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Why Tilray's Revenue Soared and Its Loss Widened in Q1

By Keith Speights - May 12, 2020 at 7:01AM

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The Canadian cannabis company expects an improving bottom line in future quarters.

Tilray's (NASDAQ:TLRY) 55% year-to-date loss is, without question, really bad. But it could have been much worse. Actually, it was much worse. At one point in March, Tilray had plunged nearly 90%.

The Canadian cannabis company announced its first-quarter results after the market closed on Monday. Don't expect those results to spark a major rebound. Here are the highlights from Tilray's Q1 update.

Cannabis leaf over an american dollar bill

Image source: Getty Images.

By the numbers

Tilray announced first-quarter revenue of $52.1 million, a 126% year-over-year jump. This result beat the average analysts' Q1 revenue estimate of $50.62 million.

But while Tilray's top line looked great, it was a different story on the bottom line. The company posted a net loss in the first quarter of $184.1 million, or $1.73 per share, based on generally accepted accounting principles (GAAP). Tilray's loss in the first quarter of 2020 was much worse than the $29.4 million, or $0.31 per share, recorded in the prior-year period. It also wasn't close to hitting the consensus Wall Street estimate of a net loss of $0.42 per share.

However, there was another positive trend for Tilray in the first quarter. Its cash position, including cash, cash equivalents, and short-term investments, increased to $174 million as of March 31, 2020, from $96.8 million as of the end of 2019.

Behind the numbers

Over half of Tilray's year-over-year revenue increase in the first quarter resulted from its Manitoba Harvest acquisition. The prior-year period only included a partial quarter of sales for the hemp food company.

However, Tilray also saw tremendous growth for most of its cannabis channels. Sales to the Canadian adult-use recreational cannabis market soared 165% year over year to $20.9 million, boosted in part by the opening of the Cannabis 2.0 cannabis derivatives market. Canadian medical cannabis sales rose 35% to $4.05 million. International medical cannabis sales jumped 221% to $5.81 million.

The only downside was bulk cannabis sales. In the prior-year period, Tilray's bulk sales totaled $4.77 million. The company had no bulk cannabis sales in Q1 of 2020.

Tilray's net loss stemmed mainly from the change in the fair value of its warrant liability of $72 million. The company also wrote off $29.8 million in impairment of assets. Currency headwinds caused another $28.1 million hit to the bottom line. 

But while Tilray's bottom line looked worse when compared to the first quarter of 2019, it actually improved somewhat from the fourth quarter of 2019. The company's net loss in Q1 was $35 million less than in Q4, thanks in large part to an improved gross margin.

As for Tilray's larger cash stockpile, it was the result of the company's public offering of common stock, pre-funded warrants, and warrants in March. This transaction generated net proceeds of $85.3 million.

Looking ahead

Most Canadian marijuana stocks still aren't generating positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Count Tilray in this group. However, that could change before too long. Tilray CEO Brendan Kennedy said that the company still plans to hit its goal of generating positive adjusted EBITDA by the end of 2020.

Kennedy noted that Tilray has taken several key steps to improve efficiency across its business that should enable the company to realize annualized cost savings of around $40 million. He said, "While the positive impact of these actions are [sic] not fully reflected in this quarter's results, they will become more clearly evident over the course of this year."

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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