Canadian licensed cannabis producer Tilray Inc. on Tuesday reported that its third-quarter loss had doubled despite rising sales, an outcome driven by a sharp increase in operating expenses related to the company’s international businesses and an expansion into the hemp industry.
The Nanaimo, B.C.-based company posted a net loss of US$35.7 million for the quarter ending Sept. 30, up from US$18.7 million a year ago. Revenue increased by approximately $12 million to $67.8 million for the quarter, boosted primarily by sales in the medical market and revenue from its acquisition of Manitoba Harvest earlier this year.
Sales to the domestic adult-use market represented just 30 per cent of Tilray’s total revenue for the quarter, a decline of two per cent from the second quarter.
The company sold 10,848 kilogram-equivalent of cannabis, almost double the amount it sold in the prior quarter but took a hit on average net selling price per gram, which plummeted 30 per cent to just $3.25.
“Our performance in the third quarter, including solid revenue growth and sequential gross margin expansion, reflects the positive business trends we have underway,” said Brendan Kennedy, Tilray’s president and CEO, in a statement released Tuesday after markets closed.
Tilray is not the only licensed producer struggling to tap the Canadian recreational market.
Cronos Group Inc. sold over 3,000 kilograms of cannabis and posted revenue of $12.7 million in the same period, but the bulk of those sales came from wholesaling to other licensed producers as opposed to provincial and private retailers.
The company’s stock was down slightly Tuesday.
Cronos’ net revenue was 25 per cent higher than the previous quarter, but the company’s per gram price on the wholesale market was just $3.75, 42 per cent lower than three months ago.
Cronos recorded an overall profit of $788 million for the quarter, but that was mostly due to a one-time $835 million gain on the revaluation of derivative liabilities.
Cronos posted adjusted gross margins of 41.5 per cent, roughly 12 per cent lower than the quarter ending June 30. The company’s adjusted EBITDA loss increased by 35 per cent, which management attributed to higher operating costs from sales, marketing and R&D.
“Now that we have opened relationships with provinces, it makes sense for us to continue expanding among the provinces. Our focus is on satisfying those channels and being able to deliver product,” said company CEO Mike Gorenstein in a conference call with analysts Tuesday morning.
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