Last week the stock market got slammed with coronavirus fears which sent the indexes plunging over 10%. This plunge has added to an increasingly tough environment for the cannabis sector.
This week Tilray (TLRY) reported earnings and although revenues were up from last year, Q4 revenues declined by 20% sequentially. The stock sold off by over 10% in after-hours trade on Monday and many investors are wondering what’s next for the company after this earnings report.
TLRY’s revenue Increased 287% to $167.0 Million in the Full Fiscal Year 2019. Adult-use cannabis revenue increased over 3x in the fourth quarter compared to the prior year period. The company saw 7% sequential quarterly revenue growth and also signed and closed a $60 million dollar senior credit facility.
The increase in revenue was driven by substantial growth in sales for the Canadian adult-use market cannabis market along with the international medical markets. The acquisition of Manitoba Harvest also contributed to its revenues.
Total cannabis kilogram equivalents sold increased over 446% to 35,380 kilograms from 6,478 kilograms in the prior year. The average cannabis net selling price per gram increased to $7.90 compared to $6.63 just a year ago. Although the average selling price climbed, the longer-term market trends are pointing towards a fall in average selling prices for 2020.
Net losses for the year were $321.2 million, or roughly $3.20 per share. Losses climbed substantially compared to last year which came in at $67.7 million, or $0.82 per share for 2018.
In 2019, the Company recorded non-cash charges of $112.1 million related to the impairment of the Authentic Brands Group LLC agreement. $68.6 million in inventory reserves were also a contributing factor. Adjusted EBITDA was a loss of $89.8 million compared to a loss of $28.3 million just a year ago. It’s evident that TLRY has struggled for the past year as their financial situation has worsened.
After reporting earnings, TLRY’s CEO Brendan Kennedy said, “Our full-year results demonstrate strong sales growth momentum, which we expect to continue in 2020. Like our peers, we have faced industry challenges, but we remain committed to driving long-term value for our shareholders.”
He went on to say that, “Tilray has a diversified business model comprised of global medical, Canada adult-use and hemp products which positions us well in the current volatile market environment. We are still in the early days of this emerging growth industry and will continue being good stewards of shareholder capital as we aim to build the world’s most trusted and valued cannabis and hemp company.”
Other than the fact that TLRY’s losses are increasing, we are concerned about where they fit in the Canadian and international markets. It’s evident that TLRY has many areas it needs to improve on. We are concerned about dilution and financing going forward and remain highly cautious on the company.
TLRY shares were trading at $13.22 per share on Tuesday morning, down $2.13 (-13.88%). Year-to-date, TLRY has declined -22.83%, versus a -4.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaron Missere
Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...
