Market Overview

Tilray, Inc. Reports Second Quarter 2018 Earnings

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  • Revenue rises 95.2% to US$9.7 million in second quarter and 75.2%
    to US$17.6 million in first half of 2018
  • Tilray medical cannabis products now available to patients in 11
    countries on five continents
  • Company has signed agreements to supply adult-use cannabis to
    consumers in seven Canadian provinces and territories
  • Significant progress achieved in expanding Company's global
    production capacity

Tilray, Inc., ("Tilray" or the "Company") (NASDAQ:TLRY) a global
pioneer in cannabis production and distribution, today reported
financial results for second quarter and six months ended June 30, 2018.
All financial information in this press release is reported in U.S.
dollars, unless otherwise indicated.

"We are very pleased with our strong start to 2018. Tilray is
well-positioned to continue to pioneer the development of the global
medical cannabis market and to become a leader in the adult-use cannabis
market in Canada," said Brendan Kennedy, President and Chief Executive
Officer of Tilray. "In the second quarter, we generated significant
revenue growth as a result of our global strategy, our multinational
distribution network and our commitment to research, innovation, quality
and operational excellence."

Second Quarter 2018 Financial Highlights

  • Revenue increased to $9.7 (C$12.7) million, up 95.2% compared to the
    second quarter of last year. The increase in revenue was driven by
    increased patient demand in Canada, sales to other Licensed Producers
    and international sales.
  • Total kilogram equivalents sold increased 745 kilograms to 1,514
    kilograms, or 97%, compared to the prior year.
  • Average net selling price per gram increased from $6.20 to $6.38
    (C$8.12 to C$8.36) for the three months ended June 30, 2017 and 2018,
    respectively. The increase was primarily due to growth in higher
    potency product and extract sales, partially offset by an increase in
    wholesale revenues.
  • Net loss for the quarter was $12.8 million compared to $2.4 million
    for the second quarter of 2017. Net loss includes non-cash stock
    compensation charges of $5.6 million compared to a $35 thousand
    charged in the prior year period. Adjusted EBITDA was a loss of $4.7
    million compared to a loss of $1.9 million the second quarter last
    year. The increased net loss and Adjusted EBITDA decline was primarily
    due to the increase in operating expenses related to continued growth,
    expansion of international teams, and costs related to financing and
    the initial public offering ("IPO").

Business Highlights in 2018 to date:

  • Successfully completed IPO in July whereby 10.350 million shares of
    Class 2 Common Stock were sold at an initial price to the public of
    $17.00 per share. The Company received net proceeds of $163.6
    (C$216.9) million after the underwriting discount. Net proceeds will
    be used to fund the build out of cultivation and processing capacity,
    repay outstanding principal and interest under the Privateer Holdings
    debt facilities, and for future acquisitions and working capital.
  • Prior to the IPO, completed Series A funding of $55.0 (C$69.2) million
    from leading institutional investors.
  • Signed agreements to supply cannabis to adult-use consumers in seven
    Canadian provinces and territories (British Columbia, Manitoba, Nova
    Scotia, Ontario, Quebec, the Yukon territory and the Northwest
    Territories).
  • Entered into a strategic agreement with Sandoz Canada, a division of
    Novartis, to collaborate on the creation and sale of co-branded and
    co-developed non-combustible medical cannabis products.
  • Signed agreement with Shoppers Drug Mart Inc., Canada's largest
    pharmacy chain with more than 1,200 pharmacies and expect to supply
    Tilray products following approval of Shoppers' application to become
    a Licensed Producer.
  • Signed binding letter of intent with Pharmasave, one of Canada's
    leading independent pharmacy chains with more than 650 pharmacies,
    which Tilray anticipates will allow it to supply Pharmasave stores
    with Tilray products contingent upon a change in laws that permits
    Canadian pharmacies to distribute medical cannabis to patients.
  • Completed exports to Argentina, South Africa and the United Kingdom,
    making Tilray products available in 11 countries on five continents.
  • Launched High Park Holdings Ltd., Tilray's wholly owned subsidiary
    formed to serve the pending adult-use market in Canada with a
    broad-based portfolio of cannabis brands and products.
  • Announced the launch of the CANACA™ brand, a new cannabis brand
    celebrating Canadian roots, values and this historical moment in
    Canada as the country becomes the world's first G7 nation to federally
    legalize cannabis through adult-use legalization.
  • Announced clinical study results of Tilray® 2:100 product
    showed promise in Canada's first pediatric study of mixed THC/CBD
    medical cannabis oil for children with drug-resistant epilepsy.

Conference Call

The Company will host a conference call to discuss these results today
at 4:30 p.m. ET. Investors interested in participating in the live call
can dial 877-489-6528 from the U.S. and 629-228-0736 internationally. A
telephone replay will be available approximately two hours after the
call concludes through Tuesday, September 11, 2018, by dialing
855-859-2056 from the U.S., or 404-537-3406 from international
locations, and entering confirmation code 2259149.

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 be archived for 30 days.

About Tilray®

Tilray is
a global pioneer in the research, cultivation, production and
distribution of cannabis and cannabinoids currently serving tens of
thousands of patients in ten countries spanning five continents.

Forward Looking Statements

This press release contains "forward-looking statements", which may be
identified by the use of words such as, "may", "would", "could", "will",
"likely", "expect", "anticipate", "believe, "intend", "plan",
"forecast", "project", "estimate", "outlook" and other similar
expressions. Forward-looking statements are not a guarantee of future
performance and are based upon a number of estimates and assumptions of
management in light of management's experience and perception of trends,
current conditions and expected developments, as well as other factors
that management believes to be relevant and reasonable in the
circumstances, including assumptions in respect of current and future
market conditions. Actual results, performance or achievement could
differ materially from that expressed in, or implied by, any
forward-looking statements in this press release, and, accordingly, you
should not place undue reliance on any such forward-looking statements
and they are not guarantees of future results. Forward-looking
statements involve significant risks, assumptions, uncertainties and
other factors that may cause actual future results or anticipated events
to differ materially from those expressed or implied in any
forward-looking statements. Please see the heading "Risk Factors" in the
final prospectuses for Tilray's initial public offering, which were
filed with the Securities and Exchange Commission on July 19, 2018, for
a discussion of the material risk factors that could cause actual
results to differ materially from the forward-looking information.
Tilray does not undertake to update any forward-looking statements that
are included herein, except in accordance with applicable securities
laws.

Use of Non-U.S. GAAP Financial Measures

To supplement its financial statements, the Company provides investors
with information related to Adjusted EBITDA, which is not a financial
measure calculated in accordance with generally accepted accounting
principles in the United States ("U.S. GAAP"). Adjusted EBITDA is
calculated as net income (loss) before interest expense, net; other
(income), net; tax expense; foreign exchange (gain) loss; depreciation
and amortization; and stock-based compensation expense. The Company
believes non-U.S. GAAP financial measures provide useful information to
management and investors regarding certain financial and business trends
relating to the Company's financial condition and results of operations.
Management uses non-U.S. GAAP financial measures to compare the
Company's performance to that of prior periods for trend analyses and
planning purposes. Non-U.S. GAAP financial measures are also presented
to the Company's Board of Directors and Adjusted EBITDA is used in its
credit agreements.

Non-U.S. GAAP measures should not be considered a substitute for, or
superior to, financial measures calculated in accordance with U.S. GAAP.
Non-U.S. GAAP measures exclude significant expenses that are required by
U.S. GAAP to be recorded in the Company's financial statements and are
subject to inherent limitations.

 
Tilray, Inc.
Condensed Consolidated Statements of Net Loss and Comprehensive Loss
(in thousands of U.S. dollars, except for per share data, unaudited)
 
      Three months ended   Six months ended
June 30,   June 30,
  2018       2017     2018       2017  
   
Revenue $ 9,744 $ 4,992 $ 17,552 $ 10,019
Cost of sales     5,567       2,284       9,479       4,563  
Gross margin     4,177       2,708       8,073       5,456  
 
Research and development expenses 639 1,040 1,614 1,701
Sales and marketing expenses 3,305 1,515 5,568 2,443
General and administrative expenses 5,622 2,434 9,990 3,966
Stock-based compensation expense     5,601       35       5,632       69  
Operating loss     (10,990 )     (2,316 )     (14,731 )     (2,723 )
 
Foreign exchange loss (gain), net 1,359 (361 ) 2,505 (580 )
Interest expense, net 497 500 913 996
Other (income) expense, net     (76 )     (20 )     (197 )     (6 )
Loss before income taxes (12,770 ) (2,435 ) (17,952 ) (3,133 )
 
Income tax expense     (63 )     -       (63 )     -  
Net loss   $ (12,833 )   $ (2,435 )   $ (18,015 )   $ (3,133 )
 
Basic and diluted net loss per share (0.17 ) (0.01 ) (0.24 ) (0.01 )
Shares used in computation of net loss per share, basic and diluted 75,000,000 75,000,000 75,000,000 75,000,000
 
Net loss $ (12,833 ) $ (2,435 ) $ (18,015 ) $ (3,133 )
Foreign currency translation gain (loss)     86       (208 )     87       (240 )
Comprehensive loss   $ (12,747 )   $ (2,643 )   $ (17,928 )   $ (3,373 )
 
 
Tilray, Inc.
Condensed Consolidated Balance Sheets
(in thousands of U.S. dollars, except for per share data, unaudited)
 
    June 30, December 31,
  2018     2017  
Assets
Current assets
Cash and cash equivalents $ 25,331 $ 2,323
Accounts receivable, net 1,757 983
Other receivables 3,696 1,131
Inventory 6,750 7,421
Prepaid expenses and other current assets     1,210       545  
Total current assets 38,744 12,403
 
Property, plant and equipment, net 65,707 39,985
Intangible assets, net 1,395 934
Deposits and other assets     632       626  
Total assets   $ 106,478     $ 53,948  
 
Liabilities
Current liabilities
Accounts payable $ 13,209 $ 5,563
Accrued expenses and other current liabilities 3,295 2,021
Accrued obligations under capital lease 199 379
Current portion of long-term debt 9,128 9,432
Privateer Holdings debt facilities     37,015       32,826  
Total current liabilities 62,846 50,221
 
Accrued obligations under capital lease     8,398       8,579  
Total liabilities   $ 71,244     $ 58,800  
 
Commitments and contingencies (Note 10)
 
Stockholders' equity (deficit)
Preferred stock, $0.0001 par value, 8,000,000 shares authorized;
7,794,042
issued and outstanding at June 30, 2018; none issued at December 31,
2017
$ 1 $ -

Common stock, $0.0001 par value, 215,000,000 shares authorized,
75,000,000

shares issued and outstanding at June 30, 2018; none issued at
December 31, 2017
8 -
Capital stock (1 share authorized, issued and outstanding at June
30, 2018
and December 31, 2017) - -
Additional paid-in capital 89,915 31,736
Accumulated other comprehensive income 3,778 3,866
Accumulated deficit     (58,468 )     (40,454 )
Total stockholders' equity (deficit)     35,234   -   (4,852 )
Total liabilities and stockholders' equity $ 106,478 $ 53,948
 
 
Tilray, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands of U.S. dollars, except for per share data, unaudited)
 
      Six months ended
June 30,
  2018       2017  
Operating activities
Net loss $ (18,015 ) $ (3,133 )
Adjusted for the following items:
Foreign currency loss (gain) 2,451 (579 )
Provision for doubtful accounts - (9 )
Inventory write-downs 227 53
Depreciation and amortization 1,148 955
Stock-based compensation expense 5,632 69
Non-cash interest expense 509 481
Deferred Income Tax expense 63 -
Loss on disposal of property, plant and equipment (2 ) 7
Changes in non-cash working capital:
Accounts receivable (840 ) (430 )
Other receivable (2,701 ) (85 )
Inventory 48 (1,055 )
Prepaid expenses and other current assets (1,033 ) (704 )
Accounts payable 8,019 591
Accrued expenses and other current liabilities       1,589       1,029  
Net cash used in operating activities       (2,905 )     (2,810 )
Investing activities
 
Increase in deposits and other assets (23 ) -
Purchases of short-term investments (29,394 ) -
Proceeds from sales of short-term investments 29,257 -
Proceeds from maturities of short-term investments 136 -
Purchases of property, plant and equipment (28,237 ) (835 )
Dispositions of property, plant and equipment 11 22
Purchases of intangible assets       (703 )     (103 )
Net cash used in investing activities       (28,953 )     (916 )
Financing activities
 
Advances (payments) under Privateer Holdings credit facility 2,250 3,271
Advances under Privateer Holdings construction facility 1,560 8
Minimum lease payments under capital lease (339 ) -
Proceeds from issuance of convertible preferred stock, net       52,557       -  
Net cash provided by financing activities       56,028       3,279  
Effect of foreign currency translation on cash       (1,162 )     239  
 
Cash and cash equivalents
Increase (decrease) in cash and cash equivalents 23,008 (208 )
Cash and cash equivalents, beginning of year       2,323       7,531  
Cash and cash equivalents, end of year     $ 25,331     $ 7,323  
 
Supplemental Disclosure of Cash Flow Information
Cash paid for interest       573       -  
 
   
Three Months Ended June 30, Six Months Ended June 30,
  2018       2017     2018       2017  
Adjusted EBITDA reconciliation:
Net loss $ (12,833 ) $ (2,435 ) $ (18,015 ) $ (3,133 )
Interest expense, net 497 500 913 996
Other (income) expense, net (76 ) (20 ) (197 ) (6 )
Tax expense 63 - 63 -
Foreign exchange (gain) loss 1,359 (361 ) 2,505 (580 )
Depreciation and amortization 670 409 1,148 955
  Stock-based compensation expense     5,601       35       5,632       69  
Adjusted EBITDA   $ (4,719 )   $ (1,872 )   $ (7,951 )   $ (1,699 )
 

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