Tilray Inc. managed to shave down its losses by more than $200 million in its most recent quarter, as it prepared to merge with rival Aphria Inc. later this year.
The Nanaimo-based cannabis company revealed Wednesday that its fourth quarter net loss dropped to US$2.9 million or two cents per share, from a loss of US$219.1 million or US$2.14 per share during the same quarter the year prior.
Tilray chief executive Brendan Kennedy attributed the significant reduction to the company signing European distribution deals, taking advantage of a surge in new cannabis store openings, unveiling a new sour cherry tetrahydrocannabinol product and reducing some prices to drive sales.
"2020 was a year in which the Tilray team delivered outstanding results despite challenging conditions," said Kennedy, on a call with analysts.
"While the pandemic presented unanticipated challenges, it did not hinder our progress."
Streamlining the company and reducing losses has become increasingly important for Tilray as it nears its merger date and as the illicit market remains resilient.
The Tilray-Aphria deal is expected to close in the second quarter 2021 and deliver at least US$100 million of annual pre-tax cost synergies within two years of closing.
The new company will operate under the Tilray name with Aphria chief executive Irwin Simon at the helm. It is expected to control more than 17 per cent of the retail cannabis market — the largest share held by any Canadian licensed producer.
Despite that position and Tilray's recent efforts to reduce its cost structure to better align with market conditions, the company will have plenty of work to do to remain competitive.
Part of that process will involve close attention to its sales volumes and prices, said Kennedy.
The amount of cannabis Tilray sold decreased by 54 per cent to reach 6,901 kilograms in its fourth quarter, from 15,039 kilograms in the prior year.
The decrease was due almost entirely to the reduction of bulk sales, Tilray said.
Its average cannabis net selling price per gram dropped to $7.99 from $8.15 in the third quarter as Tilray faced pressure to keep prices competitive in the Canadian recreational market.
Analysts and investors appeared pleased with Tilray's quarter, especially because revenue reached US$56.5 million, up from US$46.9 million previously.
Brenda O’Farrell, a senior analyst at Investing.com, called Tilray's performance "stellar" in a note and said it "did not disappoint."
"As the cannabis sector overall continues to find its footing, one of the big questions the industry is wrestling with is: Is bigger better?," she wrote.
"Well, Tilray’s results are taking the guesswork out of that query and investors were quick to notice."
Tilray shares shot up 8.2 per cent in after-hours trading, reaching $34.10 on Nasdaq.
O'Farrell said, "Although one quarter doesn’t make a trend, the winds are in the sector’s sails."
This report by The Canadian Press was first published Feb. 17, 2021.
Companies in this story: (TSX:APHA)
Tara Deschamps, The Canadian Press