Release Date: May 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TILT Holdings Inc (TLLTF, Financial) is actively improving operations by maximizing margins through product portfolio optimization and brand partner contract renegotiation.
- The company is investing in maintenance CapEx in Massachusetts to improve cannabis yields, potency, and cannabinoid profiles, showing a proactive approach to enhancing product quality.
- TILT Holdings Inc (TLLTF) has initiated a plan to refocus cannabis brand partnerships, aligning with a broader inhalation strategy and adding strong brands to their portfolio.
- In Q1, TILT Holdings Inc (TLLTF) won first place for best vape cartridge in the 2024 NECANN Cup, demonstrating product excellence and innovation.
- The company has reached an agreement to lend capital to its Pennsylvania subsidiary, which will help in constructing dispensaries and potentially boost market presence.
Negative Points
- TILT Holdings Inc (TLLTF) reported a decrease in revenue in Q1 2024 compared to the previous year, primarily due to lower sales volume and price compression in key markets.
- The company experienced a net loss of $9.7 million in Q1 2024, which was significantly higher than the previous year, indicating financial challenges.
- Gross margin declined in Q1 2024 compared to the previous year, driven by lower average pricing and ongoing market pressures.
- TILT Holdings Inc (TLLTF) faces challenges with delayed shipments and revenue impact due to issues with their manufacturing partner and collateral agreements.
- The company's cash flow from operations was negative in Q1 2024, contrasting with a positive cash flow in the same period last year, reflecting operational and financial strain.
Q & A Highlights
Q: Can you provide some insights into the revenue makeup of Jupiter and the growth outlook going forward?
A: Tim Conder, CEO of TILT Holdings, explained that due to shipping challenges in Q4 and Q1, there were lost revenue opportunities. However, the relationships with Jupiter's customer base remain strong. Despite temporary challenges from a stock revenue standpoint, the outlook for Jupiter remains positive as they work through the milestones outlined in the collateral agreement entered in February.
Q: Could you discuss the performance of Old Pal in Massachusetts and Level in Pennsylvania in the wholesale market?
A: Tim Conder noted that Old Pal is the fourth top-selling flower brand in Massachusetts and has significant market penetration in Pennsylvania. Level was recently launched in Pennsylvania, and while specific market data isn't yet available, the company is optimistic about its performance.
Q: How are you managing the gross margin pressures and what improvements have you seen?
A: Tim Conder mentioned that product mix and shipping methods significantly impact Jupiter's gross margins. For the cannabis segment, despite price compression, focusing on product mix optimization has positively impacted gross margins. Additionally, not having to pay a host community agreement in Massachusetts also positively impacted Q1 margins.
Q: Can the new credit agreement with Smoore be implemented without limitations?
A: Tim Conder confirmed that TILT Holdings is working collaboratively with noteholders to reach a forbearance agreement, ensuring the long-term success of the organization. The agreement with Smoore is part of a collaborative process across the debt stack.
Q: Regarding the $10.5 million credit line for setting up stores in Pennsylvania, why does it seem high compared to typical store setup costs?
A: Tim Conder explained that the financing was a creative solution to preserve cash while addressing the company's debt. The credit line is available as needed, which provides flexibility in managing capital while expanding operations.
Q: Are there plans to open new stores in Ohio similar to Pennsylvania, and how would that process unfold?
A: Tim Conder mentioned that there is potential for TILT Holdings to obtain retail and cultivation licenses in Ohio as regulations evolve from medical to adult use sales. The company is supportive of proposals that would allow such expansions and will evaluate these opportunities as they arise.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
