TILT Holdings Q1 Revenue Down 22% Sequentially To $42.4M, $55 Million In Leaseback Transaction

 TILT Holdings Inc.  NEO TLLTF reported its financial and operating results for the three months ended March 31, 2022. 

"As discussed on our March 30^th 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."

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.
• Cash and cash equivalents at March 31, 2022, was $9.2 million compared to $7 million in December 31, 2021. Working capital was $38.2 million compared to $41.1 million at December 31, 2021.
• Total debt as of March 31, 2022 was $88 million compared to $86.6 million at December 31, 2021. 

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 totaling $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.
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