Tilt NY Entry
TLLTF is a USA Long.
As expected, Tilt reported a strong 2Q21. Second-quarter revenue was $48.5 million, up 33% year-over-year. Revenue in the accessory business was $38.5 million, and revenue from cannabis was $10 million, up 34% and 31% year-over-year, respectively. Before the fair value of biological assets, gross profit was $13.1 million, a gross margin of 27% compared to 28.9% in the year-ago quarter. Like many other companies across various industries, 2Q21 was impacted by supply chain expenses related to higher freight costs, especially in the inhalation and accessory business. (A)EBITDA more than doubled in 2Q21 to $6.5 million compared to $2.4 million last year, with (A)EBITDA margin of 13.5% compared to 6.7% last year. CFFO was $0.3 million compared to $6 million last year. This year's cash flow was impacted due to the inventory buildup ahead of the opening of the MA rec stores. The company ended the quarter with $9.6 million in cash, up from the $7.4 million in cash on December 31, 2020, and after the quarter entered into a new $10 million revolving credit facility that bears interest at prime plus 3.5%.
Importantly, Tilt has announced a partnership with the Shinnecock Indian Nation of New York to develop a vertically integrated cannabis operation on their traditional lands in Long Island, NY. Through a joint venture with a development firm called Conor Green, Tilt will finance, build, and provide management services for the operation. In terms of transaction details, at closing, Tilt paid $700,000 in cash and stock to obtain a 75% interest in the JV, the Nation's cannabis project development firm. In addition, upon achieving certain milestones, Conor Green may earn up to an additional $2.65 million in TILT shares for total compensation of $3.35 million in cash and stock. Even with all those milestones met, this is arguably the lowest initial cost of entry to participate in a market like New York, which will likely be one of the largest cannabis markets in the country. Through the agreements between the JV and Little Beach Harvest, TILT will provide management services to establish vertical cannabis operations on Long Island, including planning, design, build-out, and funding of up to approximately $18 million in capital expenditures. The 9% debt financing will be repaid through cash flows and secured by the project's assets, including a 60,000 square foot cultivation, processing, extraction, and packaging facility, a 2-story dispensary with a drive-through, and an adjacent wellness lounge. The dispensary and lounge are being built on Montauk Highway, just minutes from South Hampton's Business District, Cooper's Beach, and Shinnecock Hills Golf Club. Once operational, the Nation will retain 75% of free cash flow from all Shinnecock cannabis operations during the initial term of up to 9 years. TILT will receive 11.25% of the Nation's gross revenue and 18.75% of free cash flow in exchange for providing management services. The management agreement may be extended up to 10 additional years pending the accomplishment of certain performance-based milestones related to revenue and profitability.
Ayr New FL Location
AYRWF is a LONG
Ayr has opened a new location in Boynton Beach, a milestone as it is its 40th location in the state. This makes it the 2nd largest company by several dispensaries in the state, only behind Trulieve. The dispensary is just a 10 minutes drive from some of South Florida's most popular beaches. It is 1,600 sq. Ft. and sits within a shopping center. Jonathan Sandelman, CEO of Ayr, said, “With 40 open stores in Florida, we now have the second largest retail footprint in the state, with more set to open during the rest of the year. Our plan in Florida is working. Our improved cultivation facility is allowing us to open new stores at a rapid clip. It is helping to greatly expand our presence in what is quickly becoming one of the largest marijuana markets in the U.S. As we continue to improve our product mix, Ayr will increasingly become a force to be reckoned with in the Florida market.”
CA Cannabis Prices Plummet
Prices of wholesale cannabis had dropped to about $700 a pound compared to last year when it was $1,200 in California. This significant price drop is due to "light dep" or "dep" weed which is cannabis that is made with a technique recently introduced where one controls the amount of light the cannabis plant gets to trick it into entering the flowering stage sooner. With the influx of dep this cannabis, there has been a massive influx in the market. For a small farmer, it costs about $500 to grow a pound. If they sell for $700, they barely have enough to pay their bills. These farmers are struggling to stay afloat. To put this overproduction into context, Humboldt County conservatively produces a little over 6 million pounds of cannabis annually; however, California consumes approximately 2.5 million pounds of cannabis annually. Not all of this cannabis is sold legally, but it shows the massive overproduction in the state and why prices are so low.
