What Investors Need To Know On Heels Of Tilray's Q1 Earnings Release

On Thursday, Tilray, Inc. TLRY TLRY released its financial results for the first fiscal quarter ended August 31, 2021, revealing net revenue of $168 million, up by 43% year-over-year and below the consensus estimates of $174.93 million.

Based in New York and Ontario, the company attributed the revenue growth to a 38% improvement in net cannabis revenue to $70 million, net beverage alcohol revenue of $15 million following the SweetWater acquisition, and revenue of $15 million from Manitoba Harvest.

RBC Dominion Securities Analysis

Douglas Miehm reiterated a Sector Perform rating on Tilray with a $19 price target.

RBC's Thesis

According to the analyst, the reported first-quarter revenues were below their estimates of $175.8 million.

The positive adjusted EBITDA of $12.7 million the company reported for the period was above RBC's estimates.

With the company ramping up toward garnering $80 million in cost synergies by the fall of 2023, Meihm expects "shares to trade in line to a bit higher."

Cantor Fitzgerald's Analysis

Pablo Zuanic maintained his price target of $18 while keeping an Overweight rating on Tilray's stock.

Cantor's Thesis

Tilray "sounded upbeat about improving trends" within the Canadian recreational market, as it reaffirmed its long-term vision of achieving $4 billion revenues by 2024, up from a current run rate of $672 million.

And while the company didn't provide proforma numbers for the combined company for May,

which was the first month following the merger with Aphria, Zuanic calculated that domestic recreational cannabis sales fell roughly 7% sequentially to $51 million.

In addition, the first quarter was impacted by issues related to the transition and integration of the two companies as well as by COVID-related events in Canada and Europe.

Based on HiFyre data for the quarter, Zuanic estimates that "legacy Aphria was down while legacy Tilray was up."

Moreover, CEO Irwin Simon said Thursday that Tilray's earnings would have been better if the company had already applied some of Aphria's processes.

"Our cannabis adjusted EBITDA would have been several million dollars higher if legacy Tilray products had been produced under a more efficient Aphria cost model," Simon told a conference call with financial analysts.

Looking forward, Zuanic sees several positives:

• Cost synergies are ahead of plan, with $55 million already achieved.
• Innovation across the domestic recreational and medical portfolio.
• The company claims good momentum in the export markets.
• Mergers and acquisitions will remain part of the story in Canada, the U.S., and Europe.

And it seems that Simon shares this opinion; he noted that M&A can fast-track the process allowing Tilray to avoid building a business from scratch.

SeekingAlpha wrote that Simon sees an opportunity in the medical cannabis field where he believes margins are better than those of the recreational segment.

"The opportunities in medical (cannabis) are tremendous," Simon stressed. "What we all really have to do is get the Canadian government to put it on prescriptions."

Price Action

Tilray's shares traded 0.73% lower at $10.94 per share during the pre-market session on Friday morning.

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