Tilray Q3 Cannabis Revenue Falls 5% Sequentially Again

Tilray Brands, Inc. Reports Q3 Fiscal 2024 Financial Results

• Achieved Net Revenue of $188 Million, ~ 30% Net Revenue Growth Over the Prior Year Quarter
• Beverage-Alcohol Net Revenue Increases 165% Over the Prior Year Quarter, 5th Largest Craft Beer Brewer in the U.S.1 with 4.5% Craft Beer Market Share
• Global Cannabis Net Revenue Increases 33% with International Cannabis Growth of 44% Over the Prior Year Quarter, #1 Market Share in Canada and #1 Market Share in Germany
• U.S. Cannabis Strategy in Place to Strike with Potential Drug Policy Reform
• Conference Call to be Held at 8:30 a.m. ET Today

NEW YORK and LEAMINGTON, Ontario, April 09, 2024 (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 third quarter ended February 29, 2024. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

Financial Highlights – 2024 Fiscal Third Quarter

• Net revenue of $188.3 million increased ~30% in the third quarter compared to $145.6 million in the prior year quarter.
• Gross profit was $49.4 million, while adjusted gross profit increased 17% to $51.6 million in the third quarter. Gross margin was 26% and adjusted gross margin was 27%.
• Beverage-alcohol net revenue increased 165% to $54.7 million in the third quarter from $20.6 million in the prior year quarter. The increase was related to our new Craft Acquisition brands while our existing brands stayed consistent.
  • Beverage-alcohol gross profit increased 89% to $18.9 million in the third quarter from $10.0 million in the prior year quarter. Adjusted beverage-alcohol gross profit increased to $20.9 million from $11.0 million in the prior year quarter.
  • Beverage-alcohol gross margin was 34% in the third quarter compared to 48% in the prior year quarter and adjusted gross beverage alcohol margin was 38% in the third quarter compared to 53% in the prior year quarter. The decrease was a result of the addition of the acquired craft brands, which currently have lower margins than our historical business, primarily due to the current underutilization of the breweries we acquired.
• Cannabis net revenue increased 33% to $63.4 million in the third quarter compared to $47.5 million in the prior year quarter, reflecting the acquisitions of HEXO and Truss as well as growth in Canadian medical, Canadian adult-use, wholesale, and international.
  • Cannabis gross profit increased to $20.9 million in the third quarter from $(32.8) million in the prior year quarter. Adjusted gross profit was $21.1 million compared to $22.2 million in the prior year quarter.
  • Cannabis gross margin was 33% in the third quarter compared to (69) % in the prior year quarter. Adjusted cannabis gross margin was 33% compared to 47% in the prior year quarter. A portion of the decrease is a result of the termination of the HEXO advisory services agreement which contributed no gross profit in the third quarter compared to $8.7 million in the prior year quarter, while the remaining decline in gross margin was a result of a change in sales mix.
• Distribution net revenue was $56.8 million in the third quarter compared to $65.4 million in the prior year quarter. Revenue was impacted by short-term challenges related to changes in the regulations pertaining to rebates, IT infrastructure outages and weather.
  • Distribution (Tilray Pharma) gross margin was 10% in the third quarter compared to 11% in the prior year quarter.
• Wellness net revenue increased 12% to $13.4 million in the third quarter from $12.0 million in the prior year quarter. The increase was related to our strategic focus on targeted advertising campaigns, coupled with our continuous innovation efforts.
• Net loss decreased to $105.0 million in the third quarter compared to net loss of $1.2 billion in the prior year quarter. Net loss per share narrowed to ($0.12) compared to ($1.90) in the prior year quarter.
• Adjusted EBITDA was $10.2 million in the third quarter compared to $13.3 million in the prior year quarter.
• Strong financial liquidity position of ~$226 million, consisting of $146.3 million in cash and $79.6 million in marketable securities.
• Reduced outstanding convertible debt by $50.7 million compared to the second quarter and a further $41.9 million subsequent to the end of our third quarter.
• Net cash used in operating activities improved to $(15.4) million in the third quarter compared to $(18.6) million in the prior year quarter. The improvement in cash use was primarily related to the achievement of the HEXO and Truss synergies.

Irwin D. Simon, Tilray Brands’ Chairman and Chief Executive Officer, stated, “Over the past several years, our playbook of expanding our cannabis business to complementary markets such as beverages and hemp-based consumer products has positioned us well to navigate the current environment and to benefit from future growth opportunities. Tilray Brands today represents the future of the global CPG industry leading the convergence of cannabis, beverages, and wellness. We have become the most dynamic and diversified cannabis-lifestyle and consumer products company globally as we lead and advance global cannabis, fuel consumer needs in wellness foods and snacks, and disrupt craft beverages.”

We are proud of our position as the #1 Canadian cannabis LP, the European market leader in medical cannabis, the leader in hemp foods, the 5th largest craft brewer in the U.S., and are now aiming to become a top 12 beer and alcohol beverage company in the U.S.

Irwin Simon, CEO

Mr. Simon continued, “We made several notable achievements during the third quarter, including growing revenue across our core business segments, increasing our adjusted gross profit, reducing our convertible debt balance, progressing the integration of our recently acquired craft beverage brands, realizing operating synergies in integrating our HEXO acquisition, completing our Canadian and international cannabis cost reduction plans, and strengthening our balance sheet.”

Operating Highlights

Strengthened Operations and Financial Position

• Significantly reduced convertible debt by $205.5 million of principal of outstanding notes through the first three quarter of the fiscal year 2024, including $50.7 million principal reduction during the third quarter 2024, and a further $41.9 million after the period end. We intend to continue to opportunistically repurchase additional notes to optimize our capital structure and enhance financial flexibility.
• Achieved $27.5 million in annualized run-rate savings (and $15.6 million in actual cash cost savings) as part of the $30-$35 million synergy plan related to the HEXO acquisition.
• Completed Canadian cannabis business cost reduction plan launched during fiscal year 2022 and international cannabis business plan launched during fiscal year 2023.

Growing Leadership Position in CPG and Beverage-Alcohol

• In September 2023, Tilray expanded and further diversified its beverage portfolio of SweetWater Brewing Company, Alpine Brewing, Green Flash Brewing, Montauk Brewing, and Breckenridge Distillery by acquiring eight beer and beverage brands from Anheuser-Busch (NYSE: BUD), which elevated us to the 5th largest position in the U.S. craft beer market. The Craft Acquisition brands, which possess strong consumer loyalty and dominate key regions across the U.S. in the Northeast, the Pacific Northwest, and the Southeast, are Shock Top, Breckenridge Brewery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company, and HiBall Energy (the “Craft Acquisition”). Tilray now seeks to become a top 12 U.S. beer and alcohol beverage company through a strategic three-pronged approach that consists of a regional brand growth, national brand expansion, and innovation strategy.
  • Since the Craft Acquisition, Tilray has increased the acquired brand category by 2.12% overall, with 10 Barrel Brewing Company increasing by 8.5% and Redhook Brewery by 7.0%. According to BI STR data, Tilray has increased its market share of total beer in 13 states, where comparing share before and after the acquisition. We are also the #1 craft supplier in the Pacific Northwest, #1 brand family in Metro New York (Montauk Brewing) and the #1 brand family in Georgia Multi-Outlet (SweetWater Brewing Company).
• Tilray’s wellness brand, Manitoba Harvest, expanded its brand leadership position in the U.S. and Canada with increased consumption in both the natural and conventional channels as the brand’s top five customers all generating growth. We continue to focus on value-added innovation within the wellness and food beverage space, with the launch of Bio-Active Fiber and protein rich Oatmeal coming to market during the third quarter. In addition, during the latter half of the quarter, we relaunched HiBall energy drinks within the wellness beverages space to complement our Happy Flower CBD beverage launch which occurred in the second quarter.

Leading Global Cannabis Operations, Brands, and Market Share

• Tilray continues to lead the Canadian cannabis market in revenue, sales volume, and market share with a 11.6% position during the third quarter. The Company led with #1 share in Cannabis Flower, Oils, Concentrates and THC Beverage product categories.
• The HEXO Corp. and Truss Beverage acquisitions together significantly bolstered Tilray’s dominant cannabis position and strengthened low-cost operations and complementary distribution across all Canadian geographies.
• Tilray is focused on growing its leading market share in medical cannabis across Europe and other international markets. This will be accomplished by capitalizing on its unrivaled cultivation and distribution operations and the leadership team’s depth of commercial and regulatory expertise. During the third quarter, international cannabis net revenue increased by 44% over the prior period driven by growth in our existing markets and expansion into emerging international medical markets.
• In the U.S. today, Tilray does not participate in any cannabis operations and therefore, does not derive any revenue or cash from any cannabis operations in the U.S. The rescheduling of cannabis could open a path for Tilray to leverage its expertise in Canadian and European medical cannabis to distribute medical cannabis in the U.S. In the event of federal cannabis legalization in the U.S., we believe that Tilray is well-positioned to immediately leverage its strong U.S. leadership position and strategic strengths across operations, distribution, and brands to include THC-infused products. We further believe that our MedMen investment in the U.S. will position us to maximize commercial opportunities providing additional revenue opportunities in cannabis.

Updated Fiscal Year 2024 Guidance

For its fiscal year ending May 31, 2024, the Company is now guiding to an Adjusted EBITDA target of $60 million to $63 million. In addition, the Company no longer expects to generate positive adjusted free cash flow for the full fiscal year 2024, due to delayed timing for collecting cash on various asset sales.

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, purchase price accounting step-up, changes in fair value of contingent consideration and other items carried at fair value, non-operating income (expenses), 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 Craft Acquisition, 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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