Cannabis company Tilray Brands to continue on acquisition path in 2024 as chief executive looks beyond Q2 results

By Steve Gelsi

Marijuana seller keeps top position in Canada and gets a boost from beer sales in the U.S., but its adjusted gross margins for pot sales are slimmer

Tilray Brands Inc. plans to continue acquisitions in 2024, Chief Executive Irwin Simon said, as he steers the cannabis and beverage company past its latest quarterly update.

With $260 million in cash and other resources, Tilray (TLRY) continues to shop for potential deals to diversify its revenue base.

"I will look to do more acquisitions in 2024," Simon told MarketWatch.

With Tilray pushing into beverages and alcohol drinks in the past year with the acquisition of Montauk Brewing Co. along with eight beer brands from Anheuser-Busch InBev (ZA:ANH), cannabis now accounts for about a quarter of its business.

With competition and tight margins in the Canadian cannabis market where Tilray operates, the company continues to look for ways to branch out elsewhere, such as beer sales in the U.S.

The company continues to follow the model of a diversified consumer-packaged-goods company in the vein of Coca-Cola Co. (KO), Diageo (DEO) or PepsiCo Inc. (PEP), he said.

But any deals that Tilray crafts must be "meaningful" to Gen Z and millennial consumers, he said.

Simon's comments came as Tilray reported that its second-quarter loss narrowed to $46 million, or 7 cents a share, from a loss of $62 million, or 11 cents a share, in the year-ago quarter.

Its adjusted loss was $2.7 million, or zero cents a share, which beat the FactSet consensus estimate for a loss of 5 cents a share.

Revenue increased by 34% to $193.8 million, just ahead of the analyst estimate of $193.7 million.

Tilray's stock dropped by 9.8% Tuesday to its lowest levels in about three weeks, in a choppy day for the market overall.

The company's adjusted gross margin for cannabis fell to 35% in the second quarter, from 43% in the year-ago quarter.

"We grew revenue, enhanced our capital structure, and realized operating synergies while strengthening Tilray Brands' position as the No. 1 cannabis operation and brand portfolio in Canada by sales volume and market share," Simon said in a statement.

The company said it expects total cost savings related to its Hexo and Truss integration of $30 million to $35 million in the current fiscal year.

On the heels of buying Montauk Brewing Co. last year and other alcoholic beverage brands for the U.S. market, Tilray said it's now the fifth-largest craft-beer brewer in the U.S.

With a 117% increase in alcohol net revenue to $47 million, Tilray said it is poised to become a top 12 beverage-alcohol company.

Ahead of Tuesday's move, Tilray's stock was down 15.8% in the past year, compared with a 37.4% increase by the Nasdaq COMP.

-Steve Gelsi

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01-09-24 1634ET

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