Cannabis Watch: Tilray says coronavirus has not materially impacted its ability to sell marijuana

Cannabis Watch

International medical cannabis sales exceed Canada, CEO says it will achieve a non-GAAP measure of profitability by end of year

Analysts polled by FactSet had expected a loss of 44 cents a share on sales of $49.4 million


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The COVID-19 pandemic has not materially hurt cannabis producer Tilray Inc.’s ability to sell pot to medical patients and recreational customers, the company said late Monday as it reported a wider-than-expected net loss.

Shares of Tilray
TLRY,
+3.85%

fell 5.3% in the extended session after closing up 3.9% to close at $8.08 in Monday trading. The stock has lost just over half its value this year, as the Cannabis ETF
THCX,
-0.34%

has fallen 31%.

The British Columbia-based cannabis company reported a first-quarter net loss of $184.1 million, which amounts to $1.73 a share, compared with a loss of $29.4 million, or 31 cents a share, a year ago. The company’s larger-than-expected losses were a result of non-cash changes in the value of its warrants, a $29.8 million asset impairment charge and $28.1 million in foreign currency-related expenses because of the relative weakness of the Canadian dollar.

In the company’s earnings call Monday, Chief Financial Officer Michael Kruteck said the $28.9 million impairment charge was the result of regulatory uncertainty related to its cannabidiol, or CBD, deal with Authentic Brands Group in the U.S. While the U.S. has legalized hemp, the Food and Drug Administration has said that foods and beverages with CBD, among other things, fall under its jurisdiction.

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Tilray’s revenue rose 126% to 52.1 million, from $7.9 million a year ago, and the company said that it paid $5 million in excise duties, which many consumer packaged-goods companies remove from gross revenue. Tilray’s revenue grew 11% compared with the fourth quarter.

In the earnings call, Kruteck said that, like many cannabis operators, Tilray saw an increase in sales during March as people stockpiled cannabis ahead of stay-at-home orders in Canada. Krutek also said that in April sales have slowed, but to a higher level than in January and February.

The company sold $5.8 million worth of medical weed abroad, which was higher than medical sales in Canada for the first time. “International medical will never go back,” Chief Executive Brendan Kennedy said in the earnings call. “It will always be in excess of our Canadian medical revenue.”

In Canada, Tilray sold $20.9 million of recreational cannabis and $4.1 million worth of medical pot. Manitoba Harvest, its hemp foods unit, reported sales of $21.3 million.

Analysts polled by FactSet had expected a loss of 44 cents a share on sales of $49.4 million.

In a statement, Kennedy said that the company predicted it would flip to a profit using a non-standard measure of profitability. He also said that the company took several steps to make its business more efficient, which should save it $40 million a year, though the measures were not “fully reflected” in the quarter’s results.

Read: Aurora Cannabis and Tilray set to detail hoarding of marijuana during COVID-19

Tilray said the average cannabis net selling price per gram decreased to $5.28 from $5.60 a year ago; excluding excise taxes, the price was $3.49 a gram.

To date, Tilray said that it had not experienced any material coronavirus-related impacts related to its medical cannabis sales, recreational pot sales in Canada or its Manitoba Harvest hemp products. In Canada, cannabis companies have been largely allowed to continue operations, though additional safety measures are necessary.

“Some of our shipments [have been] delayed here and there by a few days,” Kennedy said in the call. “Overall, we have not seen significant COVID-19-related distribution challenges in Canada or internationally in the first quarter and throughout April and the first part of May.”

In March, Tilray sold $90.4 million worth of stock at $4.76 a share, less than a third of what it listed the stock for when it went public. Tilray listed on the Nasdaq at $17 a share in 2018, months ahead of Canadian legalization of recreational pot use and at one point its shares briefly touched $300 in intraday trading. Tilray raised the money in March as the Dow Jones Industrial Average
DJIA,
-0.44%

and S&P 500
SPX,
+0.01%

suffered their largest single-day losses since the October 1987 crash.

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