP) was $(0.4) million in the three months ended December 31, 2022, compared to $4.5 million in the prior year period. The decrease was driven by the aforementioned price compression in the Company’s cannabis operations in Massachusetts.
Recent Financing Update
- In February 2023, the Company announced a series of transactions that alleviated its near-term debt maturity and further reduced its non-revolving debt from $86.7 million at December 31, 2021 to $46 million on February 16, 2023. The Company repaid $2 million of debt as one of these transactions, retiring the remainder of its 2019 senior debt facility with no further obligations. For junior noteholders, the Company revised and extended terms to provide for amended and restated promissory notes with an aggregate principal balance of $38 million and issued $8.2 million of secured promissory notes to satisfy certain outstanding accounts payable.
- In conjunction with the refinancing of the junior notes in February 2023, the Company completed a sale-leaseback transaction for its Pennsylvania cultivation and manufacturing facility for approximately $15 million.
- Altogether, as of February 28, 2023, the Company had a cash balance of approximately $5 million and principal debt of approximately $46 million.
- Completed final action in March 2023, by amending existing revolving credit facility to increase credit availability, improve terms and extend maturity date.
Q4 2022 Operational Highlights
- Launched social impact driven brand Black Buddha Cannabis in Massachusetts for both patients and adult-use customers.
- Unveiled CCELL by Smoore’s latest technology release, EVO, through the Company’s wholly-owned subsidiary, Jupiter.
- Expanded partnership with cannabis lifestyle brand, Highsman, with the launch of “H” by Ricky Williams in dispensaries throughout the Commonwealth of Pennsylvania for medical patients.
- Entered into an exclusive, five-year manufacture, supply and distribution agreement with Curaleaf International to bring Jupiter manufactured Liquid QueTM vaporizer to new territories abroad, for use as a medical device with extracts developed by Curaleaf International.
- Partnered with Coda Signature, one of the cannabis industry’s leading infused chocolatiers, to launch the brand in Massachusetts for both patients and adult-use customers.
- Announced that Jupiter will launch a proprietary initiative called Concept LVT, a first-of-its-kind, patent-pending rig-less dab solution that is an affordable, easy and clean way to experience cannabis concentrates.
- Announced the launch of Little Beach Harvest’s ancestral plant medicine, in partnership with Shinnecock Indian Nation, to both patients and adult-use customers across Massachusetts.
FY 2022 Financial Summary
- Revenue was $174.2 million in the twelve months ended December 31, 2022, compared to $202.7 million in the prior year. The decrease in revenue was primarily driven by lower volumes and pricing in the Company’s inhalation business, partially offset by continued growth in the Company’s cannabis operations.
- Gross profit was $38.2 million in the twelve months ended December 31, 2022, or approximately 22% of revenue, compared to $50.2 million or approximately 25% of revenue in the prior year. The decrease in gross profit was primarily driven by pricing pressure in both the Company’s inhalation technology business and cannabis operations.
- Net loss was $107.5 million in the twelve months ended December 31, 2022, compared to a net loss of $35.1 million in the prior year. The net loss was primarily driven by the aforementioned goodwill impairment in the fourth quarter.
- Adjusted EBITDA (non-GAAP) was $2.8 million in the twelve months ended December 31, 2022, compared to $22.3 million in the prior year. The decrease was driven by lower revenue in the Company’s inhalation technology business and pricing pressure for both inhalation and cannabis operations.
- Cash provided by operations was up significantly to $8.6 million for the twelve months ended December 31, 2022, compared to cash used of $8.6 million in the prior year. The increase was primarily driven by significant improvements to working capital.
- Total cash balance was $2.2 million at December 31, 2022, compared to $7.0 million at December 31, 2021. This cash balance included restricted cash of $1.3 million at December 31, 2022, compared to restricted cash of $2.7 million at December 31, 2021. Unrestricted cash and cash equivalents were $2.2 million, compared to $4.2 million at December 31, 2021.
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, business strategy and future outlook, followed by a question-and-answer period.
Date: Thursday, March 16, 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: 13736759
Webcast: TILT Q4 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.