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Canadian marijuana producer Tilray reported mixed third-quarter earnings after the close Tuesday. Revenue beat expectations but losses were larger than expected with higher costs and lower average selling prices. $TLRY rose over 2% on the report..

Marijuana Bud Tilray

Tilray Inc NASDAQ: TLRY  Reported Earnings After Close Tuesday

($0.32) Missed Exp ($0.23) EPS and $45.9 Beat $40 million forecast in revenue

Earnings

Tilray TLRY reported a third-quarter net loss of $35.7 million, or 36 cents a share, versus $18.7 million, or 20 cents a share, in the year-ago period. Revenue rose to $51.1 million from $10.1 million in the year-ago period, surpassing Wall Street expectations. Excluding excise taxes, revenue was $48.2 million.

However Tilray's per-share loss, of 32 cents per share, was worse than expectations for 23 cents.

Analysts surveyed by FactSet expected losses of 30 cents a share on sales of $49 million. For the fourth quarter, analysts expect a loss of 28 cents a share and sales of $57 million

Like many Canadian public cannabis companies, Tilray has struggled to meet the lofty expectations set around legalization. CEO Kennedy has in the past laid part of the blame on Canada’s other licensed weed companies, saying that they have lied about how much marijuana they can grow. That created problems for Tilray because it had planned to source marijuana from other companies versus planning to grow all of the cannabis it needed.

Kennedy told MarketWatch on Thursday that his view of the Canadian cannabis industry has not changed much from last quarter, when he said he was “less skeptical” of cannabis supply in Canada.

Costs related to international expansion, interest from convertible debt and the Manitoba acquisition kept the company in the red. The average selling price was down almost a third on the year.

Aquisitions

Revenue increased with Tilray's acquisition of Manitoba Harvest, which Tilray has described as a large hemp food company. Sales from food products accounted for $19.9 million of the company's total sales.

Tilray Inc NASDAQ: TLRY

Market Reaction > After hours NASDAQ: TLRY 22.04 USD +0.48 (+2.20%)

Highlights

  • Of its total revenue, $15.7 million is from hemp products, the result of its acquisition of Manitoba Harvest earlier this year.
  • Tilray sold 10,848 kilograms of weed in the recently ended quarter compared to 1,613 kilograms sold in the prior-year quarter.
  • The average net selling price per gram decreased to $3.25 from $6.21 in the year-ago quarter, due to the shift in product and channel mix.
  • Tilray sold $15.8 million worth of recreational cannabis
  • International medical cannabis sales increased to $5.7 million from $949,000 a year ago.
  • Tilray Chief Executive Brendan Kennedy said in an interview with MarketWatch that he attributes the international cannabis sales to investments the company made in 2017 and 2018 that are now beginning to bear fruit.

“[International revenue] will definitely increase,” he said. “And in Germany, we see continued demand, we see demand for high-quality GMP [good manufacturing practices] flower. We’ve proven we can get product into Germany, it’s more difficult than people understand to get products there and it’s difficult to have sellthrough there.”

Tilray Financial 3Q19

Germany

Kennedy said selling in Germany can be a challenge because the country expects product sold to match a narrow range of tetrahydrocannabinol, or THC, a psychoactive compound found in cannabis. THC content declines over time in cannabis plants, Kennedy said, which creates a challenge when shipping product after promising a certain THC percentage.

Kennedy said that when Tilray goes to the market to find high-potency weed, there is very little available for purchase, despite a fair amount of product showing up on the balance sheets of Tilray’s rivals. “If we had access to more of it, we could sell more of it,” Kennedy said.

Lower-quality marijuana suitable for extraction is not difficult to obtain, he said.

Tilray said in August that it was acquiring a cannabis retailer in Alberta for up to C$110 million ($82.9 million) in an all-stock deal. Tilray also signed a deal with a German company to supply $3.3 million worth of weed from its Portugal facility.

Tilray shares have struggled this year, falling 70%, as the ETFMG Alternative Harvest ETF MJ dropped 26.57% and the Horizons Marijuana Life Sciences ETF HMMJ fell 30.55%.

Cannabis is in a long term, secular bear market

Prices said to drop and settle about 90% lower than the $10/gram (US or CDN) it was for a long time under prohibition. It's a dried, non-perishable commodity that can be grown outdoors a lot cheaper as some are doing. Leave it to Ontario (and other governments) to set up a legal cannabis business framework that keeps people going to the black market.

Analysts legal market is way overpriced with less selection and it's harder to get. Some legals are learning and offering cheaper strains such as Hexo's Original Stash, but bulls seems to see the big picture which is a price war and a race to the bottom ($1/gram, US or CDN).

 

Source: Tilray, AlphaStreet

From The Traders Community Research Desk

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