Tilray Stock Fell More than 10% after Its Q2 Earnings


Aug. 14 2019, Published 8:04 a.m. ET

Tilray (TLRY) reported its second-quarter earnings after the market closed on Tuesday. For the quarter ending on June 30, the company reported revenues of $45.9 million. The revenues beat analysts’ expectation of $41.1 million.

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Tilray stock fell after its second-quarter earnings

However, the company’s net losses were wider than analysts’ expectations. Tilray’s adjusted loss per share was $0.32 compared to analysts’ expectation of a loss of $0.25 per share. The wider-than-expected losses made investors nervous, which caused Tilray’s stock price to fall. The company was trading more than 10% lower in the aftermarket trading hours.

Tilray’s revenue growth

Tilray’s revenues rose 371.1% year-over-year from $9.7 million in the second quarter of 2018. The sales from Manitoba Harvest, legalization of recreational cannabis in Canada, and growth in the medical cannabis market drove the company’s revenues.

In February, Tilray completed the acquisition of Manitoba Harvest. The hemp food sales from Manitoba Harvest contributed approximately $20 million toward the company’s revenues. The recreational cannabis segment generated $15.0 million in revenues due to a strong performance from flower and pre-rolled products. The revenues from international markets increased to $1.9 million. Germany and Australia reporting impressive sales growth.

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During the second quarter, Tilray’s kilogram equivalents sold increased to 5,588 kilograms compared to 1,514 kilograms in the second quarter of 2018. However, the overall average selling price fell from $6.38 to $4.61. The decline in the contribution of higher-priced extract products and growth in lower-priced adult-use products lowered the company’s average selling price.

Wider net losses

For the second quarter, Tilray reported a net loss of $35.1 million or $0.36 per share. However, removing non-recurring items, the company’s adjusted loss per share was $0.32. In comparison, Tilray reported a loss of $0.17 per share in the second quarter of 2018. The lower gross margin and higher operating costs increased the company’s net losses. Also, higher interest expenses, the acquisitions of Manitoba Harvest and Natura, and international expansion had a negative impact on the company’s bottom line.

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During the second quarter, Tilray’s gross margin fell from 43% in the second quarter of 2018 to 27%. However, the gross margin improved from 23% in the first quarter. The company’s gross margin was lower due to expanding cultivation facilities in Canada and Portugal and acquiring supplies from third-party suppliers. Non-cash charges of $1.4 million related to inventory accounting dragged the company’s gross margins down. Cronos Group and Aphria reported gross margins of 53% and 28% in the comparable quarter, respectively.

Tilray’s incurred operating expenses of $44.8 million in the second quarter. However, removing costs related to stock-based compensation and acquisitions, the company’s adjusted operating expenses were at $37.4 million. Higher general and administrative expenses and higher sales and marketing spending increased the company’s adjusted operating margin from $9.6 million in the second quarter of 2018.

Next, we’ll discuss Tilray’s growth prospects.


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