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Tilray reports wider-than-expected 2Q losses, higher sales

Tilray (TLRY) reported wider-than-expected losses in its fiscal second quarter, while sales surged as acquisitions earlier this year padded the Canadian cannabis company’s top-line results.

Here were the main numbers from the report, versus consensus expectations compiled by Bloomberg:

  • Revenue: $45.9 million, vs. $40.35 million expected

  • Adj. EBITDA loss: $17.9 million, vs. $14.4 million expected

  • Adj. EPS: 32 cents per share, vs. 26 cents expected

Shares of Tilray fell 4.74% as of 4:09 p.m. ET shortly following results.

Growth in Tilray’s sales was broad-based in the three months to June. Tilray’s adult-use sales nearly doubled over the quarter prior to $15 million. Canadian medical cannabis sales rose 17% quarter-over-quarter to more than $9 million. And food product sales grew 257% over the quarter prior to $19.9 million.

Ahead of results, the Street largely expected acquisitions Tilray made earlier in the year to help boost the company’s top line.

Tilray’s quarterly sales of $45.9 million were up more than three-fold from the year prior, which the company said was due to its acquisition of Manitoba Harvest, adult-use legalization in Canada (which took place in October 2018), and growth in Europe’s medical marijuana market.

The company in February closed its acquisition of Manitoba Harvest, the world’s largest hemp food manufacturer, giving it access to the lucrative U.S. hemp-based food market. That month, the company also closed its acquisition of Natura Naturals, a Canadian medical cannabis provider.

The acquisitions were some of the latest in a string of tie-ups for Tilray. In the past year, the company has also partnered with companies outside of the cannabis space including brewing giant Anheuser Busch In-Bev, pharmaceutical company Novartis, and entertainment and fashion company Authentic Brands Group.

During the quarter, average net selling price including excise taxes fell to $4.61 per gram, down 28% from the year earlier. Tilray said this was due to increased sales of adult-use cannabis, which brings in less per gram versus other forms. Tilray’s gross margins increased 4 percentage points over the quarter prior to 27%, but narrowed markedly from the 43% margin the company posted in the same quarter last year.

The Nanaimo, Canada-based company has never reported a profit in its year as a public company, and has seen losses yawn as it steps up investment into the international and adult use cannabis space. The company was the first to legally export medical cannabis from North America to Europe, and this year earned a cultivation license in Portugal to produce goods for the EU market. It also has a medical cannabis presence in Australia and New Zealand and in Chile.

US businessman, Brendan Kennedy, CEO of Tilray medical cannabis producer, delivers a speech during the inauguration of the Canadian company's European production site in Cantanhede, on April 24, 2018. - (Photo by PATRICIA DE MELO MOREIRA / AFP / Getty Images).

Tilray attributed its steepening losses in the quarter to higher operating expenses relating to growth initiatives, interest expense from convertible notes, its additions of Manitoba Harvest and Natura, and expansion of its international operations.

Some analysts have looked past the bath of red ink in Tilray’s recent results, and have instead focused on the long-term potential of the global cannabis giant.

Ahead of results, Cowen analyst Vivien Azer reiterated her Outperform rating on shares of Tilray, and said she expected “continued growth over the 2H of the year, driven by increased supply, brick-and-mortar rollout as well as novel form factor introduction in late 4Q19.”

Tilray’s results come on the heels of mixed results from peer pot companies, as investors continue to look for signs of profitability from the budding industry.

Cronos (CRON), the Canadian cannabis company that counts Philip Morris parent-company Altria (MO) as a major investor, posted a wider-than-expected quarterly loss last week and guided toward further losses in the second half o the year, as it prepares to launch new adult-use products in Canada and CBD products in the U.S. Meanwhile, Aphria (APHA) became the first major Canadian cannabis company to post a profit at the beginning of the month.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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