Tilray Brands Q3 2025 Earnings Report

Tilray Brands EPS Results

• Actual EPS: -$0.10
• Consensus EPS: -$0.04
• Beat/Miss: Missed by -$0.06
• One Year Ago EPS: N/A

Tilray Brands Revenue Results

• Actual Revenue: $185.78 million
• Expected Revenue: $213.38 million
• Beat/Miss: Missed by -$27.60 million
• YoY Revenue Growth: N/A

Tilray Brands Announcement Details

• Quarter: Q3 2025
• Date: 4/8/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, April 8, 2025
• Conference Call Time: 8:30AM ET

Tilray, Inc. engages in the research, cultivation, processing, and distribution of medical cannabis. The company offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. Tilray, Inc. is headquartered in Canada.

Tilray Brands Q3 2025 Earnings Call Transcript

Key Takeaways

• Tilray delivered a 200 basis point increase in gross margin to 28% in Q3 with cannabis gross margin reaching 41%, its highest in nearly two years.
• Strategic margin‐focused decisions—including cannabis SKU rationalization and limited vape participation—reduced reported Q3 revenue by ~$13 million but drove a 10% adjusted net revenue increase to $206 million.
• The company’s balance sheet remains robust with $248 million in cash and marketable securities, net debt below one times adjusted EBITDA, and $58 million of debt reduction year-to-date.
• Project 420 in the beverage segment has generated $20.6 million of annualized cost savings towards a $33 million target, while Q3 beverage revenue reached $56 million with a 36% gross margin.
• A $700 million non-cash impairment related to macroeconomic and regulatory uncertainties led to a Q3 net loss of $793.5 million (adjusted net loss nearly breakeven at $2.9 million).

Presentation

[Operator]

Thank you for joining today's conference call to discuss Tilray Brands Financial Results for the Fiscal twenty twenty five Third Quarter Ended 02/28/2025. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session for analysts and investment firms conducted via audio. I will now turn the call over to Ms. Baron Narada, Tilray Brands' Chief Communications and Corporate Affairs Officer. Thank you. You may now begin.

[Berrin Noorata, Chief Communications & Corporate Affairs Officer at Tilray Brands]

Thank you, operator, and good morning, everyone. By now, you should have access to the earnings press release, which is available on the Investors section of the Tilray Brands website at tilray.com and has been filed with the SEC and the CSA. Please note that during today's call, we will be referring to various non GAAP financial measures that can provide useful information for investors. However, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. The earnings press release contains reconciliation of each non GAAP financial measure to the most comparable measure prepared in accordance with GAAP.

[Berrin Noorata, Chief Communications & Corporate Affairs Officer at Tilray Brands]

In addition, we will be making numerous forward looking statements during our remarks and in response to your questions. These statements are based on our current expectations and beliefs and involve known and unknown risks and uncertainties, which may prove to be incorrect. Actual results could differ materially from those described in those forward looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward looking statements. Today, we will be hearing from key members of our senior leadership team beginning with Erwin Simon, Chairman and Chief Executive Officer Ty Gilmore, President, Tilray Beverage North America, who will provide an update on our beverage business and Carl Merton, Chief Financial Officer, who will review our third quarter financial results for the fiscal year 2025.

[Berrin Noorata, Chief Communications & Corporate Affairs Officer at Tilray Brands]

Also joining us for the question and answer segment are Denise Volticek, Chief Strategy Officer and Head of International and Blair McNeil, President of Tilray Canada. And now I'd like to turn the call over to Tilray Brands Chairman and CEO, Erwin Simon.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Thank you, Barron. Good morning, and thank you for joining us today. Tilray Brands is at the forefront of the beverage, cannabis and wellness industries on a global basis. We are expanding into new markets, developing innovative consumer products that reflect how people eat, drink, relax, and receive relief from medical conditions where other treatments have not been effective. In five years, our team has transformed Tilray from a business relying on cannabis legalization for growth into a diversified consumer products company providing specialty beverages, cannabis and wellness products worldwide.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Fear and cannabis have been consumed for thousands of years. These industries and their consumers are here to stay. They are not going anywhere and neither is Tilray. We are here to stay with our strengthened balance sheet, our strong brands, our strong businesses and our global operations. There is a lot of value in Tilray today that is not reflected in our current market cap and stock price.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Tilray is uniquely positioned as the only consumer company with a diversified portfolio of beer, spirits, cannabis and wellness products. I personally don't think people understand the value platform that we have created and have today. In a recent analyst report, it was identified that the increasing dual past month use of cannabis and alcohol, which is heightened among young adults, with thirty six percent of legal alcohol users in their 20s, Gen Z, also consuming cannabis, up 14 points the past decade and on page fifty percent of young adult users to dual use cannabis within the next ten years. Staggering numbers. Tilray continues to advance in the sectors of beverage, spirits, cannabis and wellness by innovating products, managing costs efficiently and expanding internationally at a competitive pace.

[Irwin Simon, Chairman and CEO at Tilray Brands]

While other companies are adopting similar models, Tilray remains ahead in several areas including vertically integrated operations, established portfolio of diversified brands and a comprehensive distribution network with a global reach. Regarding tariffs, Tilray confirms no current impact. After analyzing the recently announced tariffs on international trade, we conclude that they are unlikely to substantially affect our sales and costs. In The U. S, our American craft beer and beverage brands are manufactured in The U.

[Irwin Simon, Chairman and CEO at Tilray Brands]

S. Distributed in The U. S. Market. In Canada, where a majority of our cannabis cultivation is grown, our Canadian cannabis brands are produced in Canada for Canadian consumers.

[Irwin Simon, Chairman and CEO at Tilray Brands]

In international markets, our medical cannabis brands and products are produced for local patients. And in our wellness business, we have received confirmation that Manitoba Harvest is exempt from the new tariff. Since 2020, we have made seven acquisitions in the beverage craft beer and spirits sectors. We've introduced new categories including non alcoholic beverages, non out beers, waters and hemp derived THC drinks. In The U.

[Irwin Simon, Chairman and CEO at Tilray Brands]

S, we have 10 beverage facilities and over 500 distributors. When we acquired the ABI and Molson Craft brands, they were not profitable. We have built a new platform and infrastructure capable of revolutionizing the beer, spirits and beverage industries. And we're focused on capturing every opportunity to attract a broader consumer base, including new opportunities in the international markets such as new ventures into Europe that will introduce our brands to The United Kingdom and other regions with local operations leveraging the infrastructure that we have built in The U. S.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Ty will provide further details regarding our beverage businesses and its execution. Importantly, we are laser focused on building a sustainable global business platform in terms of profitable sales growth, improving profit margins and cash flow generation and maintaining a solid balance sheet that can help Tilray navigate market challenges and make use of strategic opportunities. As Karl will discuss in detail, in the third quarter, we delivered our highest cannabis gross margin in almost two years and our net debt is less than one times EBITDA. We will not seek sales growth just for the sake of growth. It is not additive to our bottom line and accretive to our shareholders.

[Irwin Simon, Chairman and CEO at Tilray Brands]

In the third quarter, we generated $186,000,000 in net revenue or $193,000,000 on a constant currency basis. In the quarter, we implemented strategic initiatives aimed at enhancing our business operations over the mid and long term. These measures focus on improving margin and profitability as well as driving long term operational efficiencies rather than pursuing revenue growth at any cost or in an unsustainable manner. However, these decisions came with short term impact in the third quarter and impacted our revenue by about $13,000,000 If we eliminated the impact of these strategic decisions in cannabis and SKU rationalization in our beer business, adjusted net revenue increased 10% to $2.00 $6,000,000 in the quarter. Our margin expansion efforts across each of our businesses including beverage, cannabis and wellness led to a 5% increase in gross profit and a 200 basis point increase in gross margin to 28% compared with the prior year period.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Our balance sheet remains strong with ample cash and marketable securities totaling $248,000,000 During the fiscal year to date, we've also reduced debt levels by 58,000,000 positioning us to pursue strategic acquisitions, seize new opportunities and capitalize on market trends. Our cash burn has primarily resulted from investments in beverage, settling legacy lawsuits and capital expenditures aimed at operational growth opportunities. We're committed to expanding our business while managing our debt responsibly. Our cannabis, wellness and distribution segments are generating positive operating cash flow and we are on track to drive growth in our beverage businesses. Tilray Brands has demonstrated remarkable resilience and maintained its fundamental strength despite market challenges, including a tougher February than expected across both cannabis and beverage alcohol industry.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Tilray continues to operate the largest legal cannabis business in Canada by revenue, lead the medical cannabis business in Europe, and continue to dominate in the branded hemp high protein food sector in North America with nearly a 60% market share in The U. S. And 80% in Canada. We rank as the fifth largest craft beer business in The United States. We are also leveraging advanced technology shareholders' interest, the consumer of tomorrow, enhancing efficiency and driving growth.

[Irwin Simon, Chairman and CEO at Tilray Brands]

AI is being implemented across our global platforms. We're combining AI driven data insights with advanced horticulture automation technology in global greenhouse operation. This integration allows real time management of greenhouse conditions leading to increased efficiency, higher output, improved quality and reduced cost for resources such as labor, water and energy. Additionally, Tilray plans to accept cryptocurrency as a payment method in its online operation and is exploring strategic initiatives related to cryptocurrency that aligns with our business goals. That is just the beginning.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Tilray Brands is at a transformational point in its journey. Our strategic initiatives, innovative product development and robust infrastructure are propelling us towards unprecedented growth. We have harnessed efficiency across our businesses, facilities and systems and our workforce globally ensuring we're prepared to capitalize on every opportunity. I also like to add, being one of the largest individual shareholders of Tilray Brands, along with my team combined, we own approximately 1% of Tilray Brands stock. We, along with our shareholders, are impacted by the decline in our stock price and we are 100% fully invested in the positive trajectory performance of our stock price.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Again, we are laser focused on building sustainable global business platform and believe our further growth performance will recognize and reward our shareholders. Now turning to cannabis. In fiscal Q3, our global cannabis business generated $54,000,000 of net revenue and $57,000,000 on a constant currency basis and increased gross margin by 800 basis points year over year. Our gross margin of 41% were the highest in almost two years. Growth in our international and our strategic decision not to participate in margin dilutive categories in the Canadian adult use market has driven margin improvements.

[Irwin Simon, Chairman and CEO at Tilray Brands]

In fact, our global medical business, when combining international and Canada, now accounts for approximately 80% of our total cannabis profits even though they contribute only approximately 35% of sales. As a side point, we would say to investors, only focus on a reported sales figure to pay more attention to gross profit dollars and potential drivers of profitable growth in the future. If The United States legalized medical cannabis, it could mean an additional $250,000,000 for Tilray, potentially capturing 2% to 3% of The U. S. Medical Cannabis market.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Tilray is not subject to any of the 280E tax obligations in The U. S. Tilray's Cannabis advantage lies in its global scale and experience. Our top tier ability to cultivate large scale pharmaceutical grade cannabis with strict quality control standards. Our established medical brands of product innovation are already improving patients' lives in legal markets such as Canada, Germany, Portugal, and various other European countries.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Regarding our international business, in Q3 we saw quarter over quarter and year over year revenue growth in Germany, Italy, Luxembourg, and Portugal. Our medical cannabis sales in Germany grew significantly with flower sales increasing 79% post legalization and extract sales increasing 31% post legalization. This is a significant increase from the end of our second quarter where we saw our post legalization flower extracts increase 5524% respectively. This growth was driven by higher patient demand in the market. As I mentioned earlier, a large focus of our strategic growth initiatives from our cannabis segment is redirecting inventories to international medical cannabis markets in order to capitalize on the higher margins available in such markets.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Taking this one step further, given the increasing demand in Germany and the margins in Germany are the highest in the international markets, we are also allocating more of our inventory to that market to further enhance our profitability. At the end of Q3, we introduced Tilray Craft, a new brand extension of the Tilray Medical brand in Germany, which aims to offer unique flower operations with higher THC and higher terpene content and are derived from novel genetics in order to address the evolving needs of patients. We are cultivating high quality medical cannabis at our FreeRx facility in Germany using prized cultivars from Canada exclusively for the German market. We're excited to launch our new medical cannabis flower, which is expected to be in the fourth quarter. Today, we are now providing high quality medical cannabis flower to Germany from our global facility in Canada, Portugal and Germany, which is allowing us to be laser focused on product quality, genetics, cost per gram for international markets.

[Irwin Simon, Chairman and CEO at Tilray Brands]

This coupled with our regulatory direct distribution to wholesaler and pharmacies with our CC Pharma medical distribution business continues to differentiate us from competitors and allows us to quickly service our customers and patients. Turning now to Canada, we continue our focus on quality of revenue and it is shown in our margins. In the quarter, we shipped 3.2 metric tons of flower to support the international market, as I previously said, where margins are stronger than in the Canadian market. However, international sales and margin earned on them will not be recognized until shipped to our customer predominantly in the Q4 caused a temporary timing delay on all our overall cannabis sales of 3,200,000 during the quarter. As I mentioned earlier, we remain the leader in the Canadian cannabis market by revenue, which is still the largest federal legal cannabis market in the world.

[Irwin Simon, Chairman and CEO at Tilray Brands]

We maintain the number one position in beverages, chocolate edibles, oils, capsules and straight edge pre roll. In the cannabis flower category, we were the number two market share position despite giving up share on lower margin SKUs in favor of higher margin opportunities. In an environment where constrained by tight regulation, price compression, and excise taxes, we remain laser focused on utilizing process improvement and investing in CapEx to drive margin improvement. Since fiscal twenty twenty four, we have reduced our cost per unit by 40% and expect an additional 20% cost reduction by the end of fiscal twenty twenty five. In parallel, our operations teams have been working hard on optimizing our extraction capability by leveraging our state of the art extraction chamber so that all our remaining biomass gets utilized at a significantly reduced cost.

[Irwin Simon, Chairman and CEO at Tilray Brands]

As a result, we can expect healthier margins in our baseline business and growth in two of the fastest growing categories in vapes and infused pre rolls. On the cultivation side, we have the most flexible footprint in the global cannabis industry. And our product range caters to diverse consumer segments, including premium with Broken Coast, mainstream with Redican and with value with Good Supply was the fastest growing flower brand in Canada, growing by 40 bps in the third quarter. Over the past couple of years, we have built a strong genetic pipeline across all our facilities, totaling over 400 unique genetics. We have cultivars across all our consumer taste profiles.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Additionally, we can add an additional 70 metric tons to our capacity when the market requires it. In the T. H. Beverage category, Tilray had a leading market share of 45% with XMG and Molo brands ranking number one and number two respectively. With multi pack formats poised to enter the marketplace, we remain confident that beverages are significantly underrepresented in Canada.

[Irwin Simon, Chairman and CEO at Tilray Brands]

We anticipate capturing additional market share in this category, which is projected to experience substantial growth as regulatory environments improve. PillRay is well positioned for long term success in the Canadian cannabis market with a facility footprint of approximately 5,000,000 square feet and the capacity to produce over 200 metric tons of cannabis. Our value chain and business process are the best in the industry and are optimized to enhance efficiency. If the Canadian cannabis excise tax were reduced by $1 per gram to $0.50 per gram and if cannabis drinks were sold at the LCBO and convenience stores, we foresee a tremendous amount of annual revenue opportunity that Tilray is positioned to capture. Turning to our Tilray Wellness business, as consumers become increasingly health conscious, we continue to see steady growth as our revenue was $14,000,000 in the quarter.

[Irwin Simon, Chairman and CEO at Tilray Brands]

We delivered an 8% net revenue growth compared to the prior year on a constant currency basis. This growth was driven by Manitoba Harvest Supersede innovation and the expansion of our wellness beverages, including High Energy. High Vol Energy is a zero calorie caffeinated seltzer with a clean label. Available on Amazon, we experienced 68% growth in the last six months and available nationwide at Whole Food Market retail stores later this month. A strong focus on cost helped the business unit improve margin delivering 180 basis points increasing gross margin year over year.

[Irwin Simon, Chairman and CEO at Tilray Brands]

The margins were driven by a more favorable sales mix and productivity savings generated at our manufacturing facilities. Tilray is exploring further expansion opportunities in the wellness section, both in wellness foods and wellness beverages. In the months to come, we'll continue to diversify expand the Manitoba Harvest portfolio in North America and to begin to bring brand new international sales. We see the success of High Vol as a validation that Tilray Wellness has the right infrastructure and experience to build and acquire a more broad based wellness beverage portfolio. With that, I will turn the call over to Ty Gilmore, President of Tilray Beverages of North America to tell you more about what's happening at Tilray Beverages. Ty?

[Ty Gilmore, President - Tilray Beverages North America at Tilray Brands]

Thank you, Irwin. Building on Irwin's points, in Q3, our beverage business generated $56,000,000 in net revenue and increased gross margin to 36% compared to 34% in the prior year quarter. Today, Tilray Beverages operates more than 20 beverage brands, including 15 American craft beer brands across 10 network manufacturing facilities, 20 brew pubs, restaurants, and a single integrated sales and marketing team operating nationwide. We are focused on profitable expansion. Last quarter, we announced Project four twenty, our strategic plan to integrate our craft beer businesses, optimize operations, revitalize the growth of our acquired brands.

[Ty Gilmore, President - Tilray Beverages North America at Tilray Brands]

This comprehensive initiative focuses on SKU rationalization, geographic and distribution consolidation, all aimed at enhancing margins and profitability through portfolio optimization, operational synergies and cost savings. In Q3, we increased our Project four twenty cost savings target to $33,000,000 of which we have already achieved $20,600,000 on an annualized basis. By working closely with our distributors in various markets, we streamlined our portfolio to eliminate duplicate and slower growth products, as well as the decision to concentrate our brands in the regions that they have the most strength impacting revenue to date by approximately 14,000,000. Together, we are poised to meet consumer preferences head on and drive growth and innovation in the beverage alcohol category. Tilray Beverages has successfully established itself as the number one craft supplier in Metro New York with Montauk Brewing and Blue Point Brewing brands.

[Ty Gilmore, President - Tilray Beverages North America at Tilray Brands]

The number one craft supplier in the Pacific Northwest across Oregon, Washington, and Idaho with our Ten Barrel Brewing, Red Hook, Hop Valley, and Widmer Brothers Brewing brands. Stilray is the number two craft supplier in the Southeast in Florida and Georgia with Sweetwater Brewing, Terrapin, and Shocktop, and the number four craft supplier in Colorado according to Circana data. Our strategic execution has led the focus on strategic brand growth with Shocktop increasing 44.8% in the Southeast food channels, Sweetwater growing 1% in Southeast food channels, Breckenridge Brewing growing 2.7% in Colorado, and Montauk Brewing showing steady growth with 1.7% growth in New York Metro Area and 10.5% growth in the Northeast. Across strategic channels, Red Hook Big Ballard is growing 7% across the convenience channel, Terrapin Hops Executioner growing 3.4% in Georgia Food, and Alpine and Green Flash growing 35.5% in California convenience channel for the quarter. And we are not done as we continue to seek profitable sales growth.

[Ty Gilmore, President - Tilray Beverages North America at Tilray Brands]

To meet the consumer demand for value, trusted brands, and disruptive innovation, we are focused on investments across the following segments. One, we created a new consumer segment Craft Light Lagers with the introduction of pub beer at below core price points. We are now scaling this proposition across regions, including Sweetwater Dye Beer in the Southeast, Long Island Light from Blue Point Brewing Company in New York, Atwater Light in Michigan, and soon Revolver's Ya'lls Beer in Texas. This strategic move has positioned us to capture a broader consumer base in line with the trends mentioned earlier. Two, our non alcoholic beer brands and product portfolio is also showing promising momentum.

[Ty Gilmore, President - Tilray Beverages North America at Tilray Brands]

We recently introduced a second Montauk SKU for New Yorkers with our NA IPA. Runner's High has recently increased distribution across 4,500 retailers demonstrating our ability to capitalize on the growth trend of the non alcoholic craft beer segment. Three, in the spirits category, Breckenridge distillery has proven its strength in the bourbon sector experiencing higher depletions compared to others in a declining market. It has also made significant progress in the vodka and gin markets complemented by the world class restaurant and retail operation that provide an immersive brand experience. Our primary objectives for growing our spirits business are to expand distribution of Breckenridge bourbon, vodka, and gin, and to launch world class innovation across tequila, non alk spirits, and to capitalize on the evolving shop segment with innovative branding and packaging.

[Ty Gilmore, President - Tilray Beverages North America at Tilray Brands]

And fourth, and last but not least, in the hemp derived THC drink segment. PillRay alternative beverage business is uniquely positioned to leverage the expertise of our hemp wellness business and our cannabis business to formulate great tasting beverages responsibly infused with five and ten milligram of hemp derived THC. In the quarter, Dylray expanded distribution of hemp derived THC across 10 states, including Florida, Alabama, Georgia, North Carolina, South Carolina, Tennessee, Minnesota, and New Jersey, and online direct to consumer. We estimate that our HDD nine drinks portfolio is sold across 1,000 distribution points. In addition to Happy Flower, Fizzy Jane, and Urban Bloom, our mocktails and seltzer brands, we are introducing four twenty Fizz, a low calorie sweet and flavorful soda proposition.

[Ty Gilmore, President - Tilray Beverages North America at Tilray Brands]

PillRay is also leveraging our established robust national beverage distribution network across our independent retailers, convenience stores, package stores, including multi state retailers such as Total Wine and ABC who are very excited about this category and new growth opportunity. And with that, I'd like to turn the call over to Carl to discuss Q3 financials. Carl?

[Carl Merton, CFO at Tilray Brands]

Thank you, Ty. As a reminder, our financial results are presented in accordance with U. S. GAAP and in U. S.

[Carl Merton, CFO at Tilray Brands]

Dollars. Let's now review our quarterly performance for the three months ended 02/28/2025. In Q3, which is one of our seasonally lowest quarters, net revenue was $185,800,000 compared to the previous year quarter net revenue of $188,300,000 However, on a constant currency basis, net revenue was $193,000,000 or up 2%. Further, as Erwin already mentioned, we made several strategic decisions during the year, which impacted our Q3 revenues, including the decision to allocate 3.2 metric tons of cannabis from the Canadian market to international markets, where the revenue from that allocation plus an incremental 2.5 metric tons will be earned predominantly in Q4. The decision to focus on margin and not revenue temporarily in the vape and infused pre rolled space, while we completed significant improvements to our industrial extraction process and the decision to engage in SKU rationalization program in the beverage business.

[Carl Merton, CFO at Tilray Brands]

The Q3 revenue impact of the allocation of cannabis to international markets pushed approximately CAD3.2 million in Canadian sales in Q3 to later quarters. Illustratively, 3.2 metric tons of cannabis sold in the international market should result in at least $10,000,000 of revenue. The Q3 revenue impact of focusing on margins with vape and infused pre rolls resulted in a decrease in year over year revenue of approximately $4,000,000 The Q3 impact of the beverages SKU rationalization was approximately $6,000,000 If those elements were included in our constant currency revenue number for the quarter, we would have reported $2.00 $6,000,000 By segment, beverage net revenue was $55,900,000 but would have been over $60,000,000 if we had not made the strategic decisions previously discussed. Cannabis net revenue was $54,300,000 and would also have been over $60,000,000 if we had not made the strategic decisions previously discussed. Distribution net revenue was $61,500,000 and wellness net revenue was $14,100,000 in the quarter.

[Carl Merton, CFO at Tilray Brands]

Gross profit increased by 5% to $52,000,000 compared to $49,400,000 in the prior year quarter. Gross margin increased 200 basis points to 28% from 26% in the prior year quarter. Selling, general and administrative costs decreased $1,200,000 from the prior year when excluding an increase of $4,400,000 in bad debt that was a result of us reversing a previous bad debt in the prior year. Like many industries and businesses impacted by the decline in the stock market since November, we are reporting a $700,000,000 non cash impairment related to macroeconomic conditions, including market volatility and the perception of the reduced likelihood of U. S.

[Carl Merton, CFO at Tilray Brands]

And or European cannabis regulatory change in the short term. Primarily as a result of this non cash impairment, we are reporting a net loss of $793,500,000 compared to a net loss of $105,000,000 in the prior year quarter, with almost $779,100,000 of non cash costs, including the $700,000,000 non cash impairment, dollars 20,000,000 of non cash fair value changes on our previous MedMen notes and $22,300,000 of non cash foreign exchange losses. On a per share basis, this amounted to a net loss of $0.87 per share compared to $0.12 per share in the prior year quarter. On an adjusted net loss basis, the loss was close to breakeven at 2,900,000 compared to an adjusted net income of $900,000 in the prior year quarter. On a per share basis, this resulted in an adjusted EPS of $00 per share for both periods.

[Carl Merton, CFO at Tilray Brands]

Adjusted EBITDA was $9,000,000 compared to $10,200,000 in the prior year quarter. The decrease in adjusted EBITDA from the prior year is primarily related to the impact of allocating cannabis to international markets of $600,000 and the SKU rationalization in our beverage business of $1,000,000 Cash flow used in operations was $5,800,000 compared to $15,400,000 in the prior year quarter. Adjusted free cash flow was negative $18,200,000 compared to positive $600,000 in the prior year quarter, largely as a result of an increased demand on our working capital, including settling multiple litigation matters, increases in inventory at Tilray Pharma as they're prepared to stock pharmacist inventories for the summer holidays, increases in inventory and beverages as we prepared for the seasonality of beverage sales in the fourth quarter, all offset by a significant decrease in Canadian cannabis inventory levels. In addition, we invested $7,800,000 in CapEx within the beverage segment, investing in the business to grow future revenues and reduce our cost structure. For the year, we settled several legacy lawsuits inherited from acquisitions and the Aphria class action for a total of $11,100,000 Those lawsuits had original claims of over $265,000,000 Turning now to our four business segments.

[Carl Merton, CFO at Tilray Brands]

Despite recent skepticism on the industry, we believe that the beer and spirit markets are not going away, but rather are in flux based on changes in consumer preferences and purchasing patterns. To capitalize on those trends, we created Project four twenty, which focuses on four key elements. A SKU rationalization focused on our best performing brands, introduction of key innovation and extension into adjacent beverage categories like water, non alcoholic drinks and HDD9 drinks, a geographic rationalization focused on our regional JUUL strategy, a distributor rationalization to reduce our over 700 distributors to approximately 500 distributors and a synergy plan to optimize our cost structure. During the quarter, we increased our synergy plan to $33,000,000 up $8,000,000 from the previous quarter and we are well on our way with $20,600,000 already achieved. Fiscal year to date, the SKU rationalization plan lowered our revenues by $14,000,000 For the fiscal year ended 05/31/2025, it is anticipated that the cumulative impact of these initiatives will result in a reduction of approximately $20,000,000 in net revenue, which we believe will be offset by the growth of our new product innovation, including the new beverage categories and brand extensions over the next twelve months.

[Carl Merton, CFO at Tilray Brands]

For the quarter, beverage net revenue was $55,900,000 a 2% growth compared to $54,700,000 in the prior year quarter. As previously discussed, without the impact of the strategic decisions identified earlier, beverage net revenue would have been over $60,000,000 Beverage gross profit increased to $20,000,000 compared to 18,900,000.0 Beverage gross margin was 36% compared to 34% in the prior year quarter. The improvement in gross margin was a result of our efforts in integrating and optimizing our facilities, as well as a favorable product mix. Gross cannabis revenue of $73,000,000 was comprised of $49,300,000 in Canadian adult use revenue, 13,900,000.0 in international cannabis revenue, 5,800,000.0 in Canadian medical cannabis revenue, 3,900,000.0 in wholesale cannabis revenue, all offset by $18,700,000 in excise taxes. Net cannabis revenue was $54,300,000 and $57,500,000 on a constant currency basis compared to $63,400,000 in the year ago period.

[Carl Merton, CFO at Tilray Brands]

As previously discussed, the strategic decision to focus on margins in vapes and infused pre rolls impacted revenue by $4,000,000 in the quarter and the decision to ship 3.2 metric tons of cannabis that would have been sold in Canada in Q3 to international markets for sale in later quarters impacted revenue by approximately $3,200,000 But for these items, net cannabis revenue would have been $64,700,000 on a constant currency basis. The decision to preserve margin on vape and infused pre rolls also had an impact on cannabis gross margins. Had we actively participated in those markets, selling the incremental $4,000,000 in the quarter, it would have had an over $3,000,000 negative impact on the gross profit we are reporting. Now that our extraction capital projects are completed and we'll be able to participate more aggressively in vapes and infused pre rolls, we do not anticipate a revenue impact continuing past the midpoint of the fourth quarter. From that point forward, the positive gross margin impact of sales in this category would be expected to generate a swing of almost $5,000,000 on gross profits versus what we would have reported in the current quarter.

[Carl Merton, CFO at Tilray Brands]

Cannabis gross profit increased 5% to $22,000,000 and cannabis gross margin increased to 41% compared to 33% from the prior year period, and 800 basis point improvement. Distribution net revenue derived predominantly through TURAY Pharma increased about 8% to $61,500,000 and almost 15% to $65,100,000 in constant currency compared to $56,800,000 in the prior year quarter, all as a result of favorable product mix. Distribution gross profit was flat at $5,660,000 in both the current year and the prior year period. Wellness net revenue grew 5% to $14,100,000 from $13,400,000 in the prior year quarter and 8% on a constant currency basis to $14,500,000 The increase was driven by our strategic focus on continued innovations. Wellness gross profit was $4,500,000 up from $4,100,000 in the prior year quarter and gross margin rose to 32 compared to 30% in the prior year quarter, a result of continued operational efficiencies.

[Carl Merton, CFO at Tilray Brands]

Our cash and marketable securities balance as of 02/28/2025 was $248,400,000 up from $225,900,000 in the prior year period. During the year and through to today, we continue to strengthen our balance sheet, including raising approximately $140,000,000 on our ATM, repaying approximately $15,000,000 on our long term debt and repurchasing approximately $60,000,000 in outstanding convertible notes. After taking into consideration these actions, we reduced our net debt position to approximately $50,000,000 which when combined with our trailing twelve months adjusted EBITDA puts our net debt to adjusted EBITDA leverage ratio below one. Today, we are revising our fiscal twenty twenty five guidance for net revenue to $850,000,000 to $900,000,000 Adjustments for constant currency and the impacts of the strategic initiatives and SKU rationalization, which totaled $50,000,000 would have resulted in expected net revenue of 900,000,000 to $950,000,000 Let me now conclude our prepared remarks and open the lines for questions from our covering analysts. Operator, what's the first question?

[Operator]

Thank you. Before we get to the first question, I'd like to remind everyone that if you'd like to ask a question, please press Our first question comes from the line of Aaron Grey with Alliance Global Partners. Please proceed with your question.

[Aaron Grey, Managing Director, Equity Research at Alliance Global Partners]

Hi. Good morning, and thank you for the questions. So first question for me, I just want to talk about allocation of cannabis product. Can understand how the higher profitability makes international appealing. But as you redirect product international, you know, would you be fine with this leading to some share loss in Canada as long as it's more profitable share segments?

[Aaron Grey, Managing Director, Equity Research at Alliance Global Partners]

Any color in terms of your share aspirations now for Canada would be appreciated just now as you're allocating more product international. Thank you.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Good morning, Aaron. Good question. Number one, you know, what's important for us is sales, in Canada and having, you know, pre rolls, flowers, edibles, and drinks. You know, it will be an important part of our market. And always profitability.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So sales are important. Don't report share is something that is reported, but everybody looks at share differently. So the number one thing for us is how we grow our business, how we grow sales. And with 5,000,000 square feet of growth, we have plenty of capacity. When we ship product now internationally, we don't have to pay excise tax, and there's much higher margin in the medical business.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So we look at Tilray today from a total company standpoint, and just don't look at Canada, just don't look at international. So we look as totality in the cannabis industry.

[Aaron Grey, Managing Director, Equity Research at Alliance Global Partners]

Thanks, Erwin. That's helpful color there. Want to have my second question on hemp derived beverages. I know a small part of your business today, but a lot of potential there. So I believe you mentioned hemp derived beverages are across 1,000 brick and mortar distribution points.

[Aaron Grey, Managing Director, Equity Research at Alliance Global Partners]

So any targets that you can point to in the near to medium term that you hope to get to? And then can you comment on any initiatives you have to help drive velocity? Maybe any marketing plans you have to speak of in the spring and summer, particularly given you do have a house of brands versus just focusing on one brand in that segment? Thank you.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So I think, listen, as Ty has talked about in regards to, and I think what you said is that you broke up there on the hemp brands. We're across 1,000 stores today. We're selling in 10 different states. And the demand, and through our wellness team and through our beverage team, we have infrastructure of salespeople on the street, and we're selling it through a lot of the beer distributors and selling it direct to consumer. There's multiple marketing programs in place to drive consumption with different retailers and different retailers with multi outlets.

[Irwin Simon, Chairman and CEO at Tilray Brands]

And I think a big thing Aaron is educating the consumer what hemp derived drinks are and what Delta nine drinks are and the benefits from them. And if anybody can do that, we are, we're in the beverage business. So that's a big, big opportunity for us. Listen, we have aspirations for that to be in the multimillion dollar business for us and also it's a great margin business. In regards to our beverage business and our beer business, like Ty has said, today with 18 different beer brands, as we look at it state by state and geography, how do we focus on growing our beer in certain geographic?

[Irwin Simon, Chairman and CEO at Tilray Brands]

We talked about Montauk and if it's New York, Pennsylvania, or New Jersey, there's a hundred million people there. And really going after share with Montauk instead of going national. So there's a lot of regional marketing that we're doing. Listen, sponsorships, hey, Florida Gators, we are the official beer of Florida Gators, congratulations with Chalk Top. And that's a big win for us in regards to sponsorships.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So there's a lot we're doing with sponsorships. Next week, our four twenty, not next week, in two weeks, we are holding some major concerts down in Atlanta, Georgia, and some other places in regards to four twenty selling our beers. So there's a lot of regional stuff that we're doing, a lot of sports sponsorships that we're doing, getting involved with the community and a lot of different concerts. That's how we're marketing our beers, and with that, we're tying that in with our retailers and tying that in with our distributors on displays. And also, we're tying it into our off premise in regards to making sure on tap we have a lot of handles out there.

[Irwin Simon, Chairman and CEO at Tilray Brands]

I test anybody to go to New York City right now and get around to a lot of the bars out there and see who doesn't have a Montauk or a Blue Point handle out there.

[Aaron Grey, Managing Director, Equity Research at Alliance Global Partners]

Okay. Great. Really appreciate that color, Orin. I'll go ahead and jump back into the queue.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Robert Moskow with TD Securities. Please proceed with your question.

[Victor Ma, Vice President, Equity Research at Cowen]

Hi, this is Victor Ma on for Rob Moskow and thanks for the questions. I guess first, so cannabis gross margins at 41 percent for the quarter was a positive surprise, I think. So what were the building blocks for that 800 bps margin expansion? How much of it was from positive mix from not participating in vapes and infused pre rolls? How much of it was from cost savings and efficiencies?

[Irwin Simon, Chairman and CEO at Tilray Brands]

I'll let Karl go ahead.

[Carl Merton, CFO at Tilray Brands]

So Victor, the majority of the 800,000,000 is mix. A portion of that mix is more international. But a big chunk of it is this concept of being very careful with what places we're playing in, particularly in vape and infused pre rolls to focus on margin.

[Irwin Simon, Chairman and CEO at Tilray Brands]

And going back to the last question, in infused pre rolls and vapes, if we would have sold in the quarter and we gave up about $7,000,000 or so in sales or something $4,000,000 or $4,500,000 but we gave up more, That could have been anywhere from 10,000,000 to $11,000,000 a hit on EBITDA. So again, we are not going out there just for sales. We are focused on profitability. We're focused on margins. And just coming back in regards internationally, again, we're not paying excise tax.

[Irwin Simon, Chairman and CEO at Tilray Brands]

I mean, throughout the year, we pay about $150,000,000 of excise tax in the Canadian market. We're not paying that internationally and where we see the opportunity. But let me tell you, we're aggressively looking at how we take costs out, and that's something Blair and team are doing. And we're not abandoning by no means the vape and pre roll category, which are some big growth categories. And Blair, in regards to our center of excellence, have come up with ways to take tremendous amount of cost out.

[Irwin Simon, Chairman and CEO at Tilray Brands]

And coming up next quarter, we have a tremendous plan in regards how to get more pre rolls and juice pre rolls and vapes into the marketplace. So there's a big focus on our margins, but there's a big focus on driving sales too.

[Victor Ma, Vice President, Equity Research at Cowen]

Got it. Appreciate the color. And then my second question is on the beverage side. So our tracking data indicates that sales and volumes for the craft beer brands are down about mid teens in the third quarter. Is that what you're seeing on your end?

[Victor Ma, Vice President, Equity Research at Cowen]

And can you help dimensionalize that number? How much combined growth do your craft portfolio see in their home markets versus their away markets? I know you gave some numbers in the call, but like what would be like the total split between the total home markets and the total away markets for your brands? And then just to squeeze another question. On Project four twenty, what is the brand hierarchy here when it comes to allocating the next marketing dollar?

[Victor Ma, Vice President, Equity Research at Cowen]

Is on prioritizing your biggest brands, your biggest markets or is it on newer brands for potentially higher growth on a percent basis?

[Irwin Simon, Chairman and CEO at Tilray Brands]

So number one, when you come back and look at your data here, I mean, one of the things in there as you go through a SKU rationalization, we're taking out a lot of the brands. So it's not really giving you a true picture. And as Ty took you through different states and different geographies on growth, and that's why I come back and say this here, you got to look at it, we're probably on an aggregate, as you say, down. But following our plan and looking at geographies of three, four state, certain states were up, certain states were down. So your numbers are probably right.

[Irwin Simon, Chairman and CEO at Tilray Brands]

But again, you got to pull out of their SKU rationalization and part of it is this here, as we introduce new products are not in there and off premise or on premise is something that there's a big focus on too and where we pulled out a lot of the taps in that that we lost, there's another big focus on that. So I wouldn't look at the craft beer data that's out there. Right now what we're trying to do is focus on sales and how we bring these brands together. You remember what I said in my remarks, as we acquired these brands from ABI and from Molson, a lot of these brands were mostly in negative territory and what we're trying to do is reverse them. We're in the midst of going through right now looking at distributors.

[Irwin Simon, Chairman and CEO at Tilray Brands]

We have over 700 distributors out there today, both Molson Coors, ABI and Independence. How do we consolidate them and how are we a bigger focus for them and how are we more important? We haven't done that yet. That's a big part of, you know, $4.20 and that's a big part of the cost savings that we're looking at. Your last question was what? On the savings on 04/20?

[Victor Ma, Vice President, Equity Research at Cowen]

Yeah. It was on just allocating incremental marketing dollars. Is the focus here on prioritizing the next dollar on your bigger brands and your biggest markets? Or is it on just the newer acquired brands that offer potentially higher growth on a percent basis?

[Irwin Simon, Chairman and CEO at Tilray Brands]

So listen, from a standpoint is, as we look at it today, where we allocate in our marketing dollars is the bigger brands. And number one, Shocktop is a brand that we would look to go national with. Sweetwater is one of our bigger brands. Bluepoint is one of our major growth brands. But if you come back and look at the Pacific Northwest with Ten Bear or Windmere, they are brands that we're going to focus on in their territory.

[Irwin Simon, Chairman and CEO at Tilray Brands]

You love all your kids equal, you love all your brands equal here, but there are certain brands that we're going to focus on. As you heard us say in Florida, with the Gators, we're focused on Shocktop there. In New York, we're focused on Montauk, then Blue you know, then Blue Point. So and and there is a lot of opportunities coming to us right now in regards to sponsorships and being part of it, being on JetBlue with Montauk is something, you know, that's been great for us. Being on Delta has been great for us.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So there's a lot of unique opportunities in regards to sponsorships being part of the community from a regional standpoint, you know, with our selection of beers that we have.

[Operator]

Thank you. Our next question comes from the line of Frederico Gomes with ATB Capital Markets. Please proceed with your question.

[Frederico Gomes, Director, Institutional Research, Life Sciences at ATB Capital Markets]

Hi, good morning. Thanks for taking my question. First question on international markets, specifically Poland. I believe there were some changes there in telemedicine. So curious if you've seen any impact from that, but also if you would expect changes in Germany in regards to telemedicine as well.

[Irwin Simon, Chairman and CEO at Tilray Brands]

I'm going to let Denise answer that. Go ahead.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

Yeah, thanks. Great question. So in Poland, in November, there was a change where telemedicine restrictions were put in place. And as a result, we saw some prescription drops from basically around like 68,000 prescriptions in the month of October to 28 month of December. And as a result, we definitely saw, I would say, demand come down a bit as patients are looking for new avenues to find prescriptions.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

However, in our Q4, we're starting to see things pick back up again. We believe that there was some oversupply potentially in the third quarter where distributors are working that through. But we are pretty bullish on that market still. We have a very, very large share in that market. We have multiple distributors that are very strong in the market with physical clinics.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

So we believe that we have the right infrastructure and the right partners to really win in that market. In terms of your question, in terms of Germany, we have been very focused on the German market as we reported. We also spent a lot of time evaluating from a government perspective and speaking with members of parliament around the change in government and whether there's going to be any change in the landscape of either MedCANG or Kanji. And what we find in terms of those conversations that we've been having and working for our industry group is that there are potentially changes on the Kanji and that means social clubs and the model experiments. What we've been assured of is that there is really going to be no changes in terms of the med kanji, which is the market that we are participating in today and where we see all of our growth.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

We are keeping an eye on the telemedicine aspect of the law and working with government officials to really support why that is necessary, especially for rural patients. We still remain very, very bullish about our business in Germany. And in fact, saw some of the highest numbers that we've seen in history for our business in Germany this past quarter.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Great. Thank you, Denise.

[Frederico Gomes, Director, Institutional Research, Life Sciences at ATB Capital Markets]

Yes. Thanks, Denise. Appreciate that. Second question, just to follow-up on Germany. If you could just comment on pricing in Germany, has anything changed recently?

[Frederico Gomes, Director, Institutional Research, Life Sciences at ATB Capital Markets]

Are you seeing any impact, I guess, from increased competition in that market? I know it's a growing market, but we also see some other companies investing there. So any changes in pricing?

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

There's definitely a lot of competition coming into the German market because I think just like we see the opportunities in Germany, both in terms of demand on patient growth and also the higher margins. I think others are seeing that as well. And I think there were some of the highest imports into Germany from Canada. Basically around 51% of the imports going into Germany are coming from Canada. And so there is definitely a lot of competition.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

We do see what we see in terms of pricing is more of a segmented market coming about where patients are focused on different levels of quality and value. And so higher quality products are still commanding much higher prices. There's also a value segment though, and that value segment is really being positioned toward patients who are really looking for a lower priced product. I think, as you know, the German market today is split between the patient led side, which is really self pay market and the doctor led side, which is more of an insurance based market. So, the insurance based side, which is at this point predominantly medical extracts, we see pricing remaining pretty secure because of that insurance coverage.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

But on the flower side, where is that segmentation? We are seeing differences of pricing based on patient demands.

[Irwin Simon, Chairman and CEO at Tilray Brands]

I think the big thing also, is important, is supply and consistent supply. And that's something that Tilray can either supply out of our Canadian facilities, can supply out of our Portugal or German facility. And I think that's what everybody's looking at. And one big thing to mention is we're vertically integrated there with CC Pharma or Tilray Pharma, our distribution business that actually has been very helpful and a big part of our growth there that we distribute directly through to the drugstores today. So, that's important to us.

[Frederico Gomes, Director, Institutional Research, Life Sciences at ATB Capital Markets]

Thank you. Appreciate that. I'll hop back in the queue.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Pablo Zuanic with Zuanic and Associates. Please proceed with your question.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

Thank you and good morning everyone. Look, my question is more for Denise. Look, I'm very impressed with the growth in your extracts business. I think you said 31% since April 1. My impression was that the reimbursed business was not growing much.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

So is this a gaining share, or are more doctors prescribing to the reimbursed market? I'm just trying to understand that. Thank you.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

Yeah, thanks, Pablo. So we do see more and more doctors prescribing it. I think you might have recalled that after the passage of MedCAN G, the government also took steps to clear out some of the restrictions that we saw on the reimbursement part of that market. Whereas before, it was a there was waiting periods, and there wasn't it wasn't clear if there would be reimbursement. And now, there actually are a much faster, more facilitated way to get reimbursed for medical cannabis.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

And we also have really stepped up our efforts in terms of our team on the street with education. So doctors are more and more interested in learning about the benefits of medical cannabis for patients with certain conditions, including chronic pain. And along with that increased interest, I think stigma is starting to fall away even more so. And so we do see increased patients, increased doctors coming to seminars wanting to learn more. So I do believe it's share as well as increased prescriptions, to answer your question.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

That's great. And just on the same point, I mean, we are hearing more about clinical studies or trials as a way to convey the message to doctors. Is Tilray involved in any of those type of studies in Europe right now?

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

We are involved in glioblastoma study in Spain that is basically into its second year of the study. We also recently completed a study with the University of Sydney on cancer induced nausea and vomiting. And so, it is something that we will continuously look at. Where does it make sense? We have had some conversations in Germany about doing studies.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

Also working with local universities as we build out programs to really bring the expertise of cannabis cultivation and processing to Germany. Because I think we've all seen the fact that there's been a lack of expertise in Germany. So we at Tilray have had to import a lot of our expertise from Canada. And we really look to build out that market.

[Irwin Simon, Chairman and CEO at Tilray Brands]

And Pablo, that's something we support, is regard to investing in research here, because we think there's a lot of good research that will come out that ultimately benefits the growth of the medical cannabis business and growth in other countries as they see the benefits from this here. So, and you know, Europe being basically only a medical cannabis business, It's important, and it's important, you know, for the future of this industry. So that's something that Tilray wants to be a part of.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

Thank you. Let me add just one more here. We're very focused, of course, on Germany, and you mentioned Poland. Denise, I mean, when you think of Europe, what's the other next big market that you're looking at right now? What's the one that can we are hearing some news from France, Czech.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

How do you think about the other European markets right now in terms of opportunity? And related but separate, is still reconsidering entering the Dutch pilot? I mean, I think there are 10 licensees, some licensees maybe are for sale. I know that's more reg, but what are your thoughts on that? That's it. Thank you.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

So in terms of markets, you mentioned Germany and Poland, Two of our primary markets, also The U. K. We've invested in The U. K. With both infrastructure and a sales force and working with additional distribution partners.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

We're very focused also on Italy. It is a very good medical market. A lot of support from the government there in terms of growing a medical cannabis market, and doctors are very interested. So we're seeing really, really good growth and good interest coming out of Italy. We just had a few Italian doctors from a very prominent cancer hospital visit our Portugal facility to learn more about medical cannabis.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

And you mentioned France. We are very we're keeping an eye on France. I think you might remember that we participated in the experiment in France when it first began. We continue to keep a foothold in that market, and we've been having conversations at the government level to really understand where it's going. We believe that there will be market authorizations available.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

We don't believe that really there would be potentially any sales coming out of there until January of twenty twenty six. But it's a big market and a big medical market. And we believe that we really can be very successful there. And then in terms of your question about the experiments in The Netherlands, we just at this point, I think we're very focused on activities and opportunities that really have a strong ROI. And we look at some of the experiments as very interesting in the sense that it potentially generates data for the marketplace, but we don't really see a large commercial opportunity.

[Denise Faltischek, Chief Strategy Officer & Head of International at Tilray Brands]

And so we'll wait and see and then see where the market goes. And then at that point, as you mentioned, we could either look to acquire something or enter the market ourselves using our well proven roadmap and strategic plans for entering new markets.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

Thank you.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Bill Kirk with Roth Capital Partners. Please proceed with your question.

[Analyst]

Yeah. Good morning. This is Nick on for Bill. Thanks for taking the question. First one for me, just wanted to follow-up on the beverage side.

[Analyst]

With the cost of aluminum potentially higher here, just wondering how you kind of see beverage margins playing out and if that'll have any impact on your business. I know you mentioned you're not impacted by tariffs, but any color on how you're working around that would be helpful. Thank you.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So like everyone, ultimately, we have contracts in place, with suppliers. Aluminum could go up, which is an input cost. But hopefully with some of the cost savings and the costs that we're taking out of those businesses right now, we can offset that. So, right now, it's minimal on aluminum, but, you know, it's kind of wait and see and what happens there. What's what's happening because I think everybody's getting in there to try and buy, you know, cans in that right now, prices are going up.

[Irwin Simon, Chairman and CEO at Tilray Brands]

But, so far, we're managing it, but trying to offset any of those prices with costs that we're trying to take out of the business.

[Analyst]

Okay. I appreciate that color. Second one for me, just on the Canadian cannabis gross margins. With international demand ramping and a large amount of this being met from Canadian suppliers, have you seen any discernible changes in supply demand economics in Canada recently? Just your sense of the supply environment in Canada would be helpful.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So, and I think Blair's on the call. I mean, number one, because we're probably the largest grower of cannabis in Canada today, the demand for us and the calls that we're getting to supply third parties with cannabis is tremendous. And right now we have had to increase GROW in Aphria One. We're at full capacity of Aphria Diamond. We have our outdoor grow, we're now growing outdoor grow.

[Irwin Simon, Chairman and CEO at Tilray Brands]

And we're looking at our facility in Gatineau that is partially vegetables and partially cannabis. Do we convert that back? So there is a major demand right now in Canada for supply because a lot of these grow facilities have either closed or gone out of business. So there is a big demand for cannabis in Canada. Our plan is to supply ourselves first, supply Canada, supply Europe where we can, and then if there's an opportunity for a third party, we'll work with a third party partner.

[Analyst]

Great. That's it for me. I appreciate the color.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Matt Bottomley with Canaccord Genuity. Please proceed with your question.

[Matt Bottomley, Managing Director, Equity Research at Canaccord Genuity Inc]

Good morning, everyone. Just I know you've talked a lot already on the call on the hemp derived space. So I guess the only other question I would have on it is just given the pretty impressive growth that the overall market has, particularly in some of these Southern states where you have distribution. I know it's not material today, but I'm just curious if there is some sort of scenario where a farm bill goes and sort of rips disability out and the market kind of has to close overnight. What sort of infrastructure investment or anything else that you've sort of spent that isn't synergistic already with your other beverages or maybe it's not at all, but I'm just curious what that would mean for you guys strategically if the plug was sort of pulled from a regulatory standpoint?

[Irwin Simon, Chairman and CEO at Tilray Brands]

I'll let Jared answer that. But first of all, number one, all our productions happens at a third party facility. And number two is, you know, we have in place, you know, a production schedule, we're not sitting out there with tons and tons of inventory and got big infrastructure and people against us. Number three, we don't believe that every state would close-up and go out of business and end this. So Jared, do you want to

[Jared Simon, President - Manitoba Harvest & Tilray Wellness at Tilray Brands]

Yeah, yeah. I'll answer that. I think Erwin's right. And we're doing this smart and steady. I think we are going into select number of states.

[Jared Simon, President - Manitoba Harvest & Tilray Wellness at Tilray Brands]

We're putting out a select number of SKUs, and we're going with the right retailers as we go and launch this platform. So I think we're being cautious. We're not over inventorying on this. We're going out to the marketplace, and we're going to places where we think we'll succeed. I think furthermore, as Erwin was saying, there's a lot of business going on in key states, particularly in the Southeast, It's become nice business for these states.

[Jared Simon, President - Manitoba Harvest & Tilray Wellness at Tilray Brands]

The legislatures are working to codify rulemaking so that this industry can continue and thrive within those states. And so I agree. I think the more we can do to advocate for smart regulation, and that's something that we are doing through our own efforts and through CABA, the Coalition for Adult Beverage Alternatives, in which we have an active participation, I think that's something that will enable this market to continue to succeed and thrive.

[Irwin Simon, Chairman and CEO at Tilray Brands]

I think the important thing out there is this here. Consumers want this product. There's much demand out there for this product. There's a real category. So I think the Farm Bill is in place, and, it's in place for another, what, two years.

[Irwin Simon, Chairman and CEO at Tilray Brands]

And, you know, and there's 10 states right now, and hopefully, this is something that we hope, you know, is legal in all 50 states.

[Matt Bottomley, Managing Director, Equity Research at Canaccord Genuity Inc]

Got it. Appreciate it. And then staying on the sort of THC beverage side of things, but, in the Canadian market now, can you give us a little more color, like independent of of your performance, in in the beverage segment? How has that grown as sort of an innovative SKU relative to there's been a few pre rolls and some others more on a macro level just because I know there's been some changes over the years from a regulatory standpoint, very minor, but still distribution of this is in the dispensaries. And I know a lot of these fridges are locked and the access to product in Canada is still, it's a little archaic in terms of how they do it.

[Matt Bottomley, Managing Director, Equity Research at Canaccord Genuity Inc]

So just how that segment has grown, again, independent of your own brands.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So again, coming back the beverage industry in Canada, and I come back and I say this here, we have a 45% share. It's somewhere around a $55,000,000 Canadian business for us today. And you're right, it's sold in refrigerators only in cannabis stores, and now they're going to a six pack from a standpoint there. And, you know, they're not cheap either. I always say this here, if tomorrow, and there's motions that we are trying, if we could sell this in the LCBO in Canada or we could sell this in, you know, convenience stores or beer stores, etcetera, you take it, if it's a $55,000,000 business for us, I would take a 10 multiple and say it's a 200 three hundred million dollars business for us because the big time growth is in the beverage industry.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So tremendous demand for a limited amount of stores that it's sold in today. And you think about it at the size of the category where it's only sold in cannabis stores, how big this would be if it could be sold in the LCBO or beer stores or on Tapit bars. And that's something that we're pushing for and hopefully something can change there.

[Operator]

Thank you. Our final question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

Thank you. Good morning. Just wanted to come back to your comments about looking to consolidate beer distribution. I guess my sense is typically that's quite localized. Do you have any cases maybe where there is overlap that you could drive efficiencies or maybe just help us understand some of the strategic rationale a little bit better?

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

And then have you taken a look at what transition costs there might be from buying distributor to to move it somewhere else?

[Irwin Simon, Chairman and CEO at Tilray Brands]

So number one, you know, we did our ABI deal. You know, we had a two year where we would have to stick with all the ABI distributors, and, so that's number one. Number two is, for instance, here in New York, we have certain distributors distributing Montauk and certain distributors that are distributing Blue Point and Sweetwater and Shocktop. So again, as we look at it today, what makes sense? Where are we obligated by distributor contracts?

[Irwin Simon, Chairman and CEO at Tilray Brands]

Where are the potential buyouts? There's tremendous savings on freight. There's tremendous savings where our salespeople are making two stops and working with distributors, and there's tremendous marketing costs. So we've got our analysis in place. We know what the potential cost savings are, and it's sort of like picking the best of the best out there and where we're going to be important to.

[Irwin Simon, Chairman and CEO at Tilray Brands]

And I will say this here, what distributors like about having Tilray brands is they see what we're doing, that we're growing, we're investing, we're coming up with new products, and think we'll buy more craft breweries, so want to stay with us. But we're going to have to look at some types of consolidation because you can't have 500, six hundred distributors. And it's actually even more because when you look at certain distributors, they got three or four different branches that we're shipping to out there. So, yes, the answer is we've done a lot of analysis. We were obligated because of contractual to stay with certain distributors.

[Irwin Simon, Chairman and CEO at Tilray Brands]

And, it's something that, you know, Ty and team that we're working with and, you know, would work with potentially a third party, group to help us get all the costs and the efficiencies and make some of the right moves.

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

Okay, that's helpful. And just on the cannabis side, maybe help us understand your capacity approach a little bit because I know you've talked about reallocation to improve mix and take advantage of the better opportunities in the EU. But it sounds like you've also dusted off some dormant facilities and have your eye on maybe where you can add more. But yet the revenue growth hasn't really been there. So how much is there a cost you're willing to carry to lean in to that even if the you're not already seeing the growth momentum?

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

I know you had some sales that got shifted into 4Q, but obviously, cannabis revenues were down. So help us square a little bit how to put all that together.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So number one, cannabis revenues are down, as we said. Some of them were decisions to make strategically just because of margins. Some of them are timing where our new products don't come into place until the fourth quarter. And some of them is we just didn't have supply. So if you come back and look at, we would have had supply for our international markets and additional supply for the Canadian team, that's from a revenue growth.

[Irwin Simon, Chairman and CEO at Tilray Brands]

The other thing is this here. There's many wholesale out there that want to buy products from us, we just don't have product to sell. So bringing on our Cayuga Outdoor Grow is something that's happening. We brought on a free of one, our phase four, which is the first time that has been operating in quite a few years. So basically today, I think it's 137 metric tons that we're growing in Canada.

[Irwin Simon, Chairman and CEO at Tilray Brands]

We have the ability for another seven it's about another 73 to 100 metric tons that we could grow there. And some of that is to support our own growth, some of that is to support international. And if there is certain strategic partners out there that we'll supply with that is profitable, and one of the things is you know, their competitors, if we're going to sell wholesale, so we got to look at that too. So, you know, again, as you see, why are our margins growing? We're focused on profitability here.

[Irwin Simon, Chairman and CEO at Tilray Brands]

But I think the difference is here, as you looked at a lot of these cannabis businesses, they decided to go with the asset light model, where they don't have grow and they got to buy consistently from different growers. You're getting different strains, different qualities, different timing, different pricing out there. That's not what Tilray is. Tilray is a vertically integrated company where we have 5,000,000 square feet to grow. We have our brands, we have our infrastructure, and that's how we're going to grow our business.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Ultimately, it will come to roost that we'll get the growth for it. And whether it's supplying Canada and whether it's supplying international markets and the question asked before, Additionally, whether it's The UK, there's talk about other international markets, whether it's Japan, whether it's India, whether it's other countries, we have supply, other GNP sourced or Canadian markets. So I think that's what's important here as we look at it, where we have these infrastructure to do it. Listen, the drink business decides what I talked about before, we have supply for drinks. Now with the whole vape industry, we have supply for vape.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Infused pre rolls, we have supply. And I think that's what the important thing is for us to measure where we're going to supply ourselves, where we're going to supply ourselves internationally, and then who else we want to supply and sell product to on a wholesale basis that makes sense too.

[Operator]

Thank you. Ladies and gentlemen, that concludes our time allowed for questions. I'll turn the floor back to Mr. Simon for any final comments.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Thank you very much, operator, and thank you very much everybody for joining our call today. It's not an easy world out there, and we've seen this. As we come back and look at what Tilray has done, we've generated net revenue in the quarter of $186,000,000 1 hundred and 90 3 million and we've decided between SKU rationalization and where we want to ship product to, a pullback on $13,000,000 And again, what we focused on, margins, profitability. We have diversified this company in over five years. We've got this close to 900 plus million in sales.

[Irwin Simon, Chairman and CEO at Tilray Brands]

If you can look at categories today where we diversified in cannabis, in the Canadian market, and being the largest grower with an infrastructure to support it out there, with innovation, with R and D. If you come back and look how we pivoted into the beverage business, Tilray is a beverage company today with our beer, with our spirits business, with our non op business, with our liquid love water, and our hemp infused drinks. We pivoted in that. And remember, we just started that in twenty, twenty five years ago today. And look where we are, the fifth largest craft brewer.

[Irwin Simon, Chairman and CEO at Tilray Brands]

We got some of the top spirit brands out there with Breckenridge and entries into these new categories with non alc, with our water business and with our energy drink, Highball, which you'll be able to find in every Whole Foods in The US right now, which you can do. Actually, when we acquired that from ABI, there was no sales from that product. And it's one of the only clean energy drinks that are out there. In regards to margin, we're focused on margin, margin, margin, margin. I understand share, I understand everything else, but that's a big thing.

[Irwin Simon, Chairman and CEO at Tilray Brands]

Margin drops profits to the bottom line. In regards to our balance sheet, and that's something today, there's a lot of cannabis companies out there sitting with a lot of debt at high interest rates. There's a lot of cannabis companies out there that own some significant taxes and excise taxes. And and a lot of things can change until rate if Canada decides to cut its excise tax. If US legalization happened for medical cannabis, if we could sell cannabis drinks in Canada or we could sell cannabis drinks in The US, I think it's billions of dollars of sales.

[Irwin Simon, Chairman and CEO at Tilray Brands]

In regards to internationally, I mean, that is a business that basically we started from scratch. I think when we acquired Tilray, we were doing about $10,000,000 of cannabis sales with with Tilray, very little, in regards to Aphria, and we did have CC Pharma. What we've turned that into, and with their growth and with their margins at some of our most profitable businesses today within the Tilray business. So from a standpoint, yes, we're focused on cash flow. Yes, we're focused on profitability, but you've got to invest to get there.

[Irwin Simon, Chairman and CEO at Tilray Brands]

And that is a big thing for us. We've had to invest in our beverage business to get it where it is. A lot of these craft businesses have been around for years and years and years. And fortunately, within the beer business, listen, if you watch every sporting event, Bud Light, Bud, Miller, a lot of these cores have big sponsorships out there. There's a lot of beers out there, and what we've done to become prominent in these markets is pretty amazing, and how we're a big player out there, and that's what we have to do.

[Irwin Simon, Chairman and CEO at Tilray Brands]

If you come back and look at the cannabis industry in Canada, it's five years old, and how we've invested in the cannabis business to create close to a $200,000,000 US business in there and build brands from scratch. Same with Europe. It's five years since Germany from a legalized well, it's not even five years from a legalization and tender in that. So we built all this from scratch to get it where it is today. Takes money, takes time, takes infrastructure, it takes people.

[Irwin Simon, Chairman and CEO at Tilray Brands]

And of course, there's gonna be some losses along the way. But where I sit here today with Tilray is I'm very proud of the people that we have in place. In regards to our organization and a big focus with this here is our balance sheet. And we are focused on debt. We are focused on balance sheet.

[Irwin Simon, Chairman and CEO at Tilray Brands]

We're focused on generating cash, and we're focused on our cash situation. We are shareholders. We're just not employees here. A big part of our compensation is in equity. A big part of all our net worth is in our stock.

[Irwin Simon, Chairman and CEO at Tilray Brands]

No, we're not happy where our stock is. But nobody has given up. Nobody's going away. And we're working hard to change that course on our stock. And you're seeing some of the results that we're putting out there today.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So I want to thank everybody for your support, understanding. We have the naysayers out there and we have the support out there. But I'll tell you what, there's a team here that is focused. And we think we have a unique business. No, we're not building an electric car.

[Irwin Simon, Chairman and CEO at Tilray Brands]

But you heard what Denise talked about research that we're doing in regards to cannabis and some of the medical stuff that we're doing there. Consumers are changing habits every day. And you heard me talk about where our Gen Z and millennials in regards to cannabis use and drinking use. And you look at that, we are there. In regards to our wellness business and our hemp infused business, when we acquired Manitoba Harvest along with Tilray, it was losing about $6,000,000 EBITDA.

[Irwin Simon, Chairman and CEO at Tilray Brands]

There's a complete reversal at 8% growth, and it's become a very profitable business for us, the wellness business is something that we're going to focus on. So yes, we've had a lot of successes. We've had some challenges. We've had some failures. But within five years, there's a lot of points that we've put on the board.

[Irwin Simon, Chairman and CEO at Tilray Brands]

So thank you very much for your support. Thank you very much for listening to us today. And like I say, hang in there with us, and we'll be there. Have a good day.

[Operator]

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Berrin Noorata, Chief Communications & Corporate Affairs Officer
• Irwin Simon, Chairman and CEO
• Ty Gilmore, President - Tilray Beverages North America
• Carl Merton, CFO
• Denise Faltischek, Chief Strategy Officer & Head of International
• Jared Simon, President - Manitoba Harvest & Tilray Wellness

Analysts

• Aaron Grey, Managing Director, Equity Research at Alliance Global Partners
• Victor Ma, Vice President, Equity Research at Cowen
• Frederico Gomes, Director, Institutional Research, Life Sciences at ATB Capital Markets
• Pablo Zuanic, Managing Partner at Zuanic & Associates
• Analyst
• Matt Bottomley, Managing Director, Equity Research at Canaccord Genuity Inc
• Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies