Industry updateTilray’s pot sales pop ahead of Aphria merger

Tilray stock rose 10% in after-hours trading Wednesday after the firm posted a better-than-expected Q4 loss of US$3M
Jared Gnam Jared GnamFebruary 17, 20218 min

Tilray Inc. (Nasdaq: TLRY) boosted sales and cut costs in the final three months of 2020, as it signed a blockbuster merger deal with rival Aphria Inc. (TSX: APHA) (Nasdaq: APHA).

On Wednesday, the Nanaimo, B.C.-based cannabis producer reported fourth-quarter net revenue of US$50.7 million, up 10 per cent from US$47.2 million in the previous quarter.

The company says it was profitable on the basis of adjusted earnings before interest, taxes, depreciation and amortization of US$2.2 million.

But net losses ticked up to a reported US$3 million, compared to US$2.3 million in the previous quarter. However, the firm said it reduced costs by US$57 million in the fourth quarter compared to the same three-month period in 2019 when it posted a net loss of US$219.8 million.

“These results required hard work and dedication and I sincerely appreciate everything the Tilray team has done to transform our business during 2020,” Tilray CEO Brendan Kennedy said in a statement. “We now look forward to the beginning of the next chapter in our corporate journey.”

In December, Tilray and Aphria agreed to merge in a deal they say will create the world’s largest global weed company by revenue.

Aphria CEO Simon Irwin will lead the new business, while the Tilray name and its ticker on the Nasdaq will remain after the deal is completed. Tilray said Wednesday it expects the transaction to close in the second quarter of 2021.

Tilray stock climbed more than 10 per cent in after-hours trading Wednesday, following a 9 per cent decline in the regular session.

Analysts on average expected Tilray to report a loss of US$0.14 per share, compared to the US$0.02 per share the firm reported.

“All eyes in the sector were on the company’s fourth quarter earnings and the company did not disappoint,” Investing.com senior analyst Brenda O’Farrell said. “In fact, it offered a stellar performance, beating analyst estimates, while showcasing its international reach.”

While one quarter doesn’t make a trend, O’Farrell says hope for federal cannabis legalization in the U.S. continues to provide strong tailwinds for the sector.

Since the U.S. federal election Nov. 3, Tilray stock has jumped 376 per cent and Aphria stock is up 296 per cent. That’s despite recent volatility fueled by Reddit traders, which helped push both pot stocks to all-time highs last Wednesday before sending them crashing down Friday.

Read more: Reddit traders send pot stocks to the moon — and back

Read more: US cannabis banking likely to come ahead of Senate legalization bill

Tilray pot sales jump ahead of Aphria merger
Tilray’s GMP-certified EU facility in Cantanhede, Portugal. Press photo

Tilray’s top boss Kennedy says his company will keep focused on lowering production costs, building strong brands and international distribution networks with partner Aphria moving forward. The companies expect US$100 million in cost-cutting synergies on an annual basis.

Tilray has signed four international supply deals since revealing the merger deal in December, including an import contract inked this month with U.K. medical cannabis distributor Grow Pharma.

Read more: Tilray stock soars 40% on UK supply deal with Grow Pharma

For now, the bulk of the firm’s revenues come from Canada’s adult-use market.

Tilray reported US$25.4 million in recreational sales at home, up 28 per cent from the previous quarter.

Medical sales in Canada were a reported US$4.2 million, while international medical revenue climbed 44 per cent on a quarterly basis to US$11.7 million.

Average per-gram sales price increased to a reported C$7.99 compared to C$1.88 in the fourth quarter of 2019. Tilray says the increase was due to a surge in international medical sales, a shift to higher potency flower and 2.0 products in the Canadian adult-use market, as well as a major drop in third-party bulk sales.

Gross margin increased to 29 per cent, compared to 7 per cent in the previous quarter.

Cash and cash equivalents totaled US$189.7 million at the end of the quarter.

Top image via Tilray

 

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