Tilray CEO Says Focus on Profitability is ‘Constraining’
(Bloomberg) -- Tilray Inc. shares fell 7.5% in post-market trading after the cannabis company reported a wider-than-expected second-quarter loss.
Although revenue of $45.9 million was ahead of the consensus estimate of $40.3 million, investors appeared to focus on the $17.9 million loss before interest, taxes, depreciation and amortization. That was wider than the $14.4 million expected by analysts and comes as pot investors are increasingly focused on profitability.
Tilray said the higher loss was due to rising operating costs related to growth initiatives, interest expense from its convertible notes, recent acquisitions and the expansion of its international operations.
- Tilray sold 5,588 kilograms of cannabis in the quarter, up 86% from the prior quarter. However, average net selling price fell to $4.61 per gram from $5.60 in the first quarter
- Gross margin rose to 27% from 23% in the prior quarter. That was below the consensus analyst estimate of 28.7%. Tilray said its margins continue to be impacted by the costs of ramping up cultivation facilities in Canada and Portugal and acquiring third-party cannabis supply
- Chief Executive Officer Brendan Kennedy is sanguine about the company’s ongoing losses. “Once in your lifetime, if you’re lucky, you see an entire industry emerge overnight and if you want to dominate that global industry, you’d be constraining yourself if you were focused on profitability at this point,” Kennedy said in a phone interview. He said Tilray could be profitable in Canada within a quarter, but “globally, now’s the time to invest.”
Kennedy expects revenue from Tilray’s international operations to “really kick in” in the next two to three quarters. He believes the company will add four to six new countries to its roster of medical customers this year.
The CannTrust Holdings Inc. regulatory breach is “an infuriating situation,” Kennedy said. He wouldn’t comment on whether Tilray is interested in acquiring any of CannTrust’s assets
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