Tilray(TLRY) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net revenue in Q1 was $153.2 million, a 9$168 million, largely due to brand and SKU rationalization and foreign currency rates [61] - Reported gross profit was $48.6 million in Q1, a 5$51 million in the prior year quarter, while adjusted gross margin increased 200 basis points to 32% from 30% [63] - Net loss was $65.8 million in Q1 compared to a net loss of$34.6 million in the prior year quarter, but adjusted EBITDA was $13.5 million, up 7$58.6 million, with Canadian adult-use revenue impacted by price compression and operational challenges, but increased 10% from the preceding quarter [68][69] - International cannabis revenue increased 2% to $10.4 million, but would have increased 16$20.7 million in net revenue, a 34% increase from the prior year quarter, primarily due to the acquisition of Breckenridge [76] Market Data and Key Metrics Changes - In Canada, the company grew its market share position nationally by 8 basis points to 8.5% for the quarter, leading competitors HEXO and Organigram [47] - In Germany, the company holds approximately a 20% market share across flower, extracts, and Dronabinol products, with revenue up 22% versus the prior year period [36][37] - The European market for cannabis is estimated to be worth as much as $37 billion by 2027, with significant momentum towards adult-use legalization [18] Company Strategy and Development Direction - The company is focused on optimizing global operations and has targeted over$100 million in cash cost savings, with $95 million already realized [11][12] - The strategic alliance with HEXO is expected to deliver$40 million, including $31 million in revenue and$9 million in interest over the fiscal year [15] - The company aims to leverage its strong balance sheet and operational efficiencies to capture market share across the global cannabis industry [15][84] Management's Comments on Operating Environment and Future Outlook - Management noted that the current macro environment is challenging, but the company is well-positioned to capitalize on growth opportunities in Canada, Europe, and the U.S. [8][20] - The company anticipates delivering significant growth in adjusted EBITDA to between $70 million and$80 million in fiscal 2023, representing up to 67% growth compared to fiscal 2022 [16][84] - Management expressed optimism about the potential for adult-use legalization in Germany and the broader European market, which could significantly enhance growth prospects [19][38] Other Important Information - The company has approximately $500 million in cash and$638 million in working capital, with over 70% of its debt set at fixed interest rates [15] - The company is launching new products in its wellness segment, including culinary oils and plant-based protein blends, and has signed a distribution agreement for its CBD beverage portfolio [30][29] Q&A Session All Questions and Answers Question: U.S. regulatory landscape and opportunities - Management acknowledged the Biden administration's recent actions as a positive sign for the cannabis industry and emphasized the company's strong cash position and growth opportunities in Canada and internationally [90][92] Question: Down-trading in alcohol assets and pricing backdrop - Management reported no signs of down-trading in their alcohol assets and noted good consumption within the beer business, while also preparing for potential shifts in consumer behavior [96][97] Question: Recreational legalization in Germany - Management expressed confidence in the legalization of cannabis in Germany, highlighting the company's investments in facilities that can quickly adapt to the adult-use market [106][110]