Tilray, Inc. Reports 2020 Full Fiscal Year and Fourth Quarter Results

Revenue Increased 26% to $210.5 Million in 2020 Compared to Prior Year

Net Loss $(3.0) Million in Q4 2020 Versus Net Loss $(219.8) Million in Q4 2019

Achieved Adjusted EBITDA Goal With $2.2 Million in Q4 2020

Combination with Aphria Inc. Expected to Close in Q2 2021 to Create the World’s Largest Cannabis Company Based On Pro Forma Revenue

$189.7 Million Cash at December 31,2020 and $261.3 Million Cash as of February 16, 2021

NANAIMO, British Columbia–(BUSINESS WIRE)–Feb. 17, 2021– Tilray, Inc. (“Tilray” or the “Company”) (Nasdaq: TLRY), a global pioneer in cannabis research, cultivation, production and distribution, today reported financial results for the full fiscal year and fourth quarter ended December 31, 2020. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

Brendan Kennedy, Tilray’s Chief Executive Officer, stated, “Over the course of 2020, and despite COVID-19 related challenges, we transformed and strengthened Tilray, delivered solid full year results, significantly reduced net loss, and achieved our stated goal of delivering break even or positive Adjusted EBITDA in Q4 2020. We did so by generating meaningful revenue growth across our core businesses, particularly international medical and Canadian adult-use in Q4, and reducing costs by $57 million on an annualized basis compared to Q4 of 2019. As a result, we now operate with a more focused, efficient and competitive cost structure. We also strengthened our balance sheet and positioned Tilray for growth and success in the future in combination with Aphria. These results required hard work and dedication and I sincerely appreciate everything the Tilray team has done to transform our business during 2020. We now look forward to the beginning of the next chapter in our corporate journey.”

Mr. Kennedy continued, “Amid an acceleration of regulatory changes and an increasingly-favorable political environment, our proposed merger with Aphria will position the combined company as a global leader with lowest cost of production, leading brands, a well-developed distribution network, and unique partnerships. Finally, and as previously stated, the ‘new’ Tilray will achieve over C$100 million in anticipated pre-tax synergies. The aggregate impact of these value drivers provides confidence that the ‘new’ Tilray will generate significant value for stockholders.”

As announced on December 16, 2020, Tilray will combine businesses with Aphria Inc. and create the world’s largest global cannabis company based on pro forma revenue. Following the close of this transaction, which is expected in the second quarter of 2021, the combined company will operate under the Tilraycorporate name with shares trading on Nasdaq under ticker symbol “TLRY”. Completion of the business combination is subject to regulatory and court approvals and other customary closing conditions, including the approval of Tilray and Aphria stockholders.

Fourth Quarter 2020 Financial Highlights

Total revenue increased to $56.6 (C$74.4) million, up 20.5% compared to the fourth quarter of 2019. Cannabis segment revenue increased 46% to $41.2 million (C$53.6 million), mainly driven by acceleration of International Medical sales (+191%) and Canadian Adult-Use sales (+49%). Canadian medical sales grew 26% and there were no bulk sales to other license producers. Hemp segment revenue decreased 18% to $15.3 million (C$20.5 million) primarily due to a shift to private label product with a large customer and the impact of COVID-related changes to consumer shopping patterns.
Total revenue increased 10% compared to the third quarter of 2020. Cannabis segment revenue increased 31%, driven by a 44% increase in International Medical sales, 27% increase in Adult-Use sales, and a 24% increase in Canada Medical sales which was partly offset by a 23% decline in Hemp sales.

Total cannabis kilogram equivalents sold decreased 54% to 6,901 kilograms from 15,039 kilograms in the prior year’s fourth quarter. The decrease was due almost entirely to the reduction of bulk sales.
Average cannabis net selling price per gram increased to $5.97(C$7.99) compared to $1.88 (C$2.52) in the fourth quarter of 2019 and decreased from $6.15 (C$8.15) in the third quarter of 2020. The increase versus 2019 was due to a continued shift in distribution channels and product mix, including growth in International Medical sales, a shift in sales to higher potency and higher priced products in the Adult-Use market, and the continued growth of Cannabis 2.0 products in Canada. The decrease from the third quarter of 2020 was due to the accelerated sales growth of cannabis flower products in the Canadian Adult-Use channel during the fourth quarter of 2020.
Average cannabis net cost per gram increased to $3.72 (C$4.98) compared to $1.53 (C$2.05) in the fourth quarter of 2019 and decreased from $4.23(C$5.61) in the third quarter of 2020. The year-over-year increase was the result of lower kilograms sold due to the discontinuation of bulk sales and partly due to increased sales of Cannabis 2.0 products which have higher costs than dried flower. The decrease in the fourth quarter of 2020 is attributable to additional realization of cost cutting measures and better absorption rates in Portugal.
Gross margin increased to 29% from (121%)% in the fourth quarter of 2019 and increased from 7% in the third quarter of 2020.
Gross margin, excluding inventory valuation adjustments, increased to 33% from 23% in the fourth quarter of 2019 and 29% in the third quarter of 2020.
- Gross margins for Cannabis, excluding inventory valuation adjustments, was 33% in the fourth quarter of 2020 versus 16% in the fourth quarter of 2019 and 27% in the third quarter of 2020. The sequential increase in gross margin was partly due to increased International Medical sales and lower costs at our production facilities resulting from our cost cutting measures.
- Gross margin for Hemp, excluding inventory valuation adjustments, decreased to 34% from 35% in the fourth quarter of 2019 and decreased from 43% in the third quarter of 2020. The decreases are primarily due to a shift in sales to larger size and lower margin private label products with one of our large customers.
Net loss was $(3.0) million, or $(0.02) per share, compared to net loss of $(219.8) million, or $(2.14) per share, in the fourth quarter of 2019 and net loss of $(2.3) million, or $(0.02) per share in the third quarter of 2020.
Adjusted EBITDA of $2.2 million was a $37.5 million improvement compared to the $(35.3) million loss in the fourth quarter of 2019 and a $3.7 millionimprovement versus the $(1.5) million loss in the third quarter of 2020. Increased sales combined with our significant cost reductions and operating efficiencies had a meaningful positive impact on Adjusted EBITDA.
Cash and cash equivalents totaled $189.7 million at the end of the fourth quarter of 2020.

2020 Financial Highlights

Total revenue increased 26% to $210.5 (C$281.9) million during 2020 from $167.0 million in 2019. The increase was driven by $26.5 million or 25% growth in the Cannabis segment, and $17.0 million or 28% growth in the Hemp segment. The Hemp segment increase was partially due to the timing of the Manitoba Harvest acquisition in 2019 which resulted in 10 months of sales in 2019 compared to 12 months in 2020.
Total kilogram equivalents of cannabis sold decreased 17% during 2020 compared to 2019 generally due to a reduction in bulk sales which was partially offset by increases in other product channels. We expect continued increases in kilogram equivalents grams sold as we generate sales growth in our key cannabis product channels, Canadian Adult-Use and International Medical. Going forward, we will pursue opportunistic bulk sales as we manage our product mix and optimize margins.
The average net selling price per gram increased by 51% in 2020 to $4.57 (C$6.12) compared to $3.01 (C$3.99) in 2019 due to an increase in International Medical Sales and Cannabis 2.0 products accompanied by a reduction in Bulk sales. International medical markets sales generally command a higher price per gram than Adult-Use and Medical sales in Canada. The proportion of International Medical sales during the 2020 increased to 23% versus 12% in 2019. Additionally, higher-priced Cannabis 2.0 products, which did not exist in the comparable period in 2019, continued to grow as a percentage of our Adult-Use business.
The average cost per gram sold increased to $3.24 (C$4.34) representing a 37% increase during 2020 compared to $2.36 (C$3.12) in 2019 partially due to fewer kilograms sold as a result of reduced bulk sales, increased sales of Cannabis 2.0 products that have higher costs than dried flower, and partially due to limited absorption of costs at our facility in Portugal as we brought new growing capacity on line.
Gross margin increased to 12% from (14%) in 2019 primarily due to reduced inventory valuation adjustments and overall improvements in our cost of production related to our cost cutting efforts.
- Gross margin for Cannabis, excluding inventory valuation adjustments, was 23% in 2020 and 20% in 2019. The improvement resulted from increased sales in International Medical markets, the introduction of 2.0 products in the Adult-Use market, and the realization of cost reduction measures implemented throughout the year.
- Gross margin for Hemp of 37% in 2020 increased from 31% in 2019 due to reduced inventory adjustments. Gross margin for Hemp, excluding inventory valuation adjustments and purchase accounting value step-up, was 42% in 2020 and 43% in 2019. The decrease in gross margin was primarily due to a sales mix shift to larger and lower margin package sizes and lower absorption rates in our facilities towards the end of the year.
Net loss for the year decreased to $(271.1) million, or $(2.15) per share, compared to $(321.2) million or $(3.20) per share in 2019 largely due to the cost optimization measures undertaken during 2020. In 2020, we recorded non-cash impairment charges of $61.1 million and $38.4 million of inventory valuation adjustments, as well as a non-cash charge of $100.3 million related to warrant valuations, partially offset by non-cash gains on debt conversion of $(61.1) million. In 2019, we recorded non-cash charges of $112.1 million related to the impairment of the Authentic Brands Group LLC (“ABG”) agreement as well as $68.6 million in inventory valuation adjustments.
Adjusted EBITDA for the year improved to a loss of $(30.3) million compared to a loss of $(89.8) million in the prior year primarily due to cost reduction measures undertaken during 2020, and our ability to leverage sales growth with a reduced cost structure.

Recent Business Developments Reflect Strong, Ongoing Global Growth and Opportunity

Progress on Expanding International Medical Business and Canadian Adult-Use Product Line

On February 9, 2021, we announced a new agreement with Grow Pharma to import and distribute Tilray medical cannabis products in the United Kingdom. This new agreement gives doctors and patients access to a sustainable supply of Tilray’s full range of pharmaceutical-grade medical cannabis products.
On February 4, 2021, we announced our partnership with Worldpharma Biotech and our first export of medical cannabis from Portugal to Spain. Worldpharma will produce the first medical cannabis products for clinical trials in Spain with Tilray GMP-certified medical cannabis. Spain marks the 17th country where Tilray medical cannabis is available.
On February 1, 2021, we announced that we had received the necessary approvals and market authorization in accordance with the Portuguese legislation to offer Tilray medical cannabis products in Portugal from our GMP-certified EU facility in Cantanhede, Portugal. This is the first time a full quality dossier was required and delivered to obtain market authorization in Europe for a medical cannabis product.
On January 26, 2021, we announced that we have been selected by the French National Agency for the Safety of Medicines and Health Products (ANSM) to supply Good Manufacturing Processes (GMP) certified medical cannabis products for experimentation in France. We will supply GMP-produced medical cannabis products to serve patients in need for the duration of the French experiment (18-24 months), due to begin in the first quarter of 2021.
On December 2, 2020, we announced that we had signed a cooperation agreement with Hormosan for the promotion of medical cannabis extracts in Germany. Hormosan is primarily focused on pain therapy and neurology and is part of the Lupin Group, an international entity that sells innovative drugs and generics. Through this strategic partnership, the expertise of both Tilray and Hormosan are now being leveraged to expand Tilray’s presence in the German market.
On October 5, 2020, our wholly-owned subsidiary, High Park Holdings Ltd., announced the newest addition to its cannabis-infused edible product line: Chowie Wowie Gummies. Chowie Wowie Gummies are handcrafted using clean and simple ingredients, are vegan and gluten free, and feature a delicious taste profile.

Progress on Strengthening Balance Sheet and Improving Financial Condition

Through February 15, 2021, warrant holders have exercised warrants to purchase approximately 12.7 million shares of Class 2 common stock at a price of $5.95 per share. The exercises resulted in proceeds of approximately $75.4 million and a reduction of our warrant liability of approximately $80.0 million.
On November 23 and 24, 2020, we announced that we had entered into privately negotiated exchange agreements with certain holders of its 5.00% Convertible Senior Notes due 2023 (the “Notes”). Pursuant to the exchange agreements, we exchanged approximately $197.2 million in aggregate principal amount of Notes plus accrued interest, for approximately 17.3 million shares of our Class 2 common stock. Following the exchange transactions, approximately $277.9 million in aggregate principal amount of the Notes remained outstanding. The purpose of the transaction was to reduce our debt and eliminate approximately $9.2 million in annual cash interest costs.

Conference Call

Tilray will host a conference call to discuss these results today at 5:00 p.m. ET. Investors interested in participating in the live call can dial 877-407-0792 from the U.S. and 201-689-8263 internationally.

There will also be a simultaneous, live webcast available on the Investors section of the Company’s website at www.tilray.com. The webcast will also be archived after the call concludes.

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