CANADA: Tilray, a global pioneer in cannabis research, cultivation, production and distribution, today reported financial results for the second quarter ended June 30, 2019. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.
“We are pleased with our second quarter results and strong business momentum,” said Brendan Kennedy, Tilray President and Chief Executive Officer. “Our team has executed against our plan, with adult-use revenue nearly doubling in the second quarter compared to the first quarter and gross margin increasing sequentially for the second quarter in a row. As we continue to grow, we remain focused on our long-term strategic objectives and deploying capital to maximize stockholder value.”
Second Quarter 2019 Financial Highlights
Revenue increased 371.1% to $45.9 (C$60.9) million, compared to the second quarter of last year, driven by the Manitoba Harvest acquisition, the legalization of the Canadian adult-use market, and growth in international medical markets, particularly in Europe. Excluding excise tax, revenue was $42.0 (C$55.8) million.
Total kilogram equivalents sold more than tripled to 5,588 kilograms from 1,514 kilograms in the prior year period.
Average net selling price per gram decreased to $4.61 (C$6.12) compared to $6.38 (C$8.36) in the prior year period. The average net selling price excluding excise taxes was $3.92 (C$5.20) per gram for the second quarter of 2019. The decrease was due to a reduced mix of higher priced extract products and a greater mix of adult-use revenue, which are at lower prices per gram compared to other channels.
Gross margin increased sequentially to 27% from 23% in the prior quarter. Gross margin in the second quarter of 2018 was 43%. Gross margin continues to be impacted by increased costs incurred with the ramping up of cultivation facilities in Canada and Portugal and acquiring third party supply. Food product margins were also impacted by a $1.4 million non-cash charge related to purchase accounting for the fair value of inventory. Excluding this purchase accounting charge, gross margin was 30% for the quarter.
Net loss for the quarter was $35.1 million or $0.36 per share compared to a loss of $12.8 million or $0.17 per share for the prior year period. The adjusted net loss for the quarter was $31.2 million or $0.32 per share for the second quarter of 2019. The adjustments to the net loss are non-recurring acquisition related charges and a non-recurring non-cash charge related to purchase accounting for the fair value of inventory. Adjusted EBITDA was a loss of $17.9 million compared to a loss of $4.7 million the prior year period. The increased net loss and Adjusted EBITDA declines were primarily due to the increase in operating expenses related to growth initiatives, interest expense from our convertible notes, the addition of Manitoba Harvest and Natura businesses, and the expansion of international operations.
Signed Letter of Intent (LOI) with Privateer Holdings, Inc. to extend lock-up for up to two years and provide for orderly release of the 75 million Tilray shares held by Privateer.
Significant capacity expansion:
Expanded international export capacity with standard manufacturing license and Good Manufacturing Practices (GMP) certification for EU Campus that allows Tilray Portugal to manufacture and export GMP-certified dried cannabis as an active substance for medicinal products.
Increased international export capacity with an additional 20 hectares (50 acres) of outdoor cultivation space in Portugal through a Definitive Agreement with Esporão, one of the largest and most sophisticated agricultural businesses in Portugal. This agreement will expand Tilray’s total production and manufacturing footprint to 3.4 million square feet worldwide.
Announced an investment of $32.6 million to increase our Canadian production and manufacturing footprint by 203,000 square feet across three facilities in Nanaimo, British Columbia, Leamington, Ontario, and London, Ontario.
Key international market developments:
Imported GMP-certified finished medical cannabis oil solutions into Ireland for nationwide distribution under the Medical Cannabis Access Programme.
Manitoba Harvest launched a Broad Spectrum Hemp Extract line that is Generally Recognized as Safe (GRAS) in the United States, marking Tilray’s first entry into the U.S. CBD market under this brand.
Expanding our brand portfolio:
Acquired Smith & Sinclair, an innovative U.K.-based confectionary company that will introduce CBD-infused consumer products where regulations permit.
Clinical research developments:
Announced support of two new clinical studies: a pilot study led by Murdoch Children’s Research Institute (MCRI) in Melbourne, Australia, to evaluate the feasibility and acceptability of a larger randomized placebo-controlled trial of cannabis extract as a form of treatment for reducing Severe Behavioral Problems (SBP) in pediatric patients with Intellectual Disabilities (ID); and a study with McGill University Health Centre’s Division of Infectious Diseases and Chronic Viral Illness in Quebec, Canada to examine the effectiveness of medical cannabis on immune activation in People Living with HIV.
Imported an initial shipment of medical cannabinoids into the United States, with approval from the U.S. government, to support two clinical trials led by NYU School of Medicine for patients with Alcohol Use Disorder and Post-Traumatic Stress Disorder with Alcohol Use Disorder.
Expanded global senior leadership team:
Appointed Kristina Adamski as Executive Vice President of Corporate Affairs, globally overseeing communications, government affairs and corporate social responsibility.
Strengthened European leadership team with the appointment of Arne Wilkens as Vice President, Business Expansion, Europe; José Tempero as Medical Affairs Director, Europe; Maike Gerlach as Vice President, Marketing, Europe; Nadja Frenzel as Vice President, Commercial Development, Europe; and Natalie Bucceri as Director, Global Portfolio Expansion.
The Company will host a conference call to discuss these results today 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, August 27, 2019, by dialing 855-859-2056 from the U.S., or 404-537-3406 from international locations, and entering confirmation code 1489081.
There will also be a simultaneous, live webcast available on the Investors section of the Company’s website atwww.tilray.com. The webcast will be archived for 30 days.