Tilray Leaders Try to Reassure Shareholders Following $1.1 Billion Writedown

Tilray Brands’ C-suite did its best to put investors at ease this week during the latest earnings call, which followed the disclosure that the company had posted a $1.1 billion loss in just the third quarter.

The company’s CEO and CFO both spoke to the loss, which they said was essentially a writedown on the value of the company itself and its assets, which had been triggered by a decrease in Tilray’s market cap.

“This noncash reduction was allocated as $55 million to inventory, $54.8 million to the HEXO convertible note, $104 million to capital assets, $38.7 million to other assets, $205 million to intangible assets, and $618.5 million to goodwill,” CFO Carl Merton said during the call.

To put the loss into context, Merton said that when Tilray announced the acquisition of Aphria in 2020, the stock price and value of Tilray and Aphria increased by more than $1.4 billion by the time the deal closed in 2021, which is “higher than the noncash reduction we announced today.”

But, Merton and CEO Irwin Simon insisted, the writedown had no material impact on Tilray’s market position or ability to execute, despite delays in the U.S. strategy – which hinges on yet-to-come federal marijuana legalization.

“The market is challenging right now,” Simon said. “But we have the right strategy in place to preserve the strong position we are in across our markets.”

Simon also repeatedly said he thinks Tilray’s stock price – which was trading at around $2.52 as of April 11 – is off significantly given the company’s market-leading position in Canada and internationally.

“I am not happy at all about our stock price. And I don’t think it truly reflects what the value is that we’re building for our shareholders today,” Simon said. “We have done a lot. And we are a brand that’s well known. We are businesses with well-known brands and there is a lot more to come.”

“Biggest Winner” in Canadian Cannabis?

In the past 12 months, Tilray paid out C$120 million in taxes to the Canadian government, Simon noted, another factor that affects the company’s finances.

But, he said, that may eventually give the company leverage with federal regulators in an attempt to right-size the national marketplace, which several Tilray executives said needs some contraction.

Contraction that Tilray is willing to help bring about. At the same time it released its third-quarter earnings, the company announced it would acquire fellow Canadian brand HEXO for $56 million.

“The biggest winner in Canada today is the Canadian government, where we pay over $120 million between excise tax and taxes and HEXO pays $35 million,” Simon said. “So ultimately it also will give us some clout to now to go to the Canadian government and say something has to change here in this marketplace.”

Simon said there are roughly 1,000 licensed producers in Canada currently and obtaining a business permit has become easier in recent years, which has led to oversaturation.

“For us to get the profitability you want, you (have) got to get bigger,” Simon said in response to a direct shareholder question. “And with 1,000 (licensed producers) out there, it’s harder to get bigger by just stealing share or you wait for a lot and go out of business. But the big thing here is consolidation is key.”