Tilray, Inc. — Form 10-Q Summary
Reporting period: Three months ended August 31, 2021 (fiscal first quarter of 2022); amounts below are U.S. dollars. The filing describes a global cannabis, beverage alcohol, distribution and wellness business. Aphria was acquired on April 30, 2021, so the current quarter includes a full quarter of legacy Tilray operations, while the prior-year comparison reflects Aphria only; reported year-over-year comparisons are therefore not fully like-for-like.
Financial results and position
| Metric | Quarter ended Aug. 31, 2021 | Prior comparable quarter |
|---|---|---|
| Revenue | $168.0 million | $117.5 million |
| Gross profit / gross margin | $51.0 million / 30% | $34.9 million / 30% |
| Operating loss | $(68.5) million | $(8.5) million |
| Net loss | $(34.6) million; $(0.08) per share | $(21.7) million; $(0.09) per share |
| Adjusted EBITDA (non-GAAP) | $12.7 million | $8.1 million |
| Cash from operations | $(93.2) million | $(56.1) million |
| Free cash flow (non-GAAP) | $(109.5) million | $(70.1) million |
Revenue increased 43%. Cannabis net revenue rose 38% to $70.4 million, distribution revenue was nearly flat at $67.2 million, and the current quarter included $15.5 million of beverage alcohol and $14.9 million of wellness revenue, with no comparable prior-year segment revenue. Gross margin was broadly unchanged overall, but cannabis margin fell to 43% from 50% and distribution margin to 12% from 14%; beverage alcohol and wellness margins were 57% and 27%, respectively.
Operating expenses rose to $119.5 million from $43.4 million, notably due to higher amortization, general and administrative costs, and $25.6 million of transaction costs. A $48.9 million non-operating gain—principally fair-value gains on convertible debentures and warrants—partly offset the operating loss. Net loss attributable to Tilray shareholders was $41.6 million; reported consolidated net loss was $34.6 million, including income attributable to non-controlling interests.
At August 31, cash was $376.3 million, down from $488.5 million at May 31; working capital was $317.8 million, versus $482.4 million. Current assets were $844.6 million and current liabilities $526.8 million. Long-term debt, net of financing fees, was $195.7 million and convertible debentures were $611.6 million; bank indebtedness was $9.2 million. The filing reports compliance with long-term debt covenants and says management considers liquidity risk low. Cash and cash equivalents decreased by $112.2 million during the quarter.
Material changes, outlook and risks
- The April 2021 Aphria combination materially changed the business and operating cost base. Tilray reported four segments: cannabis, distribution, beverage alcohol and wellness.
- Management said Canadian adult-use orders were stagnant early in the quarter, with an August improvement; it cited consumer price sensitivity and lower average selling prices. International cannabis revenue was affected by protective measures in Germany. Management also reported COVID-19-related disruption to beverage sales and a roughly five-day flooding-related CC Pharma closure in Germany, reducing quarterly revenue by almost $5 million.
- Management described cost control, market-share growth, product innovation and international expansion as priorities. It cited plans to close the Enniskillen and Nanaimo facilities; it expected legacy Tilray production costs to weigh on cannabis margins until existing inventory is sold. No specific near-term financial guidance is provided in the filing. The company’s risk factors caution it may not achieve its stated ambition of up to $4 billion revenue by 2024.
- The MedMen investment is subject to U.S. cannabis-law and regulatory conditions: conversion of the notes and exercise of warrants depend on a federal-law “Triggering Event,” a waiver and required approvals. Tilray’s share of the partnership investment was reported at $117.8 million. A subsequent share issuance of 9,817,061 shares settled part of the consideration on September 17, 2021.
- Risks include integration and synergy execution, evolving cannabis regulation, competition, COVID-19 and variants, supply-chain disruption, foreign-currency exposure, and potential future losses. Management reported no material legal loss contingencies to record or disclose; a shareholder derivative case remained ongoing, while a separate securities class action was dismissed on September 27, 2021.
Key facts for investors to verify
- How much of revenue growth and adjusted EBITDA reflects acquisitions versus organic performance, given the non-comparable prior period.
- Whether cash burn and working-capital decline stabilize, and how the company will fund debt, convertible debenture and other commitments.
- Whether cannabis margins recover as higher-cost legacy Tilray inventory clears and announced facility closures take effect.
- Progress on Aphria integration, expected synergies, and the one-time transaction and integration costs.
- MedMen investment terms, regulatory conditions, potential dilution, and the completion and accounting of the September share issuance.
- Effects of COVID-19, German flooding and operating restrictions, and U.S. cannabis-law developments on sales and outlook.