Tilray Q1 Cannabis Revenue Increases 9% Sequentially

Tilray Brands Reports Q1 2024 Financial Results

• Record Q1 Net Revenue of $177 Million, Representing 15% Growth Year over Year
• Increased #1 Cannabis Market Share Position in Canada to 13.4%
• Grew Canadian Cannabis Revenue by 16.5% and International Cannabis Revenue by 37%
• With Closing of Acquisition of Eight Craft Beer and Beverage Brands, Creating 5th Largest U.S. Craft Beer Brewer with 5% Market Share in Growing Craft Market
• Conference Call to be Held at 8:30 a.m. ET Today

NEW YORK and LEAMINGTON, Ontario, Oct. 04, 2023 (GLOBE NEWSWIRE) — Tilray Brands, Inc. (“Tilray”, “our”, “we” or the “Company”) (Nasdaq: TLRY; TSX: TLRY), a leading global cannabis-lifestyle and consumer packaged goods company, today reported financial results for its first quarter fiscal year 2024 ended August 31, 2023. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

Irwin D. Simon, Tilray Brands’ Chairman and Chief Executive Officer, stated, “Today, Tilray Brands is the most diversified global cannabis-lifestyle and CPG company in the world with four distinct and complementary business segments – medical and adult-use cannabis, beverages including, craft beer, spirits, ready to drink mixed cocktails in a can, non-alcoholic drinks, THC and CBD beverages, wellness products, and medical distribution. The balance we have brought to our diversified business model has positioned Tilray Brands as the #1 Canadian cannabis LP, the market leader in medical cannabis across Europe, a leader in the hemp foods industry, and a formidable player in the fast-growing craft beverage-alcohol industry with a growing leadership position.”

We have strategically diversified our company globally over the past several years and, as a result, Tilray is now ideally positioned to capture a wide range of opportunities across multiple industries driving value through organic and acquisitive revenue growth, operating efficiencies, and improved margins and profitability.

Irwin Simon

We will continue to invest in our future and accelerate our vision of becoming a multi-billion-dollar company with a portfolio of best-in-class brands.

Mr. Simon continued, “Since the beginning of our FY 2024, we have closed on three transactions: HEXO Corp. in June, Truss Beverage Co. in August, and the acquisition of eight beer and beverage brands from Anheuser-Busch earlier this week. The HEXO and Truss acquisitions have already boosted our competitive cannabis positioning in Canada, the largest, federally legalized cannabis market in the world, by increasing our leading market share, while the beer and beverage brands acquisition has made us the 5th largest craft beer brewer in the U.S., up from the 9th position. We are now working on the seamless integration of these acquisitions into our efficient operating platforms by leveraging our deep CPG expertise and established track record to drive revenue through product innovation and expanded distribution and maximize cost savings through synergy realization.”

Financial Highlights – First Quarter Fiscal Year 2024

• Net revenue increased 15% to $177 million in the first quarter compared to $153 million in the prior year quarter.
• Gross profit was $44 million, while adjusted gross profit was $49 million in the quarter. Gross margin was 25%, while adjusted gross margin declined to 28% from 32% in the prior year quarter.
• Cannabis net revenue increased 20% to $70 million in the first quarter compared to $59 million in the prior year quarter. On a constant currency basis, net cannabis revenue was $71 million in the quarter, up 22% from the prior year quarter.
  • Cannabis gross margin decreased to 28% in the quarter from 51% in the prior year quarter and cannabis adjusted gross margin decreased to 35% in the quarter from 51% in the prior year quarter, reflecting the prior year’s inclusion of the HEXO advisory fee revenue and the completion in our first quarter of a wholesale transaction designed to optimize inventory levels and generate $3.1 million of cash.
• Beverage alcohol net revenue increased 17% to $24 million in the first quarter from $21 million in the prior year quarter.
  • Beverage alcohol gross margin increased to 53% in the quarter from 47% in the prior year quarter and adjusted gross beverage alcohol margin was 56% in the quarter compared to 53% in the prior quarter, reflecting an increase in beer as a percentage of sales mix along with the positive impact of the Montauk acquisition.
• Distribution net revenue increased 14% to $69 million in the first quarter compared to $61 million in the prior year quarter. On a constant currency basis, distribution revenue was $67 million in the quarter, up 11% from the prior year quarter.
  • Distribution gross margin increased to 11% in the quarter from 9% in the prior year quarter, reflecting favorable sales mix and lower production costs.
• Net loss narrowed to $56 million in the first quarter compared to net loss of $66 million in the prior year quarter with a net loss per share of ($0.10) compared to ($0.13).
• Adjusted EBITDA was $11.4 million in the first quarter compared to $13.5 million in the prior year quarter primarily as a result of the prior year including HEXO advisory fee revenue.
• Achieved $17.1 million in annualized run-rate savings (and $2.9 million in actual cash cost savings) as part of the $27 million synergy plan related to the HEXO acquisition. We are on target to achieve our integration plan goals and we are confident HEXO will prove to be a successful acquisition.
• Achieved $6.8 million in annualized run-rate savings in connection with the $8.0 million cost reduction plan in Europe.
• Strong financial liquidity position of ~$466 million, consisting of $179 million in cash, including restricted cash and $287 million in marketable securities.
• Operating cash flow of $(16) million in the first quarter compared to $(46) million in the prior year quarter, representing an improvement of $30 million.

Operating Highlights

Leadership in Global Cannabis Operations, Brands, and Market Share, Further Solidified through Recent HEXO and Truss Acquisitions

• Tilray grew its #1 cannabis market share position to 13.4% in Q1 2024. The Company continues to hold the #1 market position across all major markets and a leading share across most product categories. Tilray is #1 in cannabis Flower, Oils, Concentrates and THC Beverages, and #2 in Pre-Rolls, #4 in Vape, and in the Top 10 in all other categories. The Company closed on the HEXO transaction in June 2023, significantly bolstering its position supported by low-cost operations and complementary distribution across all Canadian geographies.
• By capitalizing on the Company’s unrivaled cultivation and distribution operations and the leadership team’s depth of commercial and regulatory expertise, Tilray is focused on growing its leading market share in medical cannabis in the countries in which it distributes today and achieving early-mover advantage in new countries as cannabis legalization proliferates across Europe and other international markets. During Q1, the increase in international cannabis revenue was largely driven by expansion into emerging international medical markets.

Maximizing the Growth Potential of U.S. CPG and Craft-Beverage Lifestyle Brand Portfolio

• During Q1, Tilray made substantial strides in performance across its five craft-beverage brands including SweetWater Brewing Company, Breckenridge Distillery, and Montauk Brewing Company, growing revenue in its beverage alcohol segment by 17% and adjusted gross profit by 24%. Tilray’s wellness brand, Manitoba Harvest, maintained its brand leadership position in branded hemp with 52% market share and increased its gross margin to 29% from 26% through price increases.
• On September 29, 2023, Tilray closed on its acquisition of eight beer and beverage brands from Anheuser-Busch (NYSE: BUD). The acquired brands, consisting of Shock Top, Breckenridge Brewery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company, and HiBall Energy, possess strong consumer loyalty and further diversify Tilray’s growing U.S. beverage alcohol segment. Their expected sales volume elevate Tilray Brands to the 5th largest position in the high-growth U.S. craft beer market, up from the 9th position.
• Upon federal cannabis legalization in the U.S., Tilray is well-positioned to immediately leverage its strong U.S. leadership position and strategic strengths across distribution and brands to include THC-infused products to maximize all commercial opportunities and drive significant additional revenue in adult-use cannabis through expanded recognition and distribution.

Fiscal Year 2024 Guidance

For its fiscal year ending May 31, 2024, the Company is reiterating its adjusted EBITDA target of $68 million to $78 million representing growth of 11% to 27% as compared to fiscal year 2023. In addition, the Company expects to generate positive adjusted free cash flow.

Management’s guidance for adjusted EBITDA is provided on a non-GAAP basis and excludes transaction expenses, restructuring charges, litigation costs, facility start-up and closure costs, lease expense, purchase price accounting step-up, changes in fair value of contingent consideration and other items carried at fair value, non-operating income (expenses), interest expense, net, income tax expense and other non-recurring items that may be incurred during the Company’s fiscal year 2024, which the Company will continue to identify as it reports its future financial results. Management’s guidance for adjusted free cash flow is provided on a non-GAAP basis and excludes our growth capex, projected integration costs related to HEXO and the cash income taxes related to Aphria Diamond.

The Company cannot reconcile its expected adjusted EBITDA to net income or adjusted free cash flow to operating cash flow under “Fiscal Year 2024 Guidance” without unreasonable effort because of certain items that impact net income and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time.

Original press release

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