Don't Let the Shorts Steal Your Shares Tilray Brands Inc. (NASDAQ: TLRY) saw its shares pop on solid results after releasing its fiscal fourth-quarter earnings once markets closed on Monday. Shares jumped over 8% in early trading after the beverage and cannabis company raised its guidance for net revenues to be between $950 million and $1 billion, with mid-single digits of organic growth.
FactSet consensus for fiscal year 2025 was at $865 million for Tilray and Equity analyst Pablo Zuanic of Zuanic & Associates estimated 2025 sales at $850 million. He wrote, “We have increased our net sales estimates to $900Mn (1.05 x $855Mn), but we will remain a shade below guidance. Management has confirmed that the revenue guidance does not include potential future M&A.”
The company is basing its guidance on the potential business in the beverage markets and the German cannabis market. CEO Irwin Simon also noted in the company’s earnings call that rescheduling in the U.S. would change things at Tilray but didn’t go into any details.
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.
Zuanic wrote in his report, “The resurrection of Hi-Ball energy and entry into Delta 9 drinks could be quite additive to top line.”
Germany’s promise
Tilray’s international business net revenue grew by 22% year-over-year to approximately $53 million and remained the No. 1 market leader in medical cannabis across Europe. The company said its annual growth during fiscal 2024 was driven by increased sales in Germany, Poland, the U.K., Australia, and New Zealand. In Germany, Simon said the company was best positioned to capture a majority of the expected incremental growth in the cannabis medical market, which is projected to be approximately $3 billion in the medium term.
On April 1st, the Cannabis Act became effective in Germany, which declassified cannabis as a nonnarcotic. Simon said on the investor call, “Since the Cannabis Act went into effect, we have already seen a 65% increase in sales.”
He added, “We believe that Germany is declassifying cannabis as a nonnarcotic will also have a far-reaching impact on the drug policy throughout Europe. The European opportunity could represent a potential $45 billion medical market alone over the long term, and our presence in Europe allows Tilray to grow our global brand portfolio to a base of 700 million people, which is twice the population in the U.S.”
Zuanic wrote in his note, “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.”
Denis Faltischek, President, International Business and Chief Strategy Officer did caution that the German government is becoming overwhelmed with the import and export permits. He said, “We’ve been hearing basically given some of the increased demand on medical cannabis in terms of increasing patients, increasing number of prescriptions, we have, in fact, seen the permit timing going from two weeks to six weeks.”
He noted that filling prescriptions quickly due to increased demand was a bottleneck to growth. However, he said he believes that fulfillment will start to level out and only considers it a temporary restriction on growth. He also pointed out that Tilray competitors are facing the same supply issues – namely that flower sells out as quickly as it hits the market. He said the extract side of the business is growing more slowly.
High notes
Zuanic said he believed that Tilray should be a long-term holding for cannabis investors, but kept his rating for the stock neutral based on valuation. He said he might upgrade based on the following:
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Actual international markets growth and how TLRY directly benefits (can it hold on to share?)
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Tilray’s ability to reverse recent domestic rec market share loss
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Accretion, nature, and scope from future US deals
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Progression of key financial metrics improve (FCF, EBITDA per share)
The company seemed enthusiastic to deliver the earnings results for investors. Simon thanked shareholders for being patient as the company assembled its lifestyle portfolio of brands.
Simon said, “If I look back to 2019, at being a $50 million business. And this year, you know, we have guidance out there between $950 million to $1 billion.”
https://www.greenmarketreport.com/infused-beverages-germany-offer-big-potential-for-tilray/
Turning to our international cannabis, we grew net revenue by 22% year over year to approximately $53 million and remained the No. 1 market leader in medical cannabis across Europe. Our annual growth during the fiscal 2024 was driven by increased sales in Germany, Poland, the U.K., Australia, and New Zealand. In Germany, we believe we're best positioned to capture a majority of the expected incremental growth in the cannabis medical market, which is projected to be approximately $3 billion in the medium term.
TLRY beat across all key metrics:
Total 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.
Irwin Simon Interviews: Fox, After Earnings & TDR
https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.foxbusiness.com/video/6360056585112&ved=2ahUKEwj4q8y55eOHAxVGMdAFHS4MHisQ0PADKAB6BAgVEAE&usg=AOvVaw347opMoucebTQ2HMMujQ-F
https://www.youtube.com/playlist?list=PLpxc5nzHGn_JMOCm4PKVaUvDlNaFw_9Yt
https://www.youtube.com/watch?v=sYdsWltnRP8