Tilray (NASDAQ:TLRY) has given investors plenty to cheer about so far this year. Its share price has more than quadrupled partly due to excitement about the pending merger with Aphria (NASDAQ:APHA). However, Tilray’s business performance hasn’t been so great in recent quarters. Until now…
The Canadian cannabis producer announced its fourth-quarter results following the market close on Wednesday. The marijuana stock soared 9% in after-hours trading. Here are three reasons to applaud Tilray after its Q4 update.
1. Rebounding revenue
In the third quarter of 2020, Tilray reported flat overall revenue compared to the prior-year period. Its cannabis revenue even fell 11% year over year. The company’s performance in Q4 was much better.
Tilray announced total Q4 revenue of $56.6 million, a 20.5% year-over-year jump and a 10% quarter-over-quarter increase. Importantly, the company’s cannabis revenue soared 46% year over year to $41.2 million. That growth was driven by 191% higher international medical cannabis sales and 49% higher Canadian adult-use recreational marijuana sales.
The only fly in the ointment was hemp segment revenue, which fell 18% year over year to $15.3 million. Tilray attributed this decline to a large customer shifting to a private-label product along with changes in consumer shopping patterns due to the COVID-19 pandemic.
2. Improving gross margin
Tilray’s gross margin in the third quarter was a paltry 7%. But the cannabis producer’s gross margin jumped to 29% in the fourth quarter. The year-over-year comparison looked even better — Tilray’s gross margin in Q4 of 2019 was negative 121%.
The company’s higher revenue helped improve Tilray’s gross margin. However, the main difference was a significantly lower cost of sales in Q4. There was good and bad news with Tilray’s increased gross margin, though.
The good news is that the company recorded much lower inventory valuation adjustments than it did in the prior-year period. This pulled its cost of sales down a lot. The bad news is that Tilray’s average cannabis net cost per gram rose year over year. This increase stemmed mainly from the company’s discontinuation of bulk sales and, to a lesser extent, from greater sales of cannabis derivative products, which have higher costs than dried flower.
3. Stronger adjusted EBITDA
Arguably the best news of all for Tilray in the fourth quarter was its positive trend for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Tilray delivered on its goal of achieving positive adjusted EBITDA in Q4.
The company posted Q4 adjusted EBITDA of…
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