Piper Sandler Reviews Tilray's Q1, Outlook2023-10-05 10:58:24 AM ET (MT Newswires)
10:58 AM EDT, 10/05/2023 (MT Newswires) -- Tilray acquired eight beer and beverage brands from Anheuser-Busch (ABI) on September 29, for $85 million in cash, making it the 5th largest US craft beer brewer (up from 9th), lifting its market share to ~5%, though the new brands have had falling retail revenues for as far back as Piper Sandler has had data. Analyst Michael Lavery expects cannabis stocks (TLRY included) will continue to trade largely on US regulatory expectations. He has added revenues from its recent beer acquisition (beginning in F2Q24) and raised his 2024E sales from ~$670 million to ~$850 million.
Maintaining price target of US$2 (~2x EV/CY2024E Sales) and neutral rating.
Tilray reported FQ1 24 revenue of $176. million, well above PS $161.3 million estimate, though its adjusted EBITDA of $11.4 million was below the $14.6 million estimate. Its F1Q24 revenue was up ~16% on a y/y comparison (but down ~4% sequentially). Despite the addition of its newly acquired beer brands, management reiterated F24 EBITDA guidance in the range of $68-78 million (+11-27%). PS models near the midpoint (~$73 million). (in US$).
TLRY reported gross margin of ~28% in the quarter vs. ~37% in FQ4 23, and EBITDA margins fell ~270bps. It expects a drag on margins in Q2 24 from integrating its newly acquired (lower margin) beer brands, further price compressions in cannabis, as well as carrying costs from its recently acquired HEXO facility. Lavery is modeling ~110bps full year EBITDA margin declines, "which may prove optimistic."
Despite heavy overhead carrying costs, TLRY is hanging on to HEXO's facility in the hopes of increasing its resale value. It plans to begin cucumber farming there by the end of F24, adding more complexity while pushing into a business that commands relatively low multiples, Lavery notes. "We do not view vegetable farming as a part of an attractive, branded CPG portfolio for investors."