Tilray CEO: THC seltzer is next big upcoming business

Irwin D. Simon, Tilray, Inc. Chairman and CEO, joins Yahoo Finance Live following the company's latest earnings results.

Video Transcript

ZACK GUZMAN: We're seeing shares of Canadian cannabis giant Tilray popping today after that company reported its latest results. And the numbers coming in a little bit later than expectations on the top line growing. Cannabis revenues here, $168 million for the quarter. It was just slightly off from 173.5 million analysts were expecting. The adjusted loss came in better than expected. They're just $0.02.

EBITDA slightly lighter than expectations but still good enough for the company's 10th consecutive quarter of positive-adjusted EBITDA. And for more on where the cannabis sector is headed, happy to bring in the CEO and chairman of Tilray. Irwin Simon joins us now.

And Irwin, good to be chatting with you here today. Congrats on the quarter. I think a lot of people are cluing in on the cost savings. Of course, you guys are still now post-merger with Aphria. Talk to me about where those cost savings are manifesting right now and what that means for you guys moving forward.

IRWIN SIMON: So Zack, first of all, just let me say a few things about the quarter. Our revenue was up 43%. Our gross profit was up 46%. And you know, looking at a quarter where it began in June, Canada was still closed until the middle of June. Customers are not allowed in stores until early July. And just recently, customers have been allowed to come into stores at full tilt.

Now, I was at a store yesterday at [INAUDIBLE], which is like Times Square at noon. And it was pretty quiet there. So we've got to get people back in the stores. We've got to get bucktenders educated. And that's going to be important.

So I'm, you know, excited about what's going on in the cannabis world. And it's going to be three years that cannabis has legalized in Canada, October 17. And there's a lot of changes that happen. So we're basically from adult use, only a three-year-old industry.

Tilray and Aphria came together May 1. And a big part of bringing the companies together is consolidation. I've gone out publicly and said we look to take out $80 million of cost. And we're well on track. So far, we've taken out $55 million of cost. Including those costs is about $18 million of cash costs.

And they're coming from integrating the organization, duplications in sales marketing, organization's purchasing power. We did announce we were closing some facilities and integrating them into the [INAUDIBLE] facility. So there's costs there, duplication of marketing programs, and in regards to offices around the country, et cetera.

So that's where the cost savings are coming from. But what I want to make sure is that we're putting out good product with good potency. And at the end of the day, it's driving sales growth. And our shareholders are seeing the benefit developed from stock appreciation.

AKIKO FUJITA: Yeah, let's talk a little bit more about that sales growth. I mean, you've laid out a goal here of $4 billion in revenue by fiscal 2024. What's the next lever, the next evolution, as you described it, that you see in the market that will help you get there?

IRWIN SIMON: So on July 29, I laid that out the day after. I'm like, what will they just do to myself here? But at the end of the day, hey, you've got to put a stake in the ground. And with that, how do I take this company to the next level?

And you heard what I said before. We're only a three-year-old industry in regards to adult use being legalized in Canada. The whole-- free itself, approximately a five-year-old company. And what's going on in the cannabis world?

Well, first and foremost, how do I get cannabis to $1 billion in Canada? And that is going to be coming from driving share growth. And how do you get share growth is new products, new distribution, educating more and more consumers about the product, and bringing users into the product.

A big part of that is the medical cannabis world. And how do you get patients to get prescriptions? How do you get cannabis on the Canadian Medical Plan? How do you get companies to pay for medical cannabis if it's prescribed? And one of the things we have to do is invest in research and invest in science behind it that could support claims in regards to pain, anxiety, sleep, et cetera.

So getting Canada to $1 billion in sales, getting their European business to $1 billion of sales. And that is other countries opening up their medical cannabis and legalization happening whether it's Germany, Portugal, Israel. The Netherlands is other ways in the European market.

In the US, we're depending upon legalization in the US. And, you know, I don't know that I could put a pin in the whole now and say when that would happen. But what's important for us today, we have our spirits business in regards to SweetWater brewery. We have our Manitoba harvest business. And I've talked about other acquisitions in those categories.

ZACK GUZMAN: That's I was going to ask about too, because, I mean, you think about the growth, obviously, you're not Congress. You can't control when the lever is pulled and when it gets legalized. So I think a lot of people wish you could. And when you look at--

IRWIN SIMON: I would do it today if I could.

ZACK GUZMAN: [LAUGHS] You look at the drink side, you know, some people might have looked at the SweetWater acquisition and said, what is this, and why is this happening? Is it because they have a beer labeled 420? They got the trademark around 420-- SweetWater 420-- or is there more there?

And so when you think about the push on the drink side as you look at the US, how much of that is just prep work to be able to hit the ground running if it does get legalized?

IRWIN SIMON: So listen, there's a lot of adjacencies in regards to the spirit and alcohol business. The spirit and alcohol business does have growth in it. And there's lots of drinks going to be infused, whether it's THC and CBD. You heard Constellation talking about them coming out with additional CBD products and drinks today. And we're seeing good growth in the drink business both in Canada and the US.

So taking SweetWater's infrastructure of manufacturing brands, distribution will utilize that for CBD drinks and hopefully one day, THC drinks. And I think the next big entry upon legalization is very similar to vodka seltzers is THC and seltzers. And I think it's a big category and us having infrastructure and a business in place to support that. It's going to be very important for us.

And again, it allows us to be in a category today. There is growth. There is good margins. There is EBITDA before legalization happens in the US because as you know, we cannot touch any plant within the US marketplace

ZACK GUZMAN: Yeah, and I wonder I guess when you look at that, there have been some interesting ideas floated. I was talking about Bruce Linton, former CEO at Canopy talking about maybe, you know, why these Canadian companies had listed on US exchanges and what that means for not touching the plant in the US and whether or not it would make sense at some point to maybe shift that and not be listed in the US anymore because you already got what you needed out of it.

I wonder if you'd in that camp if it makes sense. Or also, I suppose whether there are maybe more attractive acquisitions out there to maybe prep for any changes there too.

IRWIN SIMON: So number one, in regards to trading on NASDAQ-listed where NASDAQ and the TSX-listed company, we trade anywhere from 5 to 20 million shares a day. So there's plenty of liquidity in our stock. I think moving to another exchange, you eliminate and lose that.

A big part is we have a great retail shareholder base. I want to thank them for approving the additional shares. But also, what's important to bring in institutional shareholders. And being on NASDAQ and TSX is important to them. So I do want to stay on NASDAQ. I do want to stay on TSX. And that's important to Tilray and its future growth.

In regards to other acquisitions and other categories that are adjacencies to the cannabis world, it's something absolutely we're going to look at and something that we're going to focus on. And there's a lot of interesting stuff that is out there for us to be doing in that area.