Q1 2024 Results and Analyst Insights
TILT Holdings' first-quarter 2024 results revealed disruptions in the vape hardware segment, which significantly impacted the company's sales. Despite these challenges, the custom business remained robust, and the company sees growth opportunities in hemp-derived vapes.
The vape hardware segment, which accounted for 71% of TILT's sales in 2023, faced supply-side disruptions, leading to lost sales opportunities. However, the company remains the largest CCELL distributor in the U.S., which is seen as a positive factor for future growth.
TILT's cannabis plant-touching business, encompassing operations in Massachusetts, Ohio, and Pennsylvania, showed stability despite deflation and increased competition. Massachusetts, contributing two-thirds of sales, benefited from the performance of licensed brands like Old Pal. TILT is exploring expansion in PA and Ohio through strategic partnerships and funding agreements.
As of March 2024, TILT's net debt stood at $56 million, up from $49 million at year-end 2023. Despite a manageable net debt-to-sales ratio, break-even EBITDA and negative cash flow raised concerns about leverage and potential stock dilution.
Analyst Pablo Zuanic from Zuanic & Associates noted that TILT's stock remains illiquid and has decreased by 25% in the last 90 days. However, he maintains an "Overweight" rating due to the company's market positioning and potential growth in vape hardware and cannabis segments. He believes TILT's valuation is compelling, even with concerns about debt and cash flow.