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TILT Holdings Inc (CNSX:TILT) Reports US $18.3 Million Revenue for January

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

TILT Holdings Inc (CNSX:TILT) (OTCMKTS:SVVTF) CEO Alex Coleman is ecstatic about the company’s revenue numbers for January. TILT reported US $18.3 million in revenue for the month of January, a number that does not reflect sales of cannabis products and infused products, which Coleman states are just coming online. Coleman believes TILT is unrivaled as a B2B company and is aggregating significant pieces in the cannabis space. The company recently acquired Blackbird Holdings Corp, the largest distribution platform in Nevada. Coleman explains that TILT does not face the same restrictions as other MSOs because as an infrastructure and technology cannabis company, its products can cross state lines. TILT has expanded internationally and its Macedonian operates give the company access to the lucrative European market.

Transcript:

Narrator: TILT Holdings Inc. is a business to business cannabis company focused on the research, development, manufacture, distribution and sale of products and services.

The company maintains two primary divisions: technology for software and services, and infrastructure for cannabis products and devices.

Revenue is generated from cannabis cultivation, the sale of flower, concentrates, oils, consumables and topicals, vaporizer and inhalation devices, delivery and inventory management services, and licensed software.

The company has operations in 40 US states, and Canada, and Europe, and more than 1,000 dispensaries across the US, Canada, Puerto Rico and Jamaica. TILT Holdings Inc. trades on the CSE under the ticker symbol TILT.

Brandon Colwell:   And we’re joined with Alex Coleman. How are you doing, my good sir? Thank you for joining us on the show!

Alex Coleman: Terrific, how are you?

Brandon Colwell:   I’m doing very well. You had news come out today that I think is catching a lot of people’s attention. Can you speak about that for a moment?

Alex Coleman: Sure. We produced a revenue number that we released to the market for 18.3 million for the month of January, and that was the first time we’ve actually been able to connect with investors for any results, given our long process to go public. And it’s a reflection, really, of just the starting point for all the assets we’ve been amalgamating over the past several quarters.

Brandon Colwell:   Yeah, and that’s a significant amount of revenue, especially the un-audited of last year was 98.3 or 97.3, I believe, million in USD; that’s going to put you right up there in the Tier 1 of cannabis companies. It’s just really interesting, you know – we’ve seen your news releases kind of over the last little while, people have been talking to you from here and there, but I don’t think anybody fully understood, at least speaking with other investors, just how much revenue you were actually pulling in. Is that – what states are you primarily in, and how do you get to that number so quickly?

Alex Coleman: Look, I mean, the number is interesting, because it doesn’t even reflect sales of cannabis products, infused products; you know, that’s all coming online now. Our biggest push was Massachusetts. As everybody knows, that process has been somewhat elongated by handing out license by license rather than just having the whole market go adult use at a moment in time.

And then, you know, you add in the other states, like Illinois, Ohio, Pennsylvania, you know, that we’re all going to reflect that revenue later in the year. So for us, you know, we’ve been talking to the Street, but obviously until you produce the results, I think you’re better off keeping your head down and building a business, and show what you’re doing by actually producing real revenue and real profits.

And even the margins, they were interesting, because, you know, we’re only now fully integrating all of those assets to cover each category. You know, if you think about it, we bought the largest CRM/SaaS platform, which over 1 out of 3 dispensaries use that already to connect with their consumers. We bought the largest delivery/distribution company, White Label, with a 95 market share in Nevada and a very big market share in California, and then bought the largest inhalation vaporizer company.

And what’s interesting is, what we’ve been telling the Street, you know, we use all of our fixed assets to actually produce contract manufacturing for third parties. So our universe and our product offering for the B2B market is now unrivalled in terms of how much, how comprehensive, it is.

Brandon Colwell:   Yeah, and I like how you say that as well. That’s what we’re looking for, is companies that are actually building the infrastructure of their company opposed to building the news releases for their stock. It’s really become apparent with a lot of cannabis companies, doesn’t matter if you’re in the United States or if you’re in Canada – there really are a lot of people who have been saying all of these amazing things over the last two or three years, and now fast-forward two or three years, and a lot of them are not making those milestones. They’re not adding on the revenue like they had said they are, and it’s just nice to see certain companies coming onto the stage and actually having a viable business, because that’s what people are looking for now. They’re looking for numbers.

There’s still a little bit of room for speculation, I think; it’s still a new market, it’s still growing exponentially, but it is a time right now where a lot of people are saying ‘show me the money, show me the numbers. Can you actually grow this to scale?’ And almost $100 million USD last year, it sounds like that’s exactly what you were able to do with your company.

Alex Coleman: Yeah, it’s funny you say that. Look, the industry is extremely fragmented; I read a report once that said 86 percent of everything is independent. You know, the entire market was self-financed. I mean, you wouldn’t see a market like that anywhere that would have that kind of disintermediation.

And when we got into the market, we’ve just thought about how to aggregate the largest pieces of the market, and, you know, maximize…I come from a private equity background, very traditional middle-market, and I went to my first major cannabis conference last May and saw some very interesting presentations. The first time we presented, but I’ve never been to a conference where nobody presented numbers.

And so we took that as a real positive sign for us to make a bigger initial in the market and build something very, sort of with more sustainability than just thinking about attaching a cultivation facility to a store and hoping we can just stay ahead of the consumer, which who eventually just doesn’t want to go to stores anymore.

Ed Milewski:  Alex, Ed Milewski here. How many jurisdictions are you operating in, and do you plan on continuing to expand the number of jurisdictions that you’re operating in?

Alex Coleman: Yeah, great question, absolutely. I mean, we have 33 states here and now, and that’s expanding. We have a Canadian operations, and we’ve just signed some joint ventures into Macedonia. I think the big next, I mean, obviously the United States market will be the biggest in terms of annualized revenue, but Europe is not far behind. The European Parliament just passed some type of initiative to recommend the adoption of cannabis laws on a country by country basis.

It’ll look very different than the US, I think it’ll be mostly subsidized and for health care at the outset. But you know, we have access to, there are 13,000 pharmacies in Germany on a case by case basis that are becoming registered to sell cannabis products, and through Macedonia and Nevada we can get there.

So I don’t know if that answers your question, but there’s just so much opportunity. It’s a massive expansion effort, and the biggest difference is too, we’re not bound by state barriers in trusted commerce; you know, we can sell pens, we can sell software and services across every state line, without being restricted in terms of how we handle those assets.

Ed Milewski:  And just a short follow up question: how much cash are you sitting on?

Alex Coleman: You were focused on this the last time. After all the acquisitions we have just over $40 million USD cash in the bank right now, but we’ll forever be fundraising. I mean, it’s such a great ROI opportunity for us across every state.

Ed Milewski:  Thank you.

Brandon Colwell:   Yeah, and the States especially, this has been probably the hottest topic of the beginning of this year, and obviously it was being talked about for years in the States, but really, I was starting to find a lot more investors are really saying Wait a second, why haven’t I been paying attention to some of these US players, and especially the ones who are across multi states?

Because it’s amazing how quickly the market is growing in all of these states. It’s amazing how many states are going to recreational, or going to medical, or going to both. For your – what you’d like to do in 2019, you said that you had multiple angles that you are operating under. Is there a main focus, if you had one, that you said this is going to be our bread and butter, this is what’s going to make our company? Or do you still stick with the, we offer many different types of offerings with the pens and flower, whatever it might be. Is there that one?

Alex Coleman: Look, I think you need to specialize, there’s no question. You can’t be too broad an effort, and I think that we see that a lot in the market right now. We’re, our starting point is very B2B focused and using our chief, our scientists and our engineers and our product developers to make better product that allow the businesses that are our customers engage with their customers better. And I think that’s our sole mission right now, and it’s everything in terms of the genetics of the company, how we think about product development, what helps our customers operate more efficiently and connect with their consumers more effectively.

Brandon Colwell:   Well said. You’ve got to always be able to get a lot of different people, because there are a lot of different segments that are going to come out of this cannabis sector, but also have those few that you really focus on as well.

Looking at your actual company, not so much the cash side of things, but going over to a market cap side of things: from your point of view, when you look at the revenue that you’re stating that you’ve had in January, what you’re expecting to have in 2019, and you look at your market cap sitting at around $300 million CAD, do you find that that is a massive advantage for you guys? Do you feel that you’re undervalued compared to some of these other players that are out there in the billions who, quite frankly, aren’t doing the same revenue as you’ve just stated?

Alex Coleman: Yeah, I mean, it’s substantially undervalued. I think I’m allowed to say that. By the way, just for clarification, we have about 350 million shares outstanding, so our market cap is about $1 billion CAD.

Brandon Colwell:   Oh.

Alex Coleman: But if you look at our peer group, they tend to trade around 20X forward revenue. We’re obviously, even if you just extrapolate it, the $18.3 million we reported, it’s still way below market, and that’s not even reflective of our internal budget. So no question we’re undervalued, no matter how you measure it.

We went through a different process to go public. On December 6th, we started trading; we actually did a merger, and so unlike an RTO, we control that 3 percent block that has kind of the same basis, we have more like a 14 to 15 percent float out there of shareholders that were part of our Canadian LP before we got here.

So for us, it’s going to take a little longer to work through the market. Not that worried about it; you know, the only thing it does for us is slow down our M&A a little bit, but quite honestly, as we go through these integration processes internal right now the assets we bought, we’re becoming much smarter in terms of how we think about future add-ons, and so it really hasn’t delayed much in terms of our execution.

Brandon Colwell:   I appreciate the correction there by QuoteStream; you pay a lot of money for these things, and apparently it’s lying to you. I appreciate you for correcting that, thank you.

Alex Coleman: Sure. No, we’ve had that problem. You know, the Canadian process is a little difficult to manage, so a lot of moving pieces, but we’re getting there. We get our QXQB listing in about a week as well, and that’ll allow US shareholders who want to buy and sell stock to get into it. Right now, we got left with a derivative from the merger; this doesn’t even connect to our Canadian listing. So there’s a lot of stuff, but we’ve only been public for 75 days, and there’s a lot that we’re doing to correct that.

Brandon Colwell:   Absolutely. Well, hey, I appreciate very much for you coming on the show and letting us know a little bit more about your company, but specifically speaking about that really great revenue that you’ve been able to have this last little while.

The last question is actually from one of our guests when we ask it live: William Lay is actually asking you, “Do you have one of the 9 stores in Massachusetts,” which I believe you said that’s one of the places you’re based out of. But just to ask their question straight from the chat room, we always want to make sure they’re involved: Do you have one of those nine stores?

Alex Coleman: We don’t. Our next store is, we’re in Taunton, Brockton and Cambridge, and those will grow off sequentially over the next month, month-to-month. What we did not indirectly also, what’s going to be interesting in Massachusetts, we’ve started an economic empowerment initiative about a year ago, before it became sort of more of a hot topic. Hired a gentleman by the name of Tito Jackson who’s an ex-City Councilman for Boston. We have a pipeline of dozens of minority applicants right now that we’ll end up supporting in the market through that initiative, and what would look like more of a franchise concept for lack of a better way to describe it. And we’re really excited about it, supporting all those people.

So my hope is that, on top of the three stores we open, we can open dozens of stores that are minority-led, that we can support through our B2B model. It’s like a perfect alignment.

Brandon Colwell:   Alex, I appreciate it very much, and William, I hope that answers your questions. And, cause it did. Well, thank you very much for taking the time. We appreciate you coming on the show; looking forward to speaking with you again soon as we always like tracking the progress of the companies that come on our show. I wish you all the best for the rest of your afternoon, as well.

Alex Coleman: I appreciate you having me. Thank you very much.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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