Tilray Sees Sales Drop

The alcoholic beverage category was the only segment that grew.

Tilray Brands, Inc.  (Nasdaq: TLRY; TSX: TLRY) reported financial results for the first fiscal quarter that ended August 31, 2022. Tilray delivered revenue of $153.2 million which fell 9% from last year’s revenue of $168 million. Sales were essentially flat from the fourth quarter.  This beat the Cantor Fitzgerald estimate by Pablo Zuanic of $150 million of revenue for the quarter, however, it missed the estimate on FactSet for revenues of $155 million.

The stock jumped 30% yesterday on the news from President Biden that he would seek to address the legalization issue in the U.S. and was up slightly in early trading on Friday. It was lately selling at$3.91 and Zuanic has a price target of $4.15 with a Neutral rating.

The company also reported a net loss of $66 million. The company noted that its adjusted EBITDA was $13.5 million, marking the 14th consecutive quarter of positive adjusted EBITDA and the second-highest achieved in the company’s history. This missed the estimate by  Zuanic who thought the EBITDA would be $14.2 million.

CEO Irwin D. Simon said, “Tilray Brands’ top and bottom-line results during the first quarter reflect successful realignment of the business to maximize revenue and market share gains across core business segments and geographies. Most notably, we are now the leader in net cannabis revenue worldwide, highlighted by medical cannabis leadership globally and adult-use cannabis market share primacy in Canada. We have also optimized our performance through an ambitious and expanded cost savings across the platform. Through the end of the first quarter, we have realized $95 million of our revised and increased $100 million goal of annualized cost savings. In addition, we realized an additional $13 million of cost savings from our recently launched $30 million cost optimization plan for our existing cannabis business. In aggregate, we expect to remove $130 million of costs from the business. We also plan to realize an additional $40 million in revenue and interest payments from the strategic HEXO transaction. These initiatives, combined with our market share and revenue gains, should position Tilray Brands extraordinarily well for the future, allowing us to reconfirm our guidance of $70 – $80 million of adjusted EBITDA and be free cash flow positive.”

Tilray also reaffirmed its guidance to deliver $70-$80 million of Adjusted EBITDA and be free-cash flow positive in its operating business units this fiscal year. The company has a comfortable cash balance of $500 million.

Arelis Agosto, Research Analyst at Global X ETFs said, “The earnings print highlighted Tilray’s readiness to scale up production in new markets as cannabis’ path toward nationwide legalization continues, with footprints established in key markets. Though Biden’s move is relatively modest, any sign of progress will drive momentum towards more meaningful legislative action, and we view Tilray’s cautious approach to international expansion as wise, with ongoing efforts in the consumer goods segment in the U.S., while limiting direct exposure to the complicated state-to-state markets. Though the FY 2021 earnings data missed expectations, improvement to gross margin of 51% from 43% in the prior year quarter, provides credibility to the firm’s ambitions of reaching profitability and managing ongoing headwinds in the Canadian market.”

Revenue Breakdown

The cannabis business fell to $58 million from last year’s $70 million. The distribution business fell to $60 million from last year’s $67 million and the wellness business fell slightly to $13 million from $14 million. The only segment that improved was the beverage alcohol which rose to $20 million from last year’s $15 million.

International Business

International cannabis revenue was $10.4 million. On a constant currency basis, international cannabis revenue was $11.9 million. Tilray said that Germany was poised to lead the European cannabis market and Tilray Medical already leads in medical cannabis within Germany with a market share of approximately 20% with whole flower, extracts, and Dronabinol products.

Beverages

In the U.S., Tilray’s businesses include SweetWater Brewing Company, the 10th largest craft brewer in the nation and leading lifestyle brand, Breckenridge Distillery, and Manitoba Harvest, a pioneer in hemp, CBD, and wellness products. The company said it is focused on driving revenue gains across each of these businesses, which will ultimately create a strong channel for additional revenue in adult-use cannabis, pending federal legalization.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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