Tilray 3Q F2018 Rundown – Sept 30, 2018


USD unless noted.

Last Q we noted on the Rundown and on “Inside The Ropes” podcast that Tilray had very little Finished Goods Inventory of Flower $89k and Extracts $361k at the end of the last Q and net decrease in overall cannabis inventory [decreased $913k].  We surmised that this would lead to either constrained sales growth unless they bought from 3rd parties, and if they did buy from third parties… a hit to gross margin. We have also repeatedly noted that NOT ONE financial media company has brought this up.

Well, we got that right.

Open up the financials and MDA and follow along.


Sales increased by $300 k to $10.0 million [$13 million CAD at fx rate they used] or by 3%.  Sales in Canada declined 3% or $301k, while International sales grew by $604k to $949k or by 175%.

Sales mix shifted to a majority of extracts for the first time with 52% of total sales with a growth of 17% QoQ. Flower sales fell 8%.

By weight KG sold went up 7%to 1,613 kgs, while net price per gram dropped to C$8.07 from C$8.36 last Q, or 3%.

Gross Margin:

Tilray CAD 31-Mar-18 30-Jun-18 30-Sep-18
Gross Margin without IFRS 49.9% 42.9% 30.5%

Despite the increase in extract sales, which usually delivers a boost to gross margin, gross margin fell substantially as third party purchases had to compensate for lack of internal supply at last Q end.  No one on the CC asked about the percentage of third party sales.

Gross Margin in absolute terms was $3.1 million, the lowest of Fiscal 2018.

Cost per gram went up 14% to C$4.97/gram from C$4.36/gram QoQ. This is largely attributed to sourcing from 3rd parties.

With High Park greenhouse receiving its sales licence this should start to reverse.  Also of note, is that Portugal completed its first outdoor harvest in Q3. That should be interesting in Q4.

Operating Expenses:

 Trend Analysis:

tilray sga trend

Peer Analysis:

tilray sga peer

Note: There is very little QoQ narrative in the MDA and no schedules of expenses.  So I will not be able to drill down too much in here.

Selling & Marketing expenses increased modestly by $0.2 million to $3.5 million or 35% of sales, which compares favourably to last Q’s for TRST, Aph and Ogi [the latter two did not have Sept/18 in their spend, so this could be distorted].  Tilray didn’t spend like CGC and ACB to get their brands out there.  This could be because they had so limited inventory that the spend would have not yielded better results for Q1 of Rec, and may have exacerbated the medical supply issues we saw pop up in post Adult Rec.

G&A expense increased from 58% of sales last Q to 75% of sales this Q to $7.6 million, an increase of $1.9 million.  Tilray falls into 3rd place in G&A with the above peer set with CGC and ACB higher than them and Aphria, Trst and Ogi [yet to report the Q] below them.

SBC sees a substantial increase to 112% of sales or $11.2 million as Tilray’s SP blew up in the Q. Last Q it was 58% of sales.

The remaining Opex expenses is R&D which grew 1% of sales to $0.8 million.

Tilray CAD 31-Mar-18 30-Jun-18 30-Sep-18
Opex 97.8% 155.7% 229.7%

Total Opex increased substantially with SBC being the biggest culprit.

Net Operating Profit was negative $20 million a slide from negative $11 million last Q.  The slide is attributed to the higher SBC, G&A and lower gross margin.

Net Income was negative $19 million versus negative $13 million last Q.  The difference between Net Operating Income and Net Income is almost whole FX related with Interest Expense stable at $0.5 million each Q.


Adjusted EBITDA and Breakeven Sales:

 Trend Analysis

tilray be trend

Peer Analysis

tilray be peer

Adjusted EBITDA slid to negative $7.4 million from $4.7 million QoQ, as a result of the reduction in Gross Margin and Increase in G&A.

Tilray CAD 31-Mar-18 30-Jun-18 30-Sep-18
Implied B/E Sales $19,451 $46,362 $98,256
Sales Gap to B/E Sales $9,527 $33,594 $85,195
Sales Gap to B/E EBITDA $6,471 $14,428 $31,346
Sales for B/E EBITDA $16,395 $27,196 $44,407

The decline in Gross Margin %, coupled with an increase in Opex, led to an increase in Sales required to evidence a positive Net Operating Profit to C$85 million a Q.

Sales required to evidence breakeven EBITDA also increased as a result of gross margin compression and G&A increases to C$44 million per Q.

Balance Sheet Items of Note:


  • Cash and ST Investments increased $94 million due to capital raise… This will increase with debenture raise in Q4
  • Inventory saw a net increase of $5.4 million
    • KGs Harvested to Sold improved to 3,419 kgs from a negative 53 kgs last Q
    • FG dry increased by $137k but remains at only $226k which is problematically low and has been enhanced by 3rd party supply during the Q,
    • WIP Dry did increase substantially to $7.6 million or by $4.9 million QoQ, This Q we will see how Tilray’s throughput capacity holds up.
    • FG Extracts increased to $1.0 million from $361k last Q. While improved, and processing more than sales in the Q [assuming they are doing all their own extracts and not sourcing extracts from 3rd parties], this remains low given they sold $5 million last Q.
    • WIP extracts decreased by $1.1 million to $2.0 million. Keep an eye on this figure in Q4.
    • I am going to guess Raw Materials are plants, as they report in US GAAP and not IFRS. This increased by almost 3 fold to $1.2 million in the Q.  This would represent the High Park commissioning.
  • PPE increased by $10 million to $76 million

Liabilities and Equity:

  • Privateer debt facilities of $37 million were repaid from IPO proceeds
  • Additional Paid In Capital increase by $172 million from IPO.


That puts a wrap on “Earnings Week”.


That’s all I got.






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