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Tilray (TLRY) reported solid revenue but a decline in average selling prices in the third quarter as the Canadian cannabis producer works to address a growing medical and adult-use market.
Although Tilray more than doubled the amount of cannabis sold in the third quarter of 2018 over last year, average selling prices fell by $1.32 per gram, putting pressure on margins. Gross margins were about 30% in the third-quarter versus 55% in the same period last year.
Tilray sold 1,613 kilograms – or about 3,556 pounds – of cannabis in the third quarter, from 684 kilograms in the same period of last year. Average net selling price per gram fell to $6.21 from $7.53, “primarily due to an increase in bulk sales as a percentage of total revenue,” the company said in a statement.
Increased patient demand, bulk sales and wholesale distribution in Tilray’s export markets drove revenue to $10.04 million in the quarter, an 86% increase over last year. Losses, excluding some items, were 8 cents per share, narrower than consensus expectations of an adjusted 11-cent loss per share, according to Bloomberg data.
Tilray’s net loss, which includes stock-based compensation charges and higher operating costs, rose to $18.7 million, or 20 cents per share, compared with $1.8 million a year ago.
“We are in the early stages of achieving our growth potential and our team continues to strategically execute on disciplined operational initiatives and investments to support Tilray’s long-term, sustainable growth as the pace of legalization continues to accelerate around the world,” Brendan Kennedy, CEO of Tilray, said in prepared remarks. “Going forward, the demand for our products is strong and we remain committed to expanding our leadership in the global medical and adult-use cannabis markets.”
Tilray’s stock extended losses Wednesday morning, falling 4.8% to $106.20 per share as of 9:49 a.m. ET.
Tilray has faced intense scrutiny from investors since going public in July as the company has fought to justify its ballooning valuation. The wildly fluctuating stock climbed to $300 per share – a more than 1600% increase from its $17 per share price at its IPO – during intraday trading mid-September but has since pared those steep gains. The stock fell 1.67% to $111.55 per share Tuesday, with a market capitalization north of $10 billion.
Tilray’s stock has been particularly capricious in the wake of an evolving global regulatory landscape for cannabis. Shares jumped 30% on Nov. 7 after marijuana legalization critic Jeff Sessions resigned as Attorney General and voters made Michigan the 10th U.S. state to permit adult use of cannabis. Marijuana is still classified as a schedule 1 drug federally, the same level as LSD and heroin.