Tilray, Inc. Reports Fourth Quarter and Full Fiscal Year 2019 Financial Results

Tilray, Inc. Reports Fourth Quarter and Full Fiscal Year 2019 Financial Results

Tilray, Inc. (“Tilray” or the “Company”) (Nasdaq: TLRY), a global pioneer in cannabis production, research, cultivation and distribution, reports financial results for the fourth quarter and full fiscal year ended December 31, 2019. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

“Our full year results demonstrate strong sales growth momentum, which we expect to continue in 2020,” said Brendan Kennedy, Tilray’s Chief Executive Officer. “Like our peers, we have faced industry challenges, but we remain committed to driving long-term value for our shareholders. 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.”

2019 Financial Highlights

  • Revenue increased to $167.0 (C$217.4) million, up 287.2% compared to last year. The increase in revenue was driven by significant growth in sales for the Canadian adult-use market, international medical markets as well as the acquisition of Manitoba Harvest.

For the three months ended December 31,

For the year ended December 31,

2019

2018

$ Change

% Change

2019

2018

$ Change

% Change

Cannabis
Adult-use

$

17,007

$

4,660

$

12,347

265%

$

55,763

$

3,521

$

52,242

N/A

Canada – medical

3,332

2,845

487

17%

12,556

18,052

(5,496

)

(30)%

International – medical

4,008

1,056

2,952

280%

13,378

2,912

10,466

359%

Bulk

3,924

6,970

(3,046

)

(44)%

25,450

18,645

6,805

36%

Total cannabis revenue

28,271

15,531

12,740

82%

107,147

43,130

64,017

148%

Hemp

18,665

18,665

N/A

59,832

59,832

N/A

Total revenue

$

46,936

$

15,531

$

31,405

202%

$

166,979

$

43,130

$

123,849

287%

Excise tax included in revenue

$

4,429

$

1,203

$

3,226

268%

$

13,136

$

1,200

$

11,936

N/A

N/A: Not a meaningful percentage.
  • Total cannabis kilogram equivalents sold increased over 446% to 35,380 kilograms from 6,478 kilograms in the prior year.
  • Average cannabis net selling price per gram (excluding bulk sales) increased to $7.90 (C$10.28) compared to $6.63 (C$8.63) in the prior year.
  • Net loss for the year was $321.2 million, or $3.20 per share, compared to $67.7 million, or $0.82 per share, for 2018. In 2019, the Company recorded non-cash charges of $112.1 million related to impairment of the Authentic Brands Group LLC (“ABG”) agreement as well as $68.6 million in inventory reserves. Adjusted EBITDA was a loss of $89.8 million compared to a loss of $28.3 million the prior year.

Fourth Quarter 2019 Financial Highlights

  • Revenue increased 202.2% to $46.9 million (C$61.0 million), compared to the fourth quarter of last year, driven by the Canadian adult-use market, the Manitoba Harvest acquisition, and growth in international medical markets. The Company recorded reserves of $4.2 million related to discounts and returns.
Three months ended
March 31, June 30, September 30, December 31,
Cannabis
Adult-use

$

7,881

$

15,041

$

15,834

$

17,007

Canada – medical

2,997

2,328

3,899

3,332

International – medical

1,812

1,850

5,708

4,008

Bulk

4,766

6,750

10,010

3,924

Total cannabis revenue

17,456

25,969

35,451

28,271

Hemp

5,582

19,935

15,650

18,665

Total revenue

$

23,038

$

45,904

$

51,101

$

46,936

Excise tax included in revenue

$

1,914

$

3,862

$

2,931

$

4,429

  • Total cannabis kilogram equivalents sold increased over seven-fold to 15,039 kilograms from 2,053 kilograms in the prior year period.
  • Average cannabis net selling price per gram (excluding bulk sales) increased to $8.78 (C$11.43) compared to $7.52 (C$9.79) in the prior year period. The average net selling price excluding excise taxes for adult-use was $3.19 (C$4.16) per gram for the fourth quarter of 2019. The increase was due to a shift in product and channel mix.
  • Gross margin, excluding non-cash return and inventory reserves, decreased sequentially to 29% from 31% in the prior quarter and increased compared to the fourth quarter of 2018 gross margin of 20%. Including non-cash charges, gross margin in the fourth quarter of 2019 was negative 120%.
  • Net loss for the quarter was $219.1 million or $2.14 per share compared to a loss of $31.0 million or $0.33 per share for the prior year period. Adjusted EBITDA was a loss of $35.3 million compared to a loss of $13.3 million in the prior year period. The increased net loss and Adjusted EBITDA declines were primarily due to increases in operating expenses related to growth initiatives, expansion of international teams, and the addition of Manitoba Harvest and Natura Naturals businesses.

Senior Credit Facility

The Company closed a $60 million senior credit facility on February 28, 2020 that bears interest at prime plus 8% and has a two year term. The Company ended 2019 with $97 million in cash.

2019 Business Highlights

  • Canadian adult-use brand portfolio expansion:
    • High Park™, a subsidiary of Tilray, launched the second phase of its adult-use product portfolio including vape, edible and beverage products, across Canada where regulations allow. New brand and product additions include:
      • Canaca – pure cannabis oil, all-in-one vape pens and cartridges;
      • Marley Natural – pure cannabis oil vape cartridges;
      • Chowie Wowie – cannabis-infused chocolates and gummies in THC and CBD varieties;
      • Everie – non-alcoholic, CBD-infused ready-to-brew teas and sparkling beverages with all natural flavors. Everie is the debut brand for Fluent, Tilray’s joint venture with AB InBev, facilitated through High Park and Labatt Breweries of Canada.
  • Addition of Hemp products business:
    • Tilray completed its acquisition of Manitoba Harvest. The Company now has hemp products available in over 17,000 retail doors and 20 countries around the world.
  • Key international market developments:
    • Tilray Portugal received two Good Manufacturing Practice (GMP) certifications in accordance with European Union standards, for its manufacturing facility in Cantanhede, Portugal. These certifications permit the Company to manufacture and export GMP-certified bulk and finished medical cannabis products, including dried flower and oils, from Portugal to Germany and other European and international markets with legal medical cannabis regulations. Tilray remains the only licensed producer to be GMP certified in two countries, Canada and Portugal.
    • Successfully resupplied a bulk amount of medical cannabis in the U.K. and exported medical cannabis to Ireland.
    • Successfully exported medical cannabis to Germany and Israel from Portugal, and to Switzerland from Germany. In total, Tilray’s medical cannabis products have been made available in 15 countries on 5 continents across the world.
  • Executive leadership team expansion:
    • 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. Mark Castaneda, the Company’s Chief Financial Officer, will transition to a strategic business development role after the 10-K has been filed for the fiscal year ended December 31, 2019.1
    • Katy Dickson, formerly of Mattel and General Mills, joined the Company as President of Manitoba Harvest.
  • Clinical research developments:
    • Imported medical cannabis into the United States from Canada for a new clinical trial evaluating the efficacy of medical cannabis as a treatment for taxane-induced peripheral neuropathy (TIPN) secondary to treatment with paclitaxel or docetaxel. TIPN affects more than 67% of women undergoing breast cancer treatment.
    • Announced support for additional global clinical trials; studying the efficacy of medical cannabis as treatment in reducing severe behavioral problems in children with intellectual disabilities; and another trial examining the safety, tolerability and effectiveness of medical cannabis on immune activation in people living with HIV.
  • Tilray closed its merger with Privateer Holdings, Inc. in December.

__________
1
Announced January 14, 2020

Conference Call

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 Monday, March 16, 2020, by dialing 855-859-2056 from the U.S., or 404-537-3406 from international locations, and entering confirmation code 8197352.

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, 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 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 2, 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, which is not a financial measure 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 income, net; deferred income tax (recoveries) expenses, current income tax expenses; 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; and amortization of inventory step-up. 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. The Company believes Adjusted EBITDA provides 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 Adjusted EBITDA to compare the Company’s performance to that of prior periods for trend analyses and planning purposes. Adjusted EBITDA is 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.

Consolidated Statements of Net Loss and Comprehensive Loss

(in thousands of U.S. dollars, except for share and per share data)

Three months ended December 31,

Twelve months ended December 31,

2019

2018

2019

2018

Revenue (inclusive of excise duties of $4,429, $1,203, $13,136, and $1,200, respectively)

$

46,936

$

15,531

$

166,979

$

43,130

Cost of sales
Product costs

35,870

8,117

121,892

24,294

Inventory valuation adjustments

68,073

4,280

68,583

4,561

Gross (loss) profit

(57,007

)

3,134

(23,496

)

14,275

General and administrative expenses

32,462

12,973

81,968

29,461

Sales and marketing expenses

21,923

6,305

61,084

15,366

Research and development expenses

1,667

1,848

6,558

4,264

Stock-based compensation

9,539

4,111

31,842

20,988

Depreciation and amortization expenses

4,150

566

11,607

1,598

Impairment of assets

112,070

112,070

Acquisition-related (income) expenses, net

(24,861

)

239

(31,427

)

248

Loss from equity method investments

2,667

4,504

Operating loss

(216,624

)

(22,908

)

(301,702

)

(57,650

)

Foreign exchange (gain) loss, net

(7,097

)

6,321

(5,944

)

7,234

Interest expenses, net

8,685

7,717

34,690

9,110

Finance income from ABG

(207

)

(764

)

Loss on disposal of property and equipment

2,436

190

2,436

190

Other income, net

3,572

(1,588

)

(2,501

)

(2,010

)

Loss before income taxes

(224,013

)

(35,548

)

(329,619

)

(72,174

)

Deferred income tax recoveries

(4,860

)

(4,485

)

(8,847

)

(4,485

)

Current income tax (recoveries) expenses

(5

)

(53

)

397

34

Net loss

(219,148

)

(31,010

)

(321,169

)

(67,723

)

Net loss per share – basic and diluted

$

(2.14

)

$

(0.33

)

$

(3.20

)

$

(0.82

)

Weighted average shares used in computation of net loss per share – basic and diluted

102,405,646

93,169,688

100,455,677

83,009,656

Net loss

(219,148

)

(31,010

)

(321,169

)

(67,723

)

Foreign currency translation gain, net

7,588

127

5,174

662

Unrealized loss on investments

(101

)

(765

)

(21

)

(765

)

Other comprehensive income (loss)

7,487

(638

)

5,153

(103

)

Comprehensive loss

$

(211,661

)

$

(31,648

)

$

(316,016

)

$

(67,826

)

In the fourth quarter of 2019, the Company adopted ASU 2016-01, ASC 842, ASC 606 and ASU 2018-07. Each interim period in 2019 has been recast to reflect the effects of this adoption.

TILRAY, INC.

Consolidated Balance Sheets

(in thousands of U.S. dollars, except for share and par value data)

December 31, 2019 December 31, 2018
Assets
Current assets:
Cash and cash equivalents

$

96,791

$

487,255

Short-term investments

30,335

Accounts receivable, net of allowance for doubtful accounts of $2,015 and $292, respectively

36,202

16,525

Inventory

87,861

16,211

Prepayments and other current assets

38,173

3,976

Total current assets

259,027

554,302

Property and equipment, net

184,217

80,214

Operating lease, right-of-use assets

17,514

Intangible assets, net

228,828

4,486

Goodwill

163,251

Equity method investments

11,448

Other investments

24,184

16,911

ABG finance receivable and other assets

7,861

754

Total assets

$

896,330

$

656,667

Liabilities
Current liabilities
Accounts payable

39,125

10,649

Accrued expenses and other current liabilities

50,829

14,818

Accrued obligations under finance lease

470

Accrued obligations under operating lease

2,473

Total current liabilities

92,427

25,937

Accrued obligations under finance lease

14,152

8,286

Accrued obligations under operating lease

15,255

ABG finance liability

5,566

Deferred tax liability

53,363

4,424

Convertible notes, net of issuance costs

430,210

420,367

Other liabilities

86

Total liabilities

$

611,059

$

459,014

Commitments and contingent liabilities
Stockholders’ equity
Class 1 common stock ($0.0001 par value, 250,000,000 shares authorized; 16,666,667 shares issued and outstanding)

2

2

Class 2 common stock ($0.0001 par value; 500,000,000 shares authorized; 86,114,558 and 76,504,200 shares issued and outstanding, respectively)

9

8

Additional paid-in capital

705,671

302,057

Accumulated other comprehensive income

9,719

3,763

Accumulated deficit

(430,130

)

(108,177

)

Total stockholders’ equity

$

285,271

$

197,653

Total liabilities and stockholders’ equity

$

896,330

$

656,667

Three months ended December 31,

Twelve months ended December 31,

2019

2018

2019

2018

Adjusted EBITDA reconciliation:
Net loss

$

(219,148

)

$

(31,010

)

$

(321,169

)

$

(67,723

)

Inventory valuation adjustments

68,073

4,280

68,583

4,561

Depreciation and amortization expenses

5,421

1,009

15,849

3,562

Stock-based compensation expenses

9,539

4,111

31,842

20,988

Other stock-based compensation related expenses

8,411

8,411

Impairment of assets

112,070

112,070

Acquisition-related (income) expenses, net

(24,861

)

239

(31,427

)

248

Loss from equity method investments

2,667

4,504

Foreign exchange (gain) loss, net

(7,097

)

6,321

(5,944

)

7,234

Interest expenses, net

8,685

7,717

34,690

9,110

Finance income from ABG

(207

)

(764

)

Loss on disposal of property and equipment

2,436

190

2,436

190

Other income, net

3,572

(1,588

)

(2,501

)

(2,010

)

Amortization of inventory step-up

2,041

Deferred income tax (recoveries) expenses

(4,860

)

(4,485

)

(8,847

)

(4,485

)

Current income tax expenses

(5

)

(53

)

397

34

Adjusted EBITDA

$

(35,304

)

$

(13,269

)

$

(89,829

)

$

(28,291

)

Three months ended December 31,

Twelve months ended December 31,

2019

2018

2019

2018

Adjusted net loss reconciliation:
Net loss

$

(219,148

)

$

(31,010

)

$

(321,169

)

$

(67,723

)

Inventory valuation adjustments

68,073

4,280

68,583

4,561

Impairment of assets

112,070

112,070

Acquisition-related (income) expenses, net

(24,861

)

239

(31,427

)

Amortization of inventory step-up

2,041

Adjusted net loss

$

(63,866

)

$

(26,491

)

$

(169,902

)

$

(63,162

)

Adjusted net loss per share – basic and diluted

(0.62

)

(0.28

)

(1.69

)

(0.76

)

Weighted average shares used in computation of adjusted
Net loss per share – basic and diluted

102,405,646

93,169,688

100,455,677

83,009,656

Copyright Business Wire 2020

Published at Mon, 02 Mar 2020 21:09:41 +0000

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