Shares of Tilray, Inc. (TSX: TLRY) (Nasdaq: TLRY) got a boost Monday, after the firm booked an unexpected profit in its latest earnings results. While cost cuts have boosted its bottom line, the company’s grip on the cannabis market is slipping.
In a statement, Tilray published its results for the three months ended Nov. 30, 2021, with second-quarter net revenue down 8 per cent to US$155.2 million from US$168 million in its first quarter.
Over the same period, cannabis sales dropped 16 per cent to US$58.8 million from US$168 million. Pot now makes up just 38 per cent of total revenue, down from 42 per cent last quarter.
But net income of US$5.8 million was a welcome surprise to investors, compared to a loss of US$34.6 million last quarter and ending the previous fiscal year with a net loss of US$336 million.
In the quarter, operational expenses were reduced by 27 per cent to US$87.5 million from US$119.5 million, with a significant cut to general and administrative costs. Last September, the firm said it was shuttering its flagship facility in Nanaimo, with an estimated 160–300 jobs being lost in the process.
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In the same statement, the company announced its new parent name, Tilray Brands, Inc., reflecting its “evolution from a Canadian [licensed producer] to a global consumer packaged goods company powerhouse with a market leading portfolio of cannabis and lifestyle [consumer packaged goods] brands.”
So how focused on cannabis is Tilray at this point? At US$69 million, 44 per cent of its sales came from its distribution business. Another US$13.8 million (9 per cent) came from wellness sales, and US$13.7 (9 per cent) from beverage alcohol.
It remains to be seen if broad diversification of the firm’s portfolio signifies an ongoing lack of performance in key areas, or if spreading its efforts will benefit its bottom line in the long run.
While its SweetWater craft beer brand has been expanding, Tilray disclosed in its U.S Securities and Exchange Commission filings that it ended a joint venture with Budweiser-maker Anheuser-Busch InBev NV (NYSE: BUD). The pot beverage research deal kicked off in December 2018.
Tilray says it’s kept manufacturing equipment from the JV, along with a royalty-free licence to use the developed technology worldwide.
As domestic sales slump, and prospects of a federal U.S. weed economy flail, the company has placed its near-term hopes in burgeoning international markets.
“In Germany — Europe’s largest and most profitable medical cannabis market — our nearly 20 per cent share leads the market,” CEO Irwin Simon said in the statement. “We believe this, coupled with our infrastructure, will also allow us to capture the adult-use market as legalization accelerates under the new coalition government.”
Company stock jumped around 14 per cent Monday to $9.23 on the Toronto Stock Exchange.
nick@mugglehead.com
