Tilray misses ‘muted expectations’ on plunging cannabis sales

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(This story has been corrected to reflect that Tilray’s gross international sales increased.)

Tilray reported net revenue of $155. 1 million (196 million Canadian dollars) in the quarter ended Nov. 30, considerably lower than consensus expectations of $170 million in cannabis sales, citing coronavirus-related headwinds, supply-chain issues and a lower share of the key Canadian market.

However, the New York-based company eked out net income of $5.7 million, compared with a loss of $34.6 million in the previous quarter, and said it’s still the market leader in Canada.

Tilray also unveiled the new name of its parent company, Tilray Brands.

The lower sequential revenue mostly stems from lower cannabis sales, which declined 16.6% in September-November to $58.8 million from the previous quarter.

In the company’s key Canadian adult-use market, gross sales fell 28.8% to $49.5 million and medical cannabis sales declined 5.3% to $7.9 million.

Marijuana sales accounted for only 37.9% of the company’s overall revenue, down from the previous quarter, when cannabis accounted for more than 40% of revenue.

In a note to investors, Andrew Carter, an analyst for St. Louis-based investment research firm Stifel GMP, wrote that “Tilray underperformed our muted expectations with cannabis revenue $4 million below our estimates, with gross adult use cannabis revenue down 29% sequentially (and) with Headset trends suggesting the combined portfolio of brands declined 20% sequentially during the fiscal quarter.”

Distribution was the company’s biggest segment in the quarter, with $68.9 million in sales, or 44.4% of revenue.

Wellness revenue fell 7.5% compared to the previous quarter, to $13.8 million in the three months ended Nov. 30.

Net beverage alcohol revenue fell 11.4% to $13.8 million.

Gross international sales grew to $13.7 million.

European revenue fell 1.4% from the previous quarter to $74.9 million.

On a conference call with analysts, Tilray CEO Irwin Simon said he doesn’t see legalization happening in the United States for at least the next two years.

He was more hawkish on the European market.

“We’re working with the German government in ways that (legalizing cannabis) is going to happen,” he said. “It’s probably going to get announced soon (but) it will probably take 12-18 months before it can happen.

“You will see potentially Portugal and other countries go ahead. You even see (French President Emmanuel) Macron talking about it in France in regards to his election in May that is something he will have on his election platform.”

The CEO acknowledged the company has lost market share in Canada but said Tilray won’t drop prices as much as some competitors.

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“We have lost some share in the marketplace,” Simon said. “Some of it was self-inflicted on ourselves, but the easiest thing is to drop price and get share, but we’re here to build something for the long term.”

Blair MacNeil, president of Tilray’s Canadian division, said 157 new brands launched in the highly competitive Canadian market last year, helping push overall prices lower.

“In the last year, we’ve come down on price 1.7% while the market has come down 22.6%. We have definitely protected our margins on the way down,” he said.