TLRY beat across all key metricsTotal revenues of $230Mn vs. FactSet consensus of $225Mn, and EBITDA of $29.5Mn vs. $27.5Mn. It also posted positive reported FCF for 4Q24 and positive adjusted FCF (ex-one offs) for FY24, as per guidance. • Sales. Total gross sales (before excise taxes) grew 20% QoQ to $256Mn, driven by growth in B2B sales of cannabis in Canada (branded rec, domestic med, and international were stable), seasonal and organic gains in the alcohol drinks unit, and a rebound in CC Pharma. Of the $42Mn in gross sales seq growth, those three units, respectively, added $9Mn, $22Mn, and $9Mn. Wellness was up $2Mn QoQ. Management noted the domestic B2B ramp in the May qtr was not a “new norm”.
• Profitability: Adjusted gross margins Improved seq from 27.4% to 34.8%, with gains across all four divisions, most notably in drinks (38% to 53%); cannabis also improved to 36.5% from 33.2%. Despite a $6Mn seq increase in recurring cash SGA to $67Mn, adj EBITDA margins increased seq from 5.4% to 12.8%.
• Balance sheet and cash flow: Reductions in convertible debt and use of the at the market equity facility, helped to lower net debt to $61Mn (Cash $261Mn; financial debt $322Mn). Net debt is manageable at 0.1x sales (fiscal 4Q24 annualized) and 2x EBITDA. Reported FCF (different from the company metric of adj FCF) for 4Q24 was +$21Mn vs. negative $25Mn in 3Q24, mainly due to improved earnings trends and working capital.
Main two drivers of growth in FY25 should be Germany (in particular, and Europe in general) and the US drinks business. A lot remains to be seen, but we are encouraged by TLRY saying its sales in Germany have grown 65% since 4/1. For modelling purposes, we now assume Germany is at an annualized run rate of almost $400Mn by end of CY24, $1.5Bn by end of CY25, and $2.9Bn by end of CY26.
Delta-9 beverage boost
Simon said that he sees an opportunity in selling infused beverages in the U.S. Simon told investors on the company’s earnings call, “We also relaunched HiBall Energy Drinks on Amazon and plan to launch new hemp-derived delta-9 beverages strategically in selected markets, including Texas and New Jersey, where we can leverage our existing beverage distribution network. Our hemp-derived delta-9 formulations are complete, and we’re actively developing a target launch strategy to ensure maximum impact.
He told investors that if Tiray could sell the THC beverages that it produces in Canada today in the U.S., it would be a large-sized business.
Guidance for net revenues are between $950 million and $1 billion, with mid-single digits of organic growth, which doesn't include S3.
$$$