Marijuana producer Tilray says revenue surged more than 85 percent last quarter

Key Points
  • Tilray reported an adjusted loss per share of 8 cents, better than a loss of 12 cents expected by four analysts polled by Refinitiv.
  • Total revenue came in at $10 million, an 85.8 percent increase over the last year.
  • Tilray CEO Brendan Kennedy was quick to point out to in a CNBC interview Tuesday that this revenue was all tied to medical, not adult use.
A Tilray grow room

Marijuana producer Tilray, whose shares have had a wild year because of investors looking to cash in on the emerging cannabis trend, reported that revenue surged more than 85 percent last quarter versus the same period a year ago.

Amazingly, that still wasn't quite enough to satisfy traders as the shares dropped more than 1.5 percent in after hours trading on Tuesday.

Total revenue came in at $10 million, versus 10.1 million expected on average from four analysts polled by Refinitiv.

Tilray Chief Executive Officer Brendan Kennedy was quick to point out to in a CNBC interview Tuesday that this revenue was all tied to medical and not adult use, which was just legalized in Canada. Some analysts had expected the company to see some revenue from recreational sales in the third quarter.

Average per-gram weed prices dropped to $6.21 from $7.53, which Tilray said was because it sold more pot in bulk than the prior year.

Tilray CEO: Our biggest challenge is that there's so much demand for product
Tilray CEO: Our biggest challenge is that there's so much demand for product

"All of that revenue for this quarter is medical and we look forward to next quarter, when we'll start to see some Canadian adult-use revenue in that earnings report," Kennedy said.

"The biggest challenge is that there's just so much demand, which is interesting to see," he added. "It definitely takes six to 12 months for supply and demand to reach some sort of equilibrium."

The pressure is on for Tilray to offer shareholders a reason for optimism as well as justify its steep valuation.

Tilray's stock has climbed more than 320 percent over the past three months, making it one of the most speculative names on the Street. Though it posted just $20 million in revenue last year (and is projected to generate just $140 million in 2019), the company has a market cap of about $10.5 billion.

The stock, which trades on the NASDAQ, is down 23 percent over the past month as investors cashed in for profits.

The stock pared some of its losses following those comments and was last down 2 percent in after hours trading.

Based in Nanaimo, British Columbia, Tilray is the largest of the publicly traded Canadian cannabis companies by market capitalization.

The company reported an adjusted loss for last quarter of 8 cents versus an expected 12 cents per share loss, according to the four analysts polled by Refinitiv. Total kilograms sold increased over two-fold to 1,613 kilograms from 684 kilograms in the prior year.

Tilray announced earlier in the third quarter that it had become the first and only company to receive regulatory approval in Canada and Germany to export medical cannabis flower for distribution to German patients.

While the company again found itself in the limelight Tuesday, Tilray is no stranger to the attention. The company caught the eye of many American investors and analysts far before Canada became the first Group of Seven country to approve the adult use of cannabis for recreational purposes on Oct. 17.

Cowen's Vivien Azer underscored the importance of medical marijuana to Tilray's revenue ahead of the earnings report.

"The medical market remains Tilray's core strength, and is well positioned to capitalize on the global medical cannabis opportunity," Azer wrote in a note to clients on Monday. "We think Tilray is fully engaged in a cannabis intellectual property arms war and additional insight into progress in this vector may have an outsized impact for investors and potential partners."

Tilray revenues up more than 85 percent year-over-year
Tilray revenues up more than 85 percent year-over-year

While shares of Tilray traded around $113 per share Tuesday before market close, Azer predicts that the stock will outperform the broader market and climb to $172 over the next 12 months, representing 52 percent upside.

Tilray, along with peers Canopy Growth and Aurora Cannabis, rose sharply last week after Attorney General Jeff Sessions resigned following months of public criticism from his boss, President Donald Trump.

Sessions, a longtime opponent of attempts to legalize marijuana, lifted an Obama-era policy (known as the Cole Memo) earlier this year that kept federal authorities from cracking down on the pot trade in states where the drug is legal.

Sessions's resignation came after Michiganders voted to authorize the legalization of possession, use and cultivation of marijuana products by those who are at least 21 years old. The approved law will impose a 10-ounce limit for marijuana kept at residences and mandate that amounts over 2.5 ounces be secured in locked containers.

Ten states and the District of Columbia have now approved recreational use of pot.

Founded in 2013, Tilray was incorporated under Kennedy's cannabis-focused private equity venture Privateer Holdings. Privateer, which still owns about 80 percent of the company, announced earlier this year that it has raised $200 million to invest in cannabis brands.

Billionaire investor Peter Thiel's Founders Fund became the first institutional investor in the cannabis industry through Privateer's $75 million Series B financing round in December 2014, according to the company's website.

Despite the fact that Tilray and some of its Canadian peers list their equity on U.S. stock exchanges, cannabis is still illegal under U.S. federal law.