Tilray Posts Q1 Results, Stock Falls, and Net Losses Widen

On Monday, Tilray (NASDAQ:TLRY) reported its first-quarter earnings, which ended on March 31, after the market closed. For the quarter, the company posted revenues of $52.1 million, which beat analysts’ expectations of $50.88 million. The company’s adjusted EBITDA was negative $19.7 million, which was better than analysts’ expectation of negative $24.9 million.

Despite reporting higher-than-expected sales and EBITDA, the company was trading 5% lower in the extended hours of trading on Monday. The company’s stock price fell due to higher-than-expected net losses and a sequential decline in cannabis’s average selling price. For the quarter, the company reported a net loss of $184.1 million. However, removing special items, the company’s adjusted net losses were $112.1 million. The adjusted net losses were significantly higher than analysts’ expectations of $49.1 million. Let’s look at Tilray’s first-quarter performance in more detail.

Tilray’s revenue rose

For the quarter, Tilray reported revenue growth of 126.2% from $23.0 million in the first quarter of 2019 and 11.0% from $46.9 million in the fourth quarter of 2019. The growth in cannabis and hemp sales drove the company’s revenue. Sequentially, the company’s cannabis sales grew by 8.9%, while its hemp sales increased by 14.3%. Compared to the fourth quarter, the hemp sales’ contribution to total revenue increased from 39.8% to 40.9%.

Breaking up the cannabis sales growth, Tilray’s adult-use cannabis sales grew 23.0%, while its medical sales in Canada and international markets increased by 21.6% and 44.9%, respectively. However, the decline in bulk sales partially offset some of the revenue growth in the cannabis segment. The introduction of Cannabis 2.0 products and the expansion of its retail distribution drove adult-use cannabis sales. By the end of the first quarter, the company had expanded its adult-use products to 11 provinces. Tilray introduced its Cannabis 2.0 products in nine of the regions. However, the average selling price per gram declined from $8.78 in the fourth quarter of 2019 to $5.28, which offset some of the revenue growth.

Tilray’s EBITDA margin improved

Tilray’s EBITDA improved from a loss of $35.3 million in the fourth quarter of 2019 to $19.7 million. The increased revenue, improved gross margin, lower expenses, and operational efficiencies drove the company’s EBITDA. The company’s gross margin, excluding inventory valuation adjustments, improved from 23.6% to 28.6%. Tilray’s general and administrative expenses fell from $32.5 million to $17.8 million, while its sales and marketing expenses declined from $21.9 million to $17.9 million. The company’s stock-based compensation also fell from $9.5 million to $7.7 million.

Overall, Tilray’s net losses fell from $219.1 million to $184.1 million. However, removing special or one-time expenses, the company’s adjusted net losses were at $112.1. The amount is an increase of 187.5% from adjusted net losses of $39.0 million in the fourth quarter of 2019.

Liquidity

At the end of the first quarter, Tilray had cash and cash equivalents of $174 million. During the quarter, the company secured credit of $60 million and also offered new equity offerings worth $85.3 million. These initiatives strengthened the company’s balance sheet. Meanwhile, the company’s management expects to spend $110 million–$125 million this year on operating activities, payment of interest and principal, and capital expenditures. Compared to the earlier guidance, Tilray has increased its capital expenditures due to its efforts to complete the second phase of its Portuguese facility. Meanwhile, the company’s management is still hopeful about posting a positive EBITDA in the fourth quarter of 2020.

YTD stock performance

So far this year, Tilray has lost 52.8% of its stock value as of May 11. The company’s stock price fell due to its weak fourth-quarter performance, weakness in the cannabis sector, and the global sell-off. Meanwhile, Tilray has underperformed the ETFMG Alternative Harvest ETF (NYSE:MJ), which fell by 31.7% during the same period. Canopy Growth (TSE:WEED), Aphria (NYSE:APHA), and Aurora Cannabis (NYSE:ACB) have fallen by 23.3%, 32.6%, and 68.8%, respectively.