Tilray lowers expectations for 2024, eyes Canada tax savings

Canadian cannabis and beverage alcohol company Tilray Brands has lowered its financial guidance, reducing expectations for investors in its third-quarter earnings announcement on Tuesday.

Tilray’s previous guidance for fiscal year 2024 of $68 million-$78 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) “is no longer feasible,” chief financial officer Carl Merton said during an earnings call on Tuesday morning.

“We have therefore lowered our adjusted EBITDA range to be between $60 (million) and $63 million,” he said.

Merton also said Tilray no longer expects to meet its previous guidance of achieving positive adjusted free cash flow for the full 2024 fiscal year.

Tilray attributed that change “to delayed timing for collecting cash on various asset sales,” according to a news release.

New York- and Leamington, Ontario-based Tilray, which reports its earnings in U.S. dollars, reported a $105 million net loss for the third quarter ended Feb. 29.

Tilray posted net revenue of $188.3 million, up roughly 30% from $145.6 million in revenue during the same quarter in 2023 but down from $194 million in net revenue during the company’s second quarter of 2024.

The company’s quarterly net revenue mix included:

• $54.7 million from beverage alcohol.
• $63.4 million from cannabis.
• $56.8 million from distribution.
• $13.4 million from wellness.

Tilray executives commented on Canada’s challenging cannabis excise tax structure in advance of next week’s federal budget release, after a parliamentary finance committee proposed capping excise taxes at 10% of the value of a cannabis product.

Tilray CEO Irwin Simon said the company would save $80 million annually if that recommendation were implemented.

Tilray paid $21.8 million in Canadian cannabis excise taxes during the third quarter.

Simon said the company believes “the rescheduling of cannabis from Schedule 1 to Schedule 3 in the U.S. would provide a path for Tilray to sell pharmaceutical-grade medical cannabis in the U.S., subject to doctor prescriptions.”

“This is a different strategy from what (U.S. multistate cannabis operators) are doing today,” Simon said during his prepared remarks.

Asked to provide further details during a Q&A session with equity analysts, Simon said: “Is there a possibility with (the North American Free Trade Agreement) or with other rules that we can export cannabis from Canada that’s GMP-certified?”

“Today you can export cannabis from Canada to other countries around the world if it’s GMP-certified, so I’m not sure why that wouldn’t be the case in the U.S. if that happens.”

Tilray operates a medical marijuana-distribution business in Germany, which recently legalized recreational cannabis without creating a full commercial market.

In Germany, Simon said “new opportunities for Tilray flow mostly from the removal of medical cannabis from the Narcotics Act.”

“This de-schedule change is expected to significantly expand the medical cannabis market in Germany, as it would allow for more doctors to prescribe medical cannabis more easily to patients and potentially allow for broader health insurance coverage.”

Tilray reported $146.3 million in cash and equivalents as of the end of the quarter.

Shares of the company trade as TLRY on the Nasdaq and the Toronto Stock Exchange.

Solomon Israel can be reached at solomon.israel@mjbizdaily.com.