COVID-19The weed wireTilray slides on massive Q1 loss, says COVID-19 hasn’t disrupted operations

Company said it had to grapple with reducing its 1,443-member workforce by 10% in February and restructure its operations
Jared Gnam Jared GnamMay 12, 20207 min

Despite reporting that COVID-19 hasn’t yet impacted its operations, shares of Tilray Inc. (NASDAQ: TLRY) slid Tuesday after the Canadian cannabis producer posted a steep first-quarter loss.

On late Monday, the British Columbia-based company said its net loss for the three months ending March 31 amounted to US$184.1 million, which actually improved from a $219.1 million net loss in Q4 when the company reported significant impairment charges.

Read more: Tilray takes a tumble after reporting 2019 losses

Tilray said in the first three months of 2020 it had to grapple with reducing its 1,443-member workforce by 10 per cent in February and restructure its operations.

The company attributed the net loss in Q1 largely to the impact of a US$72 million change of the fair value of the warrant liability and a near US$30 million asset impairment charge. Also, a weakened Canadian dollar in the quarter and increased severance costs due to the headcount reductions further cut into its bottom line, Tilray said.

Despite the rocky first-quarter financial results, CEO Brendan Kennedy said the cannabis firm is on the road to profitability.

“We remain focused on executing on our long-term growth opportunities and our goal of generating positive Adjusted EBITDA by the end of the fourth quarter [2020],” he said in a statement.

Tilray/Press photo

International medical sales key to Tilray’s strategy

The company reported US$52.1 million in Q1 net revenues, which increased 11 per cent overall from the prior quarter.

The growth was driven by a 23 per cent jump in Canadian adult-use sales and a 14 per cent bump from its hemp food sales across the U.S. and Canada from Tilray’s Manitoba Harvest hemp subsidiary.

For the first time, the company reported that international medical sales of US$5.8 million had eclipsed domestic medical sales of US$4.1 million in the first quarter.

Kennedy said he expects international medical sales to be key to driving growth and positively impact margins moving forward.

Gross margin, excluding the inventory valuation adjustments, increased to 29 per cent in Q1 from 24 per cent in Q4.

The CEO added that cutting Tilray’s workforce and focusing on efficiencies will help the company save around US$40 million over the course of the rest of the year.

Tilray reported an adjusted earnings before interest, taxes, depreciation and amortization loss of US$19.7 million in Q1, which improved from the recorded adjusted EBITDA loss of US$35.3 million in Q4. The improvement was generally due to cost reductions and operating efficiencies, the company noted.

Tilray also reported that the average cannabis net selling price per gram fell to US$5.28 from US$5.60 a year ago. Excluding excise taxes, the price was US$3.49 a gram.

While the company said its had to adjust to jurisdictional health and safety protocols in response to the COVID-19 pandemic, its production and manufacturing sites remain open.

“To date, the company has not experienced any material COVID-19 impacts related to its ability to serve patients and consumers around the world with medical cannabis products, adult-use cannabis products in Canada, and Manitoba Harvest hemp products,” Tilray said.

Shares in the company fell 7.5 per cent on Tuesday on the NASDAQ exchange. Tilray stock has declined around 98 per cent since from its highs on Sept. 2018.

The company ended the first quarter of 2020 with US$174.0 million in cash. Tilray was able to tap capital markets for a US$90.4 million equity offering in the quarter, but the financing was priced at a 25 per cent discount to the company’s shares at the time of the March 13 announcement.

Read more: No, cannabis isn’t recession proof, analyst says

Top image via Tilray

 

jared@mugglehead.com

@JaredGnam

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