TILT Holdings’ Earnings Call: Strategic Moves Amid Challenges

Tilt Holdings ((TSE:TILT)) has held its Q1 earnings call. Read on for the main highlights of the call.

TILT Holdings’ recent earnings call painted a mixed picture, reflecting both strategic progress and ongoing challenges. While the company is making significant strides in transforming into a Jupiter-first organization and innovating its product line, it continues to grapple with decreased revenue and supply chain issues. The sentiment expressed during the call was cautiously optimistic, highlighting both achievements and areas needing improvement.

Strategic Transformation Progress

TILT is undergoing a strategic transformation to become a streamlined Jupiter-first organization. This transformation focuses on reducing regulatory complexity, freeing up working capital, and enhancing growth potential. The company has been actively engaged in strategic asset sales and improving cost discipline to achieve these goals.

Successful Divestiture in Massachusetts

A notable development for TILT was the signing of a definitive agreement to sell two dispensaries in Massachusetts for $2 million. The proceeds from this sale are intended to reduce Smoore-related obligations, thereby positioning Jupiter for future growth and stability.

Product Innovation and Growth

In the realm of product innovation, TILT has seen promising growth. In Pennsylvania, their Live Rosin products experienced a 9.5% month-over-month sales increase. Additionally, the launch of a new 0.5 gram Live Rosin product in Ohio marked the introduction of a new category in the cannabis vape market.

Major Milestone in EU Certification

TILT achieved a significant milestone with the QMID handheld liquid vaporizer device receiving European Union Medical Device Regulation certification. This marks it as the first handheld vape device to achieve such status, opening new avenues in the European market.

Improved Cash Flow

The company reported an improvement in cash flow, with operations providing $1.9 million in the first quarter. This is a positive shift compared to previous quarters where cash was used rather than generated.

Decreased Revenue

Despite these positive developments, TILT faced a decrease in revenue, reporting $22.7 million in Q1, down from $37.5 million in the same period last year. This decline was primarily driven by challenges in the Jupiter hardware business and ongoing supply chain issues.

Lower Gross Margin

The gross margin for Q1 was 15%, a decrease from 18% in the year-ago period. This occurred despite a 700 basis points increase in Jupiter’s gross margin due to a new commission-based structure.

Net Loss and Adjusted EBITDA Decline

TILT reported a net loss of $13.2 million in Q1, compared to a $9.7 million loss in the previous year. Adjusted EBITDA was negative $974,000, reflecting the impact of lower revenue and consolidated gross margin.

Continued Supply Chain Challenges

Supply chain challenges persist, exacerbated by tariff uncertainties. These issues have impacted customer purchasing behavior, leading to a decrease in the number of orders year-over-year.

Forward-Looking Guidance

Looking ahead, TILT is focused on its strategic transformation into a Jupiter-first organization. The company aims to reduce regulatory complexity, free up working capital, and enhance growth potential. Key metrics include a 20% quarter-over-quarter sales increase in plant-touching businesses and a 35% increase in average order totals, despite a decrease in the number of orders. TILT remains committed to exiting plant-touching operations, driving product innovation, and optimizing its supply chain to fuel future growth.

In summary, TILT Holdings’ earnings call highlighted a company in transition, making strategic moves to position itself for future growth while navigating current financial challenges. The sentiment was one of cautious optimism, with a clear focus on innovation and strategic transformation as key drivers for overcoming the hurdles ahead.