Tilray Brands, Inc. (Nasdaq: TLRY) reported financial results for the second fiscal quarter that ended November 30, 2022, as revenues fell 7% from last year’s $155 million to 2022’s net revenue of $144 million. Revenue also fell sequentially from the previous quarter’s net revenue of $153 million. On a positive note, the company did record $29.2 million in operating cash flow and $25.4 million in free cash flow in the quarter.
Tilray also delivered a net loss of $67 million versus last year’s net income of $5.7 million. The earnings per share were -$0.11 and the Adjusted EPS of -$0.06. The company said it has 8.3% of the Canadian cannabis market share.
The company stated it had a strong financial position with $433.5 million in cash and marketable securities. Yet, the cash and cash equivalents were only $190 million in November 2022, which fell from $415 million in May 2022. The shift is the marketable securities which now account for $243 million.
CEO Irwin D. Simon said, “During the second quarter, Tilray Brands took decisive, effective actions to manage operating cash flow and focus the business on accretive acquisitions and a path to long-term profitability. And we have certainly done so – even amid an evolving retail environment – by removing costs and driving efficiencies across the platform in supply chain, procurement, packaging, and labor. We are close to achieving our increased annualized cost savings target of $130 million, consistent with our commitment to building a lean, efficient, and dynamic business that will realize tangible and immediate benefits as the market improves.”
Tilray reported that its cannabis gross profit increased 37% to $18.6 million from $13.5 million in the prior year’s quarter, while the gross margin percentage increased to 37% from 23%. The company attributed the improvement on cost-savings programs, offset by reducing production, coupled with the revenue realized from the strategic alliance with HEXO in the current year and in inventory provision in the prior year.
However, net cannabis revenue in the quarter fell to $49 million from last year’s $58 million for the same time period. The company brought in more in distribution which was $60 million but also fell from last year’s $68 million.
The company said it would focus on using data and consumer insights coupled with ongoing budtender and consumer education is expected to enable the acceleration of both sales and market share growth.
In a statement, Tilray said, “Even as Europe contends with a difficult economic climate that has negatively impacted the cannabis industry, the positive trends towards greater acceptance of medical cannabis and legalization of adult use continue. We believe we are exceptionally well situated to benefit from the meaningful economic growth that will come to our industry as a result of these positive changes, given our ability to provide the most sought-after, consistent and sustainable cannabis products for the medical and adult-use markets. In Germany, we are in a win-win position regardless of whether in-country cultivation is exclusively permitted or whether imports are also allowed given our domestic footprint with our Aphria RX facility located in Germany along with our facility in Portugal. In addition to our supply-chain footprint, we are also uniquely positioned to take advantage of the insights and learnings we have developed through our participation in the Canadian adult-use market. This experience, paired with our competitively advantaged supply-chain footprint, gives us great confidence in our ability to lead the European medical market and German adult-use market in the future.”
Beverage-alcohol sales increased 56% to $21.4 million, over the prior-year quarter, including revenue from acquisitions. In the U.S., Tilray’s businesses include SweetWater Brewing Company, the 10th largest craft brewer in the nation; Breckenridge Distillery; and Manitoba Harvest, a pioneer in hemp, CBD and wellness products; as well as Montauk Brewing Company, the fastest growing craft beer brand and #1 craft brewer in Metro New York, which Tilray Brands acquired in the second quarter of fiscal 2023. Tilray said that the Montauk Brewing transaction was immediately accretive to EBITDA and it expects it will deliver strong revenue and adjusted EBITDA on a go-forward basis.
Mr. Simon continued, “Tilray Brands’ re-positioning as a global diversified portfolio of brands will drive our ability to seize top-line opportunities across geographies and business lines. In the U.S., this includes investing in, acquiring, or building compelling and profitable lifestyle CPG brands across craft beverage-alcohol and wellness consumer products that are cannabis adjacent, resonate powerfully with consumers, and are strongly positioned in key markets. In Europe, we believe that we are extremely well-positioned overall in a cannabis market. And, in Canada, we will be patient and strategic in building our competitive positioning amid the price compression and difficult operating conditions that we expect will, inevitably, consolidate the oversupply of licensed producers. These efforts will be supported and enhanced by one of the strongest balance sheets in the industry with close to $433.5 million in cash and marketable securities on-hand.”