Alcohol Fuels Tilray Brands’ Q2 as Cannabis Margins Drop

Alcohol net revenue doubled despite the firm falling short of top-line growth expectations.

Ontario-based Tilray Brands Inc. (Nasdaq: TLRY) (TSX: TLRY) released its financial results for the second quarter of fiscal year 2024, ending Nov. 30, 2023, showing sizable rises in net revenues as alcohol gains continue to pour into the balance sheet.

The Canadian cannabis producer and consumer packaged goods company reported a net revenue of $194 million for the quarter, a 34% increase from $144 million in the same quarter of the previous year. The figure was roughly in line with analysts’ average expectations of $195.1 million. Gross profit for the quarter was $47 million, up 11% from the previous year, with an adjusted gross profit of $52 million, an increase of 18%.

Tilray’s cannabis net revenue rose by 35% to $67 million, compared to $50 million in the same quarter of the previous year. However, the cannabis gross margin fell from 43% in the prior year to 31% in this quarter. The adjusted cannabis gross margin was 35%, down from 43% the previous year.

Tilray’s chairman and CEO, Irwin Simon, highlighted the company’s growth in revenue and the strengthening of its capital structure. He also pointed out the company’s leading position in various markets, including Canada’s cannabis operation and brand portfolio, the European medical cannabis market, and the U.S. craft beverage-alcohol industry.

“Our Q2 financial results demonstrate the strength of our brands, our global team, and our diversified growth strategy,” Simon said in a statement Tuesday. “Tilray is now uniquely positioned to become a top 12 beer and alcohol beverage company in the U.S.”

The CEO has previously cited the cyclical nature of spirits brand sales, pointing to sales peaks in the fiscal second quarter, thanks to to holiday buy-ins.

Still, Tilray posted a net loss of $46 million for the quarter, an improvement from a net loss of $62 million in the same quarter of the previous year. The company’s adjusted net loss was $2.7 million for the quarter.

The company’s beverage alcohol segment reported a 117% increase in net revenue, reaching $47 million, up from $21 million in the corresponding quarter of the previous year. The gross margin for this segment was 34%, down from 47% in the previous year, with an adjusted gross margin of 38%, compared to 52% in the prior year.

Distribution net revenue increased by 12% to $67 million, compared to $60 million in the prior year quarter. The distribution gross margin was 11%, a decrease from 13% in the same quarter of the previous year.

The company achieved $22 million in annualized run-rate savings and $14 million in actual cash cost savings as part of a $30 million synergy plan related to the HEXO acquisition. Tilray also reduced its outstanding convertible debt by $127 million compared to the first quarter, with a further reduction of $18 million subsequent to the end of the second quarter.

Tilray reiterated its adjusted EBITDA target of $68 million to $78 million for the fiscal year ending May 31, 2024.

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.


One comment

  • michael g mclaughlin

    January 9, 2024 at 7:26 pm

    Thank you for the article. A lot of numbers and accounting terms.
    My comment is the beverage industry is too crowded. I doubt their profits will keep on growing. They still owe a great deal of money. The European medical business is going to face some stiff competitions from the Germans and all of EU. Don’t count out the Dutch. They are already big in the seed market. Soon the US market and Tilray will be challenged by the Columbian and Mexican producers. That won’t happen for years however. But it will come to pass.

    Reply

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