Quarterly Revenue Increased 126% to $52.1 Million (C$70.7
Million) Compared to the First Quarter of 2019 and 11% Sequentially
from the Fourth Quarter of 2019
International Medical Cannabis Sales Exceeded Canada Medical
Sales by 43% in the Quarter
Implemented Cost Reductions Designed to Achieve Approximately
$40 Million Annualized Savings
Reduced Net Loss by $35 Million, or 16%, Compared to the Fourth
Quarter of 2019
Implemented COVID-19 Related Protocols to Ensure the Health of
Our Global Workforce and Satisfy Patient and Consumer Needs
Focused on Achieving Positive Adjusted EBITDA by End of the
Fourth Quarter of 2020
Tilray, Inc. (“Tilray” or the “Company”) (Nasdaq: TLRY), a
global pioneer in cannabis research, cultivation, production and
distribution, reports financial results for the first quarter ended
March 31, 2020. All financial information in this press release is
reported in U.S. dollars, unless otherwise indicated.
“We are pleased to report strong sequential quarterly revenue
growth across each of our core business segments for the first
quarter of 2020,” says Brendan Kennedy, Tilray’s Chief Executive
Officer. “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. As evidenced by our International
Medical sales in the quarter, we expect this segment to demonstrate
continued growth and positively impact margins. During and since
the first quarter, we took significant steps to drive efficiencies
across our business, enabling us to realize annualized cost savings
of approximately $40 million compared to fourth quarter 2019 run
rates. While the positive impact of these actions are not fully
reflected in this quarter’s results, they will become more clearly
evident over the course of this year.”
First Quarter 2020 Financial Highlights
- Revenue increased 126.2% to $52.1 million (C$70.7 million),
compared to the first quarter of last year. Growth was driven by
cannabis sales, which experienced meaningful increases across all
channels with the exception of bulk, and the inclusion of the
Manitoba Harvest acquisition for a full quarter in 2020 compared to
a partial quarter in the prior year.
- Revenue increased 11.0% compared to the fourth quarter of 2019.
Growth was driven by a 23.0% increase in adult-use sales and a
14.3% increase in hemp product sales, partially offset by a decline
in bulk sales.
(in thousands of United States
dollars)
Three months ended March
31,
2020
2019
$ Change
% Change
Cannabis
Adult-use
$
20,919
$
7,880
$
13,039
165
%
Canada - medical
4,051
2,998
1,053
35
%
International - medical
5,806
1,811
3,995
221
%
Bulk
—
4,767
(4,767
)
(100
)%
Total Cannabis revenue
30,776
17,456
13,320
76
%
Hemp
21,326
5,582
15,744
282
%
Total
$
52,102
$
23,038
$
29,064
126
%
Excise duties included in revenue
$
4,972
$
1,559
$
3,413
219
%
- Total cannabis kilogram equivalents sold increased 92.4% to
5,794 kilograms from 3,012 kilograms in the first quarter of 2019.
This growth resulted from increases in adult-use cannabis flower
sales and the launch of Cannabis 2.0 products.
- Average cannabis net selling price per gram decreased to $5.28
(C$7.16) compared to $5.60 (C$7.54) in the first quarter of 2019.
The decrease was due to a shift in product and channel mix. The
average net selling price excluding excise duties for adult-use was
$3.49 (C$4.73) per gram for the first quarter of 2020.
- Gross margin for the quarter was 21%, a 200 basis point
decrease compared to the first quarter of 2019 and a significant
positive change over the negative margins recorded in the fourth
quarter of 2019. Gross margin, excluding inventory valuation
adjustments, increased to 29% from 28% compared to the first
quarter of 2019 and 24% in the fourth quarter of 2019. Gross margin
for cannabis, excluding inventory valuation adjustments, decreased
to 20% from 23% compared to the first quarter of 2019 while gross
margin for hemp, excluding inventory valuation adjustments,
decreased to 41% from 44% compared to the first quarter of
2019.
- Net loss was $184.1 million, or $1.73 per share, compared to a
loss of $29.4 million, or $0.31 per share, for the first quarter of
2019. The increase in net loss was primarily due to the change in
the fair value of the warrant liability of $72.0 million related to
the Company’s registered offering of common stock and warrants,
impairment of assets of $29.8 million, weakening of the Canadian
dollar resulting in a foreign currency translation loss of $28.1
million, increased operating expenses related to growth initiatives
in the Company’s cannabis sector and severance costs of $1.9
million related to headcount reductions.
- Net loss was reduced by $35.0 million, or 16%, compared to the
fourth quarter of 2019. The reduction in net loss from $219.1
million, or $2.14 per share, in the fourth quarter of 2019 was
largely due to improvements in gross margin in the first quarter of
2020 and the significant impairments recorded in the fourth quarter
of 2019.
- Adjusted EBITDA was a loss of $19.7 million compared to a loss
of $15.3 million in the first quarter of 2019. The moderate
increase in Adjusted EBITDA loss was largely the result of
increased costs in general and administrative expenses related to
commercial growth initiatives and increased operating costs related
to our cultivation efforts.
- Adjusted EBITDA loss of $19.7 million was a 44% improvement
over the $35.3 loss during fourth quarter of 2019. The improvement
was generally due to cost reductions and operating
efficiencies.
- The Company ended the first quarter of 2020 with $174.0 million
in cash.
First Quarter 2020 Business Highlights
- Tilray made several additions to its executive leadership team:
- Jon Levin, formerly of Revlon, joined the Company as Chief
Operating Officer.
- Michael Kruteck, formerly of Molson Coors and Pharmaca, joined
the Company as Chief Financial Officer.
- In January 2020, the Company signed a 2.5 tonne strategic
partnership agreement with Canndoc (an Israeli Medical Cannabis
Agency) to export medical cannabis from Tilray’s European Union
facility in Portugal to Israel. The successful export addresses
growing demand for medical cannabis products in the Israeli
market.
- On February 28, 2020, the Company closed a $59.6 million senior
credit facility that bears interest at Canadian prime plus 8% and
has a two year term.
- On March 17, 2020, the Company closed an underwritten
registered offering of common stock, pre-funded warrants and
warrants. Net proceeds from this offering were approximately $85.3
million after deducting underwriting discounts and offering
expenses.
- On March 25, 2020, Tilray’s Board of Directors unanimously
approved the pro rata release of 11 million shares of Class 2
common stock held by the former stockholders of Privateer Holdings,
Inc. The released shares are part of the previously announced
release of Tilray stock over a two-year period.
Update Related to COVID-19
During the COVID-19 pandemic, the Company’s priority remains the
health, safety and well-being of its global workforce, patients,
customers and communities where it operates. Over the course of
several weeks, the Company enacted response protocols and
contingency plans to prepare for events in relation to the global
pandemic. The Company has implemented remote work arrangements for
all office personnel and restricted business travel as of
mid-March. The Company’s operational sites remain open, but with
enhanced measures to protect the safety of its workforce including
rotating shifts of self-quarantined staff, reducing the sites to
business-critical personnel only, physical distancing incorporated
into manufacturing lines and cultivations sites, sanitation
protocols and other enhanced safety measures. These protocols are
being evaluated and adapted in accordance with government and
health authority recommendations on a daily basis.
Currently, the Company is focused on establishing a safe
recovery plan for returning to more normal business conditions and
returning staff to corporate offices and operational sites when
appropriate.
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. For more
information on COVID-19 and associated risks to our business, see
Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q, filed
with the Securities and Exchange Commission on May 11, 2020.
Conference Call
The Company will host a conference call today, May 11, 2020, to
discuss these results at 5:00 p.m. ET. Investors interested in
participating in the live call can dial 877-489-6528 from the U.S.
and 629-228-0736 internationally. A telephone replay will be
available approximately two hours after the call concludes through
Tuesday, May 26, 2020, by dialing 855-859-2056 from the U.S., or
404-537-3406 from international locations, and entering
confirmation code 7890876.
There will also be a simultaneous, live webcast available on the
Investors section of the Company’s website at www.tilray.com. The
webcast will be archived for 30 days.
About Tilray®
Tilray (Nasdaq: TLRY) is a global pioneer in the research,
cultivation, production and distribution of cannabis and
cannabinoids currently serving tens of thousands of patients and
consumers in 15 countries spanning five continents.
Forward Looking Statements
This press release contains “forward-looking statements”, which
may be identified by the use of words such as, “may”, “would”,
“could”, “will”, “likely”, “expect”, “anticipate”, “believe,
“intend”, “plan”, “forecast”, “project”, “estimate”, “outlook” and
other similar expressions, including statements regarding our
growth potential, the sustainability of growth, our ability to
become Adjusted EBITDA positive, demand for our products and the
medical and adult-use cannabis markets, anticipated plans for
strategic partnerships and acquisitions, and future sales of our
common stock. Forward-looking statements are not a guarantee of
future performance and are based upon a number of estimates and
assumptions of management in light of management’s experience and
perception of trends, current conditions and expected developments,
as well as other factors that management believes to be relevant
and reasonable in the circumstances, including assumptions in
respect of current and future market conditions. Actual results,
performance or achievement could differ materially from that
expressed in, or implied by, any forward-looking statements in this
press release, and, accordingly, you should not place undue
reliance on any such forward-looking statements and they are not
guarantees of future results. Forward-looking statements involve
significant risks, assumptions, uncertainties and other factors
that may cause actual future results or anticipated events to
differ materially from those expressed or implied in any
forward-looking statements. Please see the heading “Risk Factors”
in Tilray’s Quarterly Report on Form 10-Q, which was filed with the
Securities and Exchange Commission on May 11, 2020, for a
discussion of the material risk factors that could cause actual
results to differ materially from the forward-looking information.
Tilray does not undertake to update any forward-looking statements
that are included herein, except in accordance with applicable
securities laws.
Use of Non-U.S. GAAP Financial Measures
To supplement its financial statements, the Company provides
investors with information related to Adjusted EBITDA and Gross
margin, excluding inventory valuation adjustments, which are
financial measures which are not calculated in accordance with
generally accepted accounting principles in the United States
(“U.S. GAAP”).
Adjusted EBITDA is calculated as net income(loss) before
inventory valuation adjustments; interest expenses, net; other
expenses (income), net; deferred income tax (recoveries) expenses,
current income tax expenses (benefit); foreign exchange gain
(loss), net; depreciation and amortization expenses; stock-based
compensation expenses; other stock-based compensation related
expenses; loss from equity method investments; finance income from
ABG; loss on disposal of property and equipment;
acquisition-related (income) expense; amortization of inventory
step-up; severance costs; impairment of assets; and change in fair
value of warrant liability. A reconciliation of Adjusted EBITDA to
net loss, the most directly comparable GAAP measure, has been
provided in the financial statement tables included below in this
press release. Gross margin, excluding inventory valuation
adjustments, is calculated as revenue less cost of sales adjusted
to add back inventory valuation adjustments and amortization of
inventory step-up, divided by revenue. A reconciliation of Gross
margin, excluding inventory valuation adjustments, to gross margin,
the most directly comparable GAAP measure, has been provided in the
financial statement tables included below in this press
release.
The Company believes these non-GAAP financial measures provide
useful information to management and investors regarding certain
financial and business trends relating to the Company’s financial
condition and results of operations. Management uses these non-GAAP
financial measures to compare the Company's performance to that of
prior periods for trend analyses and planning purposes. These
non-GAAP financial measures are also presented to the Company’s
Board of Directors.
Non-U.S. GAAP measures should not be considered a substitute
for, or superior to, financial measures calculated in accordance
with U.S. GAAP. Non-U.S. GAAP measures exclude significant expenses
that are required by U.S. GAAP to be recorded in the Company's
financial statements and are subject to inherent limitations.
TILRAY, INC.
Condensed Consolidated
Statements of Net Loss and Comprehensive Loss
(in thousands of United States
dollars, except for share and per share data, unaudited)
Three months ended March
31,
2020
2019
Revenue (inclusive of excise duties of
$4,972 and $1,559, respectively)
$
52,102
$
23,038
Cost of sales
Product costs
37,188
17,329
Inventory valuation adjustments
4,044
324
Gross profit
10,870
5,385
General and administrative expenses
17,776
12,934
Sales and marketing expenses
17,876
7,821
Research and development expenses
1,258
1,048
Stock-based compensation expenses
7,677
5,736
Depreciation and amortization expenses
3,591
1,865
Impairment of assets
29,839
—
Acquisition-related expenses, net
2,355
4,424
Loss from equity method investments
1,748
—
Operating loss
(71,250
)
(28,443
)
Foreign exchange loss, net
28,069
179
Change in fair value of warrant
liability
71,978
—
Interest expenses, net
9,146
8,744
Finance income from ABG
—
(135
)
Other expense (income), net
4,651
(3,845
)
Loss before income taxes
(185,094
)
(33,386
)
Deferred income tax recoveries
(1,272
)
(3,777
)
Current income tax expenses (benefit)
301
(240
)
Net loss
$
(184,123
)
$
(29,369
)
Net loss per share - basic and diluted
(1.73
)
(0.31
)
Weighted average shares used in
computation of net loss per share - basic and diluted
106,463,352
94,875,351
Net loss
$
(184,123
)
$
(29,369
)
Foreign currency translation loss, net
(16,633
)
(475
)
Unrealized (loss) gain on
available-for-sale debt securities
(74
)
19
Other comprehensive loss
(16,707
)
(456
)
Comprehensive loss
$
(200,830
)
$
(29,825
)
In the fourth quarter of 2019, the Company adopted ASU 2016-01,
ASC 842, ASC 606 and ASU 2018-07. The first quarter of 2019 has
been recast to reflect the effects of this adoption.
TILRAY, INC.
Condensed Consolidated Balance
Sheets
(in thousands of United States
dollars, except for share and par value data, unaudited)
March 31, 2020
December 31, 2019
Assets
Current assets
Cash and cash equivalents
$
173,990
$
96,791
Accounts receivable, net of allowance for
credit losses of $595 and provision for sales returns of $1,138
(December 31, 2019 - $615 and $1,400, respectively)
38,324
36,202
Inventory
95,586
87,861
Prepayments and other current assets
31,066
38,173
Total current assets
338,966
259,027
Property and equipment, net
186,970
184,217
Operating lease, right-of-use assets
18,654
17,514
Intangible assets, net
187,892
228,828
Goodwill
150,870
163,251
Equity method investments
8,827
11,448
Other investments
21,250
24,184
Other assets
2,135
7,861
Total assets
$
915,564
$
896,330
Liabilities
Current liabilities
Accounts payable
23,907
39,125
Accrued expenses and other current
liabilities
47,032
50,829
Accrued lease obligations
3,370
2,473
Senior Facility - current
4,723
—
Warrant liability
92,339
—
Total current liabilities
171,371
92,427
Accrued lease obligations
28,538
29,407
Deferred tax liability
48,019
53,363
Convertible notes, net of issuance
costs
432,807
430,210
Senior Facility, net of transaction
costs
39,106
—
Other liabilities
5,415
5,652
Total liabilities
$
725,256
$
611,059
Commitments and contingencies
Stockholders’ equity
Class 1 common stock ($0.0001 par value,
250,000,000 shares authorized; 16,666,665 shares issued and
outstanding)
2
2
Class 2 common stock ($0.0001 par value;
500,000,000 shares authorized; 107,976,818 and 86,114,560 shares
issued and outstanding, respectively
11
9
Additional paid-in capital
840,436
705,671
Accumulated other comprehensive (loss)
income
(6,988
)
9,719
Accumulated deficit
(643,153
)
(430,130
)
Total stockholders’ equity
190,308
285,271
Total liabilities and stockholders’
equity
$
915,564
$
896,330
(in thousands of United States
dollars)
Three months ended March
31,
2020
2019
Adjusted EBITDA reconciliation:
Net loss
$
(184,123
)
$
(29,369
)
Inventory valuation adjustments
4,044
324
Severance costs
1,861
—
Depreciation and amortization expenses
3,591
1,865
Stock-based compensation expenses
7,677
5,736
Impairment of assets
29,839
—
Acquisition-related expenses, net
2,355
4,424
Loss from equity method investments
1,748
—
Foreign exchange loss, net
28,069
179
Change in fair value of warrant
liability
71,978
—
Interest expenses, net
9,146
8,744
Finance income from ABG
—
(135
)
Loss from disposal of property and
equipment
457
111
Other expense (income), net
4,651
(3,845
)
Amortization of inventory step-up
—
681
Deferred income tax recoveries
(1,272
)
(3,777
)
Current income tax expenses (benefit)
301
(240
)
Adjusted EBITDA
$
(19,678
)
$
(15,302
)
(in thousands of United States dollars,
except percentages)
Three months ended March
31,
2020
2019
2020
2019
2020
2019
Gross margin, excluding inventory
valuation adjustments reconciliation:
Cannabis
Hemp
Total
Revenue
$
30,776
$
17,456
$
21,326
$
5,582
$
52,102
$
23,038
Cost of sales
Product costs
24,603
13,511
12,585
3,818
37,188
17,329
Inventory valuation adjustments
3,247
324
797
—
4,044
324
Gross profit
2,926
3,621
7,944
1,764
10,870
5,385
Inventory valuation adjustments
3,247
324
797
—
4,044
324
Amortization of inventory step-up
—
—
—
681
—
681
Gross profit, excluding inventory
valuation adjustments
$
6,173
$
3,945
$
8,741
$
2,445
$
14,914
$
6,390
Gross margin, excluding inventory
valuation adjustments
20
%
23
%
41
%
44
%
29
%
28
%
In the fourth quarter of 2019, the Company adopted ASU 2016-01,
ASC 842, ASC 606 and ASU 2018-07. The first quarter of 2019 has
been recast to reflect the effects of this adoption.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200511005877/en/
For further information: Media: Chrissy Roebuck,
+1-833-206-8161, news@tilray.com Investors: Raphael Gross,
+1-203-682-8253, Raphael.Gross@icrinc.com
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