Tilray cannabis sees share price fall amid higher losses
14:15, 7 October 2021
Canadian cannabis company Tilray reported revenue and gross profit growth during its latest quarterly earnings report on Thursday, but investors continue to worry about its net losses.
Tilray posted net revenue of $168m (£123.3m) for the three-month period ending in August, up 43% over the comparable period from last year, according to the company’s press release. Those strong revenue numbers drove another profitable quarter of $51m in gross profit, up 46% year over year.
However, net losses totalled $34.6m during the quarter compared with net losses of $21.7m in the prior year quarter. It also represented a reversal of the net income gain of $33.6m the company posted in its prior quarterly results for the three-month period ending in May.
Stock price
Tilray shares swiftly moved nearly 3% lower to around $10.47 per share as the market absorbed the news.
Tilray’s shares are technically up nearly 20% on the year, but back in February a Reddit retail investor push caused the shares to surge briefly to highs of $67 per share. Since then, the shares have fallen by around 84%.
After the company set a price for its initial public offering at $17 per share in 2018, the shares quickly surged to more than $148 per share in the following months. But since that IPO, Tilray shares have continued to fall and now trade 92% lower off those highs.
Mergers and acquisitions
Tilray has been aggressive in its acquisition strategy since going public and management said it will continue to be aggressive as it looks to expand in Germany and more broadly in Europe.
In May, Tilray closed its acquisition of Aphria making it the largest cannabis company by revenue. To date, the company says that acquisition has helped generate cost-savings of $55m on a run-rate basis, with actual cash-savings close to $20m.
Back in November 2020, Tilray also bought Atlanta-based brewery SweetWater, which the company said drove $15m of revenue during the quarter.
Additionally, Tilray’s acquisition of CBD and hemp foods brand Manitoba Harvest from 2019 drove another $15m of revenue for the company during the quarter.
Legalisation efforts
Senate majority leader Chuck Schumer of New York introduced a bill earlier this month to legalise marijuana in the US.
Taking questions from retail investors during the earnings call, one investor described the legislation as “impending”. However, later in the call Vivien Azer of Cowen and Co. noted that the company’s house view is that the legislation is very much not impending.
Congress currently is focused on passing the Build Back Better Act, a corresponding bipartisan infrastructure bill, and expanding the debt ceiling so that the government does not default on its debts.
“The Schumer bill came out with a lot of thunder, and everyone thought it would happen right away, but I agree with you that it’s slow,” said Irwin Simon, chair and CEO of Tilray. “Yes, we’d love to see legalisation in the US … but if legalisation doesn’t happen for 18-24 months, we still have a lot of runway to grow this business and do acquisitions in adjacent areas whether its spirits and alcohol or hemp and CBD.”
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