Share Market: Tilray Stocks Soar after Revenue Beat

SHARE MARKET – Tilray stocks soared almost 5% during the extended session following its first-quarter revenue, which rose 195% from a year ago to $23 million. This was also higher than the figure it reported in the fourth quarter.

Analysts previously expected the Canadian pharmaceutical and cannabis company to report around $21 million.

The legalization of recreational marijuana in Canada helped push sales higher. Hemp-food sales from Manitoba Harvest – which is a large hemp-supplier that Tilray acquired earlier this year – and gains in international markets boosted prices further.

Last February, Tilray also acquired Natural Naturals, which is a cultivation center in Ontario.

From the previous quarter, Tilray saw its gross margins go higher to 23%. However, gross margin would continue to take some blows due to rising costs in bringing cultivation facilities online in Canada and Portugal, according to the company.

Tilray also added that the purchases from third-party suppliers would cut into margins.

Tilray said that it wanted to buy from third-party suppliers for ingredients. However, some analysts said that the quality of the product has left something to be desired.

The company said it still hasn’t found a product that meets its standards.

Tilray CEO and “Funded Capacity”

Meanwhile, the company’s chief executive Brendan Kennedy said that it would have sold a lot more pot if growers in Canada had not lied about their “funded capacity.”

According to Kennedy, even if there was a widespread hype for a supply glut of cannabis in Canada, it wasn’t really happening.

To prove the point, the company said it was still having a tough time sourcing enough amount of high-quality marijuana. Additionally, it expected supply issues to still be a problem for the next 18 to 24 months.

Tilray blamed this to producers, saying that “some of them were lying about their funded capacity” in an interview. Kennedy said that public companies inflated the “funded capacity” metric to attract investors who were using the metric for their valuations.

The “funded capacity” is a number that refers to the growing capacity a company has without raising additional capital.

However, in many instances, the capacity of Canadian public companies was theoretical.

“If I can go back 18 months, 12 months ago, I would have invested another $100 million, $200 million in terms of Canadian cultivation,” Kennedy said during a conference call. “That was a – that was a mistake. But we believed, we believed all the hype 18 months ago.”