Tilray CEO ‘frustrated’ with pace of U.S. cannabis legalization, reports Q2 loss
The cannabis company, which keeps its books in U.S. dollars, said the loss amounted to 11 cents per diluted share for the three months ended Nov. 30.
Tilray Brands Inc. reported a second-quarter net loss of US$61.6 million in its most recent quarter as it temporarily slowed cannabis production because of the “longer-than-anticipated march toward legalization” in some markets.
Among the markets whose timing is hampering the Leamington, Ont. pot company is the U.S., where its chief executive said, “we do not expect (legalization) to happen at any time in the near future.”
“In the U.S., participation in the adult-use cannabis market has always been very important to us and integral to our long-term strategy,” Irwin Simon told analysts on a call on Jan. 9.
“However, as long as cannabis remains federally illegal in the U.S. we will not engage directly in business that touch the cannabis plant to fully optimize the value and strength of our U.S. business.”
Cannabis is legal for medical purposes in about 39 states and for recreational use in 19, including D.C. However, federal law still considers it a Schedule I controlled substance with high risk of abuse and no accepted medical use, placing it in a group with harder drugs like heroin, LSD and peyote.
But last year U.S. President Joe Biden revealed he will pardon people convicted under federal law of possessing cannabis and review the status of pot as a Schedule 1 substance.
The U.S. has also seen discussion around the Safe Banking Act, a Democratic bill with some Republican support that would allow financial institutions to work with cannabis companies without retribution, and the Marijauana Opportunity Reinvestment and Expungement (MORE) Act, which would pave the way for federal legalization.
“I’m frustrated that legalization, whether it’s Safe Bank, whether it’s MORE Act, whether it’s descheduling, nothing has happened within cannabis,” said Simon.
Yet even talk of such moves has spurred excitement at cannabis companies like Tilray, Canopy Growth Corp. and Aurora Cannabis Inc. They have long been purchasing stakes in U.S. brands in anticipation that the U.S. would loosen its cannabis regulations and legalize pot on a federal basis.
Simon’s remarks came as he announced Tilray’s US$61.6 million second quarter net loss, which compared with net income of nearly US$5.8 million in the same quarter a year earlier.
The cannabis company, which keeps its books in U.S. dollars, said the loss amounted to 11 cents per diluted share for the three months ended Nov. 30 compared with net income of zero cents per diluted share a year earlier.
Net revenue for the quarter totalled US$144.1 million, down from nearly US$155.2 million in the same quarter last year.
The results came as Tilray’s cannabis business reported US$49.9 million in revenue, down from US$58.8 million in the same quarter last year, while its distribution business saw revenue of US$60.2 million compared with US$68.9 million a year ago.
To offset the competitive nature of Canada’s recreational cannabis market, which has seen a race for lower prices and an oversaturation of stores in some regions like Toronto, the company has also focused on beverages.
Tilray has a roster of alcohol and beverage brands, which include Montauk Brewing Company, SweetWater Brewing Company, Alpine, Green Flash and Breckenridge Distillery.
“All the major alcohol companies have an eye on cannabis, no different than the tobacco companies,” said Simon. “So with that, if I today can’t do anything in the U.S. and have to sit there, why not get bigger into some of these craft brewers like a SweetWater, like a Montauk, like a Breckenridge?”
Tilray’s beverage alcohol business had US$21.4 million in revenue, up from US$13.7 million last year, and its wellness business revenue totalled nearly US$12.7 million, down from US$13.8 million a year ago.
