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Operator: Thank you for joining today's conference call to discuss Tilray Brands Financial Results for the First Quarter 27 ended 08/31/2026. 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 conducted via audio. I will now turn the call over to Ms. Berrin Noorata, Tilray Brands' Chief Corporate Affairs Officer. Thank you. You may now begin.
Berrin Noorata: 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 brand's website at tilray.com and has been filed with the SEC and OFC. 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 a reconciliation of each non GAAP financial measure to the most comparable measure prepared in accordance with GAAP. 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 Irwin David Simon, chairman and chief executive officer who will provide opening remarks and commentary, followed by Carl A. Merton, Chief Financial Officer who will review our financial results for the first quarter. And now I would like to turn the call over to the Tilray Brands Chairman and CEO, Irwin David Simon.
Irwin David Simon: Thank you, Aaron, and good morning, everyone. Before I discuss the quarter, I want to frame how investors should think about Tilray Brands. Today. We are building a larger, more diversified global business with multiple engines of growth, category leadership across cannabis, beverage, wellness and pharmaceutical distribution, and a clear focus on converting that platform into stronger margins cash generation, and long-term shareholder value. Tilray is not a single category company. And we are not dependent on 1 market, 1 regulatory catalyst, or 1 product cycle. That matters for shareholders because diversification gives us more ways to grow more ways to manage risk, and more opportunities to create value as consumer cannabis beverage, wellness, and pharmaceutical distribution markets evolve around the world. We have grown Tilray from a $50 million company 7 years ago to a pro forma 1.2 billion global business today. Reflecting our ability to identify opportunities acquire strategically, integrate assets, and build platforms with greater reach. We are not done. We will continue to grow Tilray organically and through focused M&A using our infrastructure operating capabilities, and brand building expertise to create more value from the assets that we acquire. Today, Tilray operates from a position of global scale and category leadership that few companies in our categories can replicate. We believe we are the world's largest cannabis grower with more than 6 million square feet of cultivation capacity and a leading low cost production base. We are a market leader in the largest federal legal cannabis markets. Including Canada, and across Europe. We are the #1 craft beer supplier in The UK, and the 4th largest total beer category supplier in The UK grocery market. The 4th largest craft brewer in The United States and a global leader in hemp foods, beverage, and wellness. Overall, we operate nearly 40 hospitality venues, including pubs, bars, and hotels, that showcase our beers and beverages deepen consumer engagement, and give Tilray a differentiation platform to bring our brands to life in markets around the world. In The US, consumers can find a Tilray product in almost every major supermarket and our beer is now available on tap in approximately 28 thousand on-premise accounts. Go try 1. This scale matters. Because it gives Tilray the infrastructure and commercial network to buy attractive assets integrate them effectively, improve them how they run, and expand their distribution, and make them stronger and more profitable businesses. With BrewDog, Hilarie did more than acquire a beer company. We acquired 1 of the world's most recognized craft beer brands, a passionate global consumer community a scaled hospitality footprint, and a powerful platform for international beverage growth. For shareholders, BrewDog is a clear example of our acquisition strategy in action. We can buy a valuable brand, stabilize the business, return it to profitability, reinvest behind growth, and use Tilray's global platform to expand its reach globally. Investors should also understand the cadence of our business Not every quarter will look the same because parts of our portfolio are seasonal, and our fiscal year is more heavily weighted to the second half across beverage, cannabis, and distribution. What matters is where we are going. Tilray is becoming larger and more diversified. And more globally recognized. With multiple levers to drive growth, expand margins, and to improve profitability over time. In The US, we continue to believe cannabis will create significant opportunities over time. And when it does, Tilray is prepared to act from a position of strength but our strategy is not dependent on 1 regulatory event. Delays in rescheduling, have impacted sentiment towards cannabis stocks, including ours, And we believe the market too often evaluates Tilray as if we are just a pure play US cannabis operator. But we are not. Tilray is a global diversified business with established positions in cannabis, beverage, wellness and pharmaceutical distribution and we will continue to grow with or without a single regulatory outcome. In quarter 1, we delivered record revenue of $257 million up 23% year-over-year. And a record first quarter gross profit. We also expanded gross margin year over year demonstrating that Tilray is not only getting larger, but also building a stronger financial profile. That progress reinforces our confidence as we move into the seasonality stronger second half of our fiscal year and we are maintaining our adjusted EBITDA guidance for the year. Turning to international, this is 1 of Tilray's most important growth engine. And 1 of the clearest examples of why our global platform matters. In quarter 1, EMA revenues, medical cannabis, beverage, and pharmaceutical distribution combined, increased over 70%. Reflecting momentum across our markets where Tilray already has infrastructure regulatory expertise, and commercial reach. International cannabis revenue grew 21% year over year, while EU-GMP medical cannabis shipments accelerated with flower volumes up 110% oil volumes up 150%, year over year. This is where Tilray is built to lead. Regulated markets where demand is growing, standards are high, operating expertise matters, including scale, low cost, and quality. The leadership is backed by vertically integrated global cannabis supply chain, that gives Tilray control across cultivation, production, distribution, and patient access. Approximately 90% of our international cannabis supply comes from our Portugal facility, which anchors our European cannabis operations and is 1 of the most strategically assets in our global network. Together with low cost production in Canada, EU-GMP capabilities in Portugal and Germany, pharmaceutical distribution through CC Pharma, direct patient access through life in The UK, and a proprietary genetics bank, Tilray has built an end to end cannabis operating model designed to compete and win across regulated medical markets. Our strategy is to leverage the global scale regulatory expertise and patient access model to capture growing demand, improve product mix, and drive greater profitability as these markets scale. Europe has become 1 of Tilray's most important growth markets, with opportunities across Germany, Poland, The UK, and Italy, and our international opportunities extend beyond Europe we are also expanding in Australia and New Zealand, creating additional pathways to scale our medical cannabis business and capture growing patient demand. In The UK, life gives Tilray a powerful strategic advantage: direct access to patients. We are focused on improving and shortening the patient journey. Doubling life's patient base and scaling Tilray Medical products through an integrated pharmaceutical distribution network. Across Europe, we continue to strengthen the economics and performance of our medical cannabis operation. In Portugal, we reduced our operating and cultivation cost by approximately 40%. While improving strains, process, and potency. We believe Portugal is now among the lowest cost cannabis producers in Europe. And we expect this facility to deliver more than 40 metric tons of flour at full capacity in our fiscal year 2027. In Germany, Aphria RX is operating at 100% capacity Portugal and Germany combined with our low cost production position in Canada gives Tilray 1 of the strongest global cannabis operating models in the industry. With the scale we have, the cost structure, quality standards, and operating discipline to compete, and win across regulated medical cannabis markets. And importantly, our advantage extends well beyond cultivation CC Pharma provides Tilray with pharmaceutical distribution infrastructure, commercial relationships, and market access in 1 of your most important regulated medical markets with distribution to over 6 thousand pharmacies. CC Pharma is more than a growing distribution business. It is a strategic connector across pharmaceutical distribution medical cannabis, and patient access in Europe. Strengthening our competitive position and creating additional avenues for profitable growth. In Canada, Tilray is built to gain share strengthen profitability through scale, low cost cultivation, low cost processing operation, and focused commercial management. Our scaled cultivation operation gives us a meaningful advantage particularly as we come out of the summer transition to new cultivars. These strains are improving yields, lowering costs, and giving consumer the potency and terpene profiles they expect. Even with inflation in cannabis input costs, we have continued to reduce cost per gram and improve our margins. We are harvesting these cultivars now across our network, and we expect to see a larger impact late in Q2 and beyond. The cost leadership together with our brand portfolio and sharper market focus gives us a clear path to gain share in Canada. While protecting profitability. It also position us well as a market evolves beyond traditional cannabis formats into new consumer occasions. Cannabis beverages are 1 of the most exciting and compelling examples of that opportunity Today, Tilray pays over C$100 million in excise tax, and the legal cannabis industry has become an increasingly important contributor to the government revenue across Canada. And as governments look for responsible ways to expand that revenue base, while strengthening the regulated market Cannabis beverage represents a clear opportunity for that. Tilray is the largest producer of THC beverages in Canada. With over a 40% market share and a broader access through bars, restaurants, and other regulated outlets would be a meaningful win for consumer, governments, hospitality operators, and, of course, the legal cannabis industry. It would give consumers a safe regulated environment to try THC cannabis beverages. Help drive traffic to hospitality venues, and create a stronger and more accessible legal cannabis market. In beverages, BrewDog gives Tilray more than a global brand. It gives us a passionate consumer following, a scaled hospitality footprint, and significant runway to expand across beer, spirits, nonalcoholic beverages, and ready to drink formats. We see BrewDog as a major growth engine for Tilray, a brand with global reach, cultural relevance, and the potential to help reshape our beverage alcohol business over time. Beverage revenue increased 82% year-over-year to a $101.5 million in Q1, largely driven by BrewDog. BrewDog also contribute to sequential growth in the beverage segment reinforcing the early impact of the acquisition and the momentum we are building. Importantly, BrewDog became profitable in Q1. Since taking ownership we have stabilized operations, invested behind the brand, returned BrewDog to profitability, and began unlocking new growth. We recently launched BrewDog's first major campaign under new ownership. Followed by The UK wide choose craft campaign. Which celebrates the quality, flavor, and character that makes craft beer worth choosing. The early response has been strong since under the new owners campaign launch and Choose Craft began rolling out punk IPA sales across BrewDog's top 6 off trade retailers up 187% over the last 2 weeks, compared with the same period last year. At the same time, BrewDog is also secure over 9 thousand new distribution points with the launch of its latest craft beer innovation. BrewDog has also launched 8 new on-trade partnerships across live entertainment, sports, pubs and hotels. This is exactly the kind of momentum we expected when we acquired BrewDog. A globally recognized consumer brand that Tilray can stabilize, reinvest behind, and scale across markets channels, and different locations. We see a major opportunity to make BrewDog an even larger part of Tilray's international growth story. Our strategy is to grow BrewDog globally through a combination of expanded distribution, local market partnerships, and a franchise system of Brew Dog pubs, bars around the world. As Tilray expands across global medical cannabis markets, we are also building relationships infrastructure, and market knowledge that can support the broader international growth of our beverage businesses. Through strategic partnerships, we plan to expand BrewDog's operations and build bars across key markets where Tilray already has a presence or see attractive long term opportunities, including India, Poland, France, Israel, and The Middle East. This is how we can use Tilray's global reach to take BrewDog into more markets create new consumer touch points, and strengthen the international growth of our beverage business. Long term, we see room for top line synergies between beverage and cannabis globally. We are already using BrewDog's reach to expand the beverage portfolio globally, including the launch of over 20 Tilray owned American craft beers and functional beverages across The UK. BrewDog also delivered strong brand proof points at the 26 World Beer Awards with Hazy Jane, Wigman, and Mackie's 2 Scoops earning gold and Scotland country winner honors. Looking ahead, our focus is clear. Continue integrating BrewDog. Strengthening the business, and investing behind its global brand. Hospitality platform, and consumer experience. With BrewDog, we are not just building a stronger beer business. We are building a broader global consumer experience rooted in great beer powered by new innovation, connect with today's dynamic consumers across craft beer, nonalcoholic beverages, ready to drink formats, food, digital engagement, and live experience. This is how we take BrewDog, Beyond Beer, deepen our connection with consumers around the world, and build 1 of the most dynamic global beverage and hospitality platforms in the industry. Across Tilray, we are managing the business with purpose allocating capital to the opportunities where we see the greatest potential to improve performance expand margins, and continue to grow profitability. Cost controls and capital allocation remain central to how we operate. We have streamlined our operating structure captured acquisition efficiencies, optimized production and procurement, and maintain focus around corporate costs. These actions are creating greater operating flexibility and allowing us to invest behind the business and the markets where we see the strongest potential return. Our Q1 result demonstrates that progress revenue growth, record first quarter gross profit, gross margin expansion and continued cost savings. We are building momentum. We are focused on converting that progress into stronger performance across the portfolio. In beverages, we improved gross margin sequentially, and year over year despite normal beer seasonality higher input cost, and a onerous fuel surcharges. A clear sign that BrewDog integration costs disciplines, and operating efficiencies are beginning to translate into stronger performance. That progress is important because it shows we are improving the financial profile of the beverage segment and creating additional margin upside over time. In US beer, we are building a stronger, more competitive business The category is dynamic. Distributor consolidation is reshaping the route to market. And Tilray has the reach, focus, and brand portfolio to gain share in the markets where we can win. We are simplifying the business, taking cost out, continuing to SKU rationalization, and putting a sharper focus around the channels, retailers, and distributors that can drive profitable growth for us. Our spirit business is also important part of the broader US beverage strategy giving us another platform to reach consumers around many occasions, expand higher margin innovation, and deepen our relationship with distributors, retailers, and on-premise partners. This work takes time, but the opportunity is meaningful. Sharpen the portfolio, improve commercial performance, and convert Tilray's US beverage footprint into stronger and a more profitable growth over time. We are beginning to see clear proof points that our US beer turnaround strategy is gaining traction. According to Circana data for the 14 weeks ended August 30, Tilray is now the #2 craft vendor in Georgia and in the West, #4. In New York State, and Sweetwater is the 3rd largest craft brand in Georgia. Representing 12% of craft beer sales in that market. We are also seeing meaningful brand level momentum with 25%, Sweetwater H.A.Z.Y. IPA up 38%, and the Terrapin brand family delivered a 21% swing and growing 7.5% fiscal year to date. And Breckenridge juice drop up 22% in the respective priority markets. Just as important, our portfolio and package decisions are working. Our 4-pack 16-ounce strategy drove 28% growth on the West Coast and key innovation particularly Popsicle Pub Light and High Voltage added more than 100 thousand cases in Q1. These moves sharpen our focus, give distributors and retailer stronger reason to support our brands, and position Tilray to gain share in the market where we can win. As we strengthen our core US beer business we are also positioning for the next phase of growth through strategic partnerships that expand our scale capabilities and commercial reach. Our exclusive multiyear partnership with Carlsberg Group reinforces The US beer business we are building. Carl is 1 of the world's premier brewing organization and is widely recognized as 1 of the largest global brewers with a business over 30x the size of Tilray's beverage operation. The fact that a brewer of Carlsberg's scale global sophistication, partner with Tilray as its US brewing and commercial partner matters. It validates that our brewing capabilities are quality standards our commercial reach, and our ability to scale international brands in The US matters. Beginning 1/1/2027, Tilray will produce market, sell and distribute Carlsberg Elephant 1.66 thousand and Kronenbourg 1.66 thousand Blanc across all channels in The United States. We expect this partnership to deliver immediate scale revenue contribution when it begins adds globally recognized premium European beer brands to our portfolio, and deepen our relationship across the distributor and retail network. Just as important, we expect the partnership to strengthen and evolve over time as we combine Carlsberg's iconic brands brewing heritage and global category expertise with Tilray's national go to market capabilities. Taken together, BrewDog and Carlsberg gives us 2 powerful levers, to build a stronger, more diversified and more profitable beverage business over time. In wellness, Manitoba Harvest remains another strong Tilray brand. With room to grow beyond its core hemp platform. We are expanding Manitoba Harvest into adjacent brands, plant based products, and new wellness occasions. Using the brand's leadership in hemp foods to build a broader health and wellness portfolio that can reach more consumers across grocery, natural, and, of course, ecommerce channels. Across Tilray brands, we are building something few companies in our categories can replicate. A diversified global business with powerful brands international infrastructure, and operating capabilities across cannabis, beverage, wellness and pharmaceutical distribution. The next phase is clear. Improve productivity. Expand margins, generate cash, and convert our platform into stronger earnings power. This is why even with industry headwinds, challenging dynamics in The US beer and planned integration growth investments, we are reaffirming our 2027 adjusted EBITDA guidance. We remain confident our ability to deliver through the balance of the year because the underlying direction of our businesses is strong. Better operating performance stronger cost controls, and growing contributions from BrewDog and international cannabis and multiple levers to expand our profitability. Our growth plan is anchored in opportunities we can control today, expanding global medical cannabis in the markets where we have already operate, leveraging our low cost cultivation and international supply chain, scaling craft beverages, growing wellness and pharmaceutical distribution, and maintaining the disciplined capital allocation. At the same time, we continue to preserve meaningful upside from future cannabis reform globally, including The US. Lastly, we know profitability matters and how important it is to our shareholders. We are laser focused on improving earnings, generating cash flow, driving shareholder value. But it is also important to recognize what we have accomplished today. We have approximately $221 million of cash on our balance sheet. We have settled more than $42 million of debt fiscal year to date. We continue to actively evaluate opportunities to further strengthen our capital structure and reduce interest expense. This quarter, we reported a net loss of $40 million excluding non cash nonrecurring items our adjusted net loss was $3 million. Including roughly $5 million of net cash interest expense Simply put it, we can continue to reduce the interest burden earnings power of this business becomes increasingly visible. We know exactly what we need to do. Improve performance, expand margins, generate cash, grow sales, and convert Tilray brand assets and operating capabilities into stronger earnings and sustained value creation. With that, I will turn the call over to Carl To walk you through the quarter in more detail. Carl, let's go.
Carl A. Merton: Thank you, Irwin, Before I begin, please note that we present our financials in accordance with US GAAP and in US dollars. Throughout our discussion, we will be referring to both GAAP and non GAAP adjusted results. And we encourage you to review the reconciliation contained within the earnings press release or reported results under GAAP with the corresponding non GAAP measures. Turning to our Q1 results. Tilray delivered record first quarter revenue and record first quarter gross profit. With net revenue increasing 23% year-over-year. To $257.1 million compared to $209.5 million in the prior year quarter. Growth was driven by the addition of BrewDog, continued strength in international cannabis, and solid performance from our distribution business. Gross profit increased 35% to $77.5 million and consolidated gross margin increased approximately 300 basis points to 30%. These results reflect the same principles Irwin outlined. Expanding gross margin, improving the quality of revenue and positioning the business for sustainable profitable growth. All of which we are doing. Beginning with international cannabis, which remains 1 of our most important growth engines, revenue increased 21% year over year to $16.2 million driven by higher patient demand in Germany, and contributions from life in The UK. Total cannabis net revenue $56.1 million compared to $64.5 million in the prior year quarter, reflecting our disciplined decision to prioritize profitable growth and higher return international opportunities. Cannabis gross margin increased approximately 300 basis points year-over-year to 39% from 36%. Cannabis gross profit was $22 million in the quarter, compared to $23.3 million in the prior year quarter as stronger margin performance helped offset approximately $8.8 million of price compression in international markets. The margin improvement was driven by operating efficiencies, a stronger product mix in Canada and importantly, increased utilization of our Portugal facility which lowered unit costs as production volume scaled. In Canada, we continue to prioritize profitable growth over volume amid competitive market conditions. Adult use cannabis revenue was affected by planned strain rotations temporary supply constraints, and our decision to redirect approximately 1 metric ton of inventory representing $1.1 million of potential Canadian revenue to higher return international markets. This is consistent with our broader strategy to use Tilray's global platform low cost cultivation and processing basis, and EU-GMP capabilities to allocate product where it can generate the strongest returns. Turning to beverage, where Irwin spoke about BrewDog as a global brand and scaled platform. Segment net revenue increased to $101.5 million compared to $55.7 million in the prior year period. The increase included $55.9 million of incremental revenue from BrewDog, which meaningfully expands the scale international reach, and margin profile of our beverage platform. The acquisition transformed our beverage business from a primarily US focused operation into an international craft beverage platform. Adding brands distribution capabilities, and consumer reach across multiple markets. BrewDog also strengthened the segment's profitability profile. As beverage gross margin expanded by approximately 300 basis points to 41%. Our legacy US craft beverage business continues to operate in a challenging market. We are taking decisive action to streamline operations improve brewery utilization, and focus investment where consumer demand is strongest. Consistent with Irwin's comments on the strategic role of our European infrastructure, our CC Pharma distribution business continued to perform well exceeding expectations as net revenue increased 14% to $84.3 million compared to $74 million in the prior year quarter. Supported by competitive pricing and product mix. Distribution gross margin remained consistent at 11%. However, excluding a $1.3 million prior year classification difference, improved year over year due to favorable product mix higher average selling prices, and cost reduction initiatives. Distribution remains an important strategic asset supporting both profitability and our broader European medical cannabis infrastructure. Within wellness, performance was relatively stable with revenues of $15.3 million. Innovation and new product offerings continued to gain traction, although temporary constraints in the supply of organic hemp seed affected certain e commerce channels during the quarter. We remain encouraged by the portfolio and the opportunities ahead particularly as we continue to focus investment behind categories where Tilray can build durable consumer platforms. Moving to profitability. We reported a net loss of $40 million compared with net income of $1.5 million in the prior year quarter. Excluding noncash and nonrecurring items, adjusted net loss was $3 million of which $5 million related to net cash interest expense. Without the cash interest, which we are actively working to eliminate, we would have made $2 million of adjusted net income. The year over year change primarily reflected higher costs associated with investing back in our business including higher marketing costs to drive growth and headwinds from fuel surcharges. Adjusted EBITDA for the quarter was $9.2 million compared with $10.2 million in the prior year quarter. Results were impacted by $8.8 million international cannabis price compression as well as fuel surcharge associated with the broader geopolitical landscape. These fuel related costs increased by $1.7 million compared with the prior year quarter, representing a discrete external cost headwind to adjusted EBITDA. Excluding these impacts, the underlying business continued to benefit from improved utilization, acquisition integration, and disciplined cost management. And we expect those initiatives to strengthen performance as we progress towards our fiscal 27 guidance. Turning to cash flow and the balance sheet. We ended the quarter with approximately $221 million in cash, restricted cash and marketable securities. During the quarter, we raised a modest amount of capital through our ATM program, leaving $70 million available. And continue to reduce debt through additional note exchanges. We retired $24 million of principal during the quarter and a further $12 million after quarter end. Leaving $52 million of principal outstanding. As we move toward the June 2027 maturity, our capital allocation priorities remain unchanged. Strengthening the balance sheet, reducing future obligations, and investing selectively where returns support sustainable, profitable. Growth. From a capital allocation perspective, last quarter, our focus centered on the approximately $50 million purchase price for BrewDog, and an additional $50 million of short term funding while cash collections followed 90-day payment terms. With that initial collection cycle now behind us, we expect ongoing funding requirements to be materially lower and largely limited to capital expenditures. Importantly, BrewDog required no cash injections during the quarter and was self financing. Looking ahead, our focus remains on the operational levers that drive stronger profitability and cash generation. Expanding cannabis margins through international scale and cultivation efficiencies, realizing BrewDog integration benefits, optimizing our beverage manufacturing footprint, preparing for the transition of Carlsberg production and sales control in The US, improving working capital efficiency, and continuing to strengthen the balance sheet. Market conditions remain mixed across several categories, but our priorities are clear. We are focused on disciplined execution, profitable growth and building a stronger global platform that can create long-term shareholder value. Based on our current outlook, the strength of our diversified platform and the actions underway across the business, we are reaffirming our fiscal 27 adjusted EBITDA guidance of $68 million to $75 million Operator, we can now open the call for Q&A.
Operator: Thank you. We will now be conducting a question and answer session. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. 1 moment please for our first question. Thank you. And the first question today is from the line of Aaron Grey with Alliance Global. Please proceed with your question.
Aaron Grey: Hi, good morning, and thank you very much for the questions First question for me is just on the international cannabis dynamics. I know you mentioned some of the pricing pressure. And so as we think about the broader competitive environment with 2 of the largest players potentially combining, You know, how are you thinking about the international landscape you know, and how you are best positioned to ensure that you have, you know, durable sales growth? Thank you.
Irwin David Simon: Thank you, Aaron, and good question. Number 1, I the most important thing is that we have the growth. And with the facility that we have in Cantanhede, and what we have in Germany, So we have tremendous amount of grow for either flour or oil. The 2nd thing is. Listen. We have been in the marketplace in. Internationally now for 7 years. So we have infrastructure people. We have relationships with doctors. We have expanded in other countries. So again, it is just getting out there and selling our products. And you know, 1 of the other things that we have different than a lot of other companies, we have something called CC Pharma, which is you know, a pharmaceutical distribution business that goes direct to drugstores. So I really, really feel good about our international business. And it is not that we have to go out there and look for grow to sell. Have plenty of grow, but we do not have enough grow. We have know, Canada to be able to serve us. So we have product. We have oil. We have flour. We have infrastructure. We have great relationships out there. We have CC Pharma. That sells into 16 thousand drugstores. So you know, I am not concerned about the potential combination that could happen out there.
Aaron Grey: Okay. Great. Appreciate that, Irwin, 2nd question for me, just on the alcohol side, specifically on the gross margin. Just given the some of the dynamics you talked about with distribution consolidation, and broader structural challenges, just how do you think about the gross margin evolution, you know, for the category? Just think about BrewDog now being integrated and other dynamics that you could have. Thank you.
Irwin David Simon: So again, from a gross margin standpoint, listen. You know, we got into this business in 2020 with Sweetwater, Montauk came along, which we integrated into Sweetwater. And then came the ABI businesses in the Montauk and then Molson businesses. You know, all of sudden, we are sitting with 8 to 10 breweries So Number 1 was getting rid of some of the smaller breweries, which we have in regards to revolver, in regards to Terrapin, Fort Collins, and there is probably 1 more, you know, we sold off that water. there is probably 1 more that we could integrate that we can close and integrate in which there is some big savings from there. So number 1, it is integration of our facilities and getting them down to 5 or 6 facilities that have tremendous capacity that are strategically located. And, you know, bringing on Carl is gonna be a big feat for us, which there is gonna be a lot of product and a lot of opportunities with that. So that is number 1. And with that, combining all these, you know, breweries, is also getting the benefits of hop supply, getting the benefits of, you know, other ingredients, cans, etcetera. So that is in place. Number 2, as we all know, as this 3-tier system, there is been a lot of change going on with distributors. You know, for instance, in New York, we have AB InBev that has, you know, that has Blue Point and Shocktop. We have someone else that has Montauk another distributor that has BrewDog and. Will have Carl. We are in the midst of trying to consolidate distributors out there so we only have certain shipping points. And we become an important part of that distributor, and that is happening. And in a 3-tier system, it is not the easiest to, you know, to make happen. And the 3rd thing is what we are really changing is the way we go to market where we were dependent upon distributors going into pubs in. At retail. And, you know, now what we are doing, whether it is Kroger, whether it is Walmart, we are calling on them ourselves and making sure we get the pods. So it. it is coming together. Little different than the consumer packaged goods business where you just went to a Walmart and my old company Hain, and you sold and you shipped to Walmart's warehouses. And but the good news and I. What I feel good about is the lineup that we have in the beer categories today on a regional basis, not so much on a national basis. And with Carl and Shocktop, we have 2 great national, you know, brands out there. And again, as we look at our beer brands, from standpoint, you know, with 18 beer brands, do we know, put 1 or 2 of them together and just get out of some of the smaller brands so we continuously look at that? We will continuously expand into the RTD business, which we have had. We continuously. With Highball, which is our energy drinks, we are looking at other things with water. You know, there is lots of innovation out there. You. We saw a Constellation paid for a vodka seltzer business yesterday. You know, that is a mix. We can go out and create them and not go buy them. So there is a lot we will create as we have manufacturing. We have distribution. We have tremendous amount of infrastructure and r and d. So there is lots out there for us to do with this whole beer category. And listen. My hope 1 day we can sell cannabis drinks. Because if we could sell cannabis drinks throughout The United States, or you know, our hemp drinks, there is either a few hundred million dollar or a billion dollar opportunity business for us, and we have the infrastructure and the ability to do that.
Aaron Grey: Appreciate that color and outlook, Irwin, I will jump back in the queue.
Operator: Thank you. The next question is from the line of Bill Kirk with Roth Capital Partners. Please proceed with your question.
Bill Kirk: So there was a line in the release about BrewDog reaching profitability in Q1. I do not recall that having happened in Q4. And I think BrewDog was at an operating loss for years. So, Irwin, you talked about ways BrewDog can grow, but maybe can you add a little bit more detail on how you were able to quickly turn years of losses into a profit, and do you expect it to stay profitable?
Irwin David Simon: Well, number 1, the you know, the big thing is I was not saddled with a lot of their bars and pubs that were losing money. So that is number 1. Number 2, we right sized in regards to people that we did not have to take. You know, when you go into administration, there was a whole lot of leases that we did not have to take or new leases that we renegotiated. So from a standpoint, that was a big part of it. And know, but we really put good cost controls in place as we. You know, there is a big facility you know, up in Aberdeen that we really focused on. We moved away from unprofitable businesses as the spirits business. They would already shut it down. So there are things that we did We also had a great, great summer with the World Cup with our bars that we did have open. And again, the opportunity in which we are seeing today as we launch the campaign, okay, you can cut your way to profitability, but it is growth within the brands. And, you know, when we took this business over, the brands were declining double digits, and you know, started to claw their way back, and now we are seeing good growth among the brands from a depletion standpoint with the campaign. Now we took this business over. People thought BrewDog went away. So do I absolutely the budget for this year is, you know, profitability and some profitability coming from BrewDog. And, you know, what I am excited about too is the expansion opportunities not only in The UK, is what we will do in Australia, what we will do here in The US. And different partnerships that we plan to do in both brew pubs and distribution in other countries.
Analyst: Arun, can I just add 1 more point? Hello?
Bill Kirk: Thank you. And then if I could follow-up on the Canadian adult use contraction. You know, you. Carl outlined a few reasons and decisions that contributed to the year over year contraction. I guess going forward, would you expect a similar deliberate headwind dynamic Or are some of the factors more specific to 1Q decisions made in 1Q and year over year looks better hereafter Q1.
Irwin David Simon: So more decisions whereas this queue is. And this happens all the time. As we come off the summer months and yields and as we transition from different strains. That is number 1. Number 2, you know, we are focused on margin. And I think what is important, you know, from a standpoint there is being focused on profitability. The other thing which again, which I feel good about Canada, you know, Canada is 40 million people and half the population in the age can consume cannabis you know, there is a couple of big things that we have to do there. Is move more and more away as we are looking at from the illicit market. And 1 of the opportunities that is in place right now that could happen is cannabis drinks being sold you know, in food establishments, in restaurants, in bars, and in beer stores. And that is on the table in Ontario, a couple other provinces. And with us having over a 50% share and having the production for us, that would be big. 1 of the big things in Canada is excise tax. And we pay over C$100 million in Canadian excise tax. If we were just if we were selling, you know, alcohol, and we would be half that. And what all these governments are looking at you know, sales are down on American brands in alcohol, and sales are down in alcohol. How do I replace that with additional cannabis sales? And you know, there is stuff going on in Quebec in regards to age. there is additional products that can be sold in convenience stores. So that is the way the Canadian market ultimately is gonna grow is more and more cannabis products. That are available not just through, you know, cannabis stores. Thanks.s.
Bill Kirk: Thank you, everyone. I will pass it along.
Operator: Thank you. The next question is from the line of Pablo Zuanic with Zuanic and Associates. Please proceed with your questions.
Pablo Zuanic: Thank you, and good morning, everyone. Look. I have 2 more questions regarding Carl. Can you give us a sense, you know, what is the upside there in terms of revenues I do not know who is producing or distributing Carlsberg before. You know, what were their peak sales, Anything to help us frame the potential for Carl in The U.S. That would help And then the second part of the question relating to Carl, I think you said in your prepared remarks, you expect the partnership to strengthen and evolve over time. If you can give more color in terms of what that could mean. Thank you.
Irwin David Simon: Thank you, Pablo. Listen, I spent a lot of time with the Carl team. there is a you know, 1 of the largest beer producers in the world today. And, you know, it is it is they have tremendous growth across their brands and some of the other products. You know, as I spent time with them on their innovation, as know, product development, their brewing capabilities, So that brings a tremendous asset to Tilray that we can tap into a company of that size, that scale as a partnership here. And, you know, there is other companies out there that partner with other cannabis companies in the cannabis side. We are fortunate to have a partner like Carl to partner with us know, on the beverage side. So from a standpoint, right now, we you know, obtain it is a it is a venture, a profit sharing that all the Carl products will be produced in our US plants. We have the distribution, marketing, selling rights to all of The US. And with that, it is all Carl products. And where are the opportunities? Additional innovation that comes from Carl And, you know, there is other markets that 1 day that we hope to talk to Carl about that we can sell to, and there is lot. there is a big country out there. That we would expand in. And Carlsberg is around the world, and the other opportunity is this here. Carl distributing some of our products you know, in certain markets, that we would like to go into. So there is lots of opportunities, and it is been, you know, a pleasure to work with them. And I think with you know, they ultimately see this is here. US being 1 of the biggest beer markets here, and they were basically seen as an import, and they really wanna see you know, US being a big foothold for them and their growth factor. Right. Thank you.
Pablo Zuanic: Look. And in terms of just to, in terms of M&A, I know Carl spoke about cash deployment and priorities in terms of cash allocation. But I understand you are building a diversified business platform But in the first quarter, you know, beverages were 54% of your gross profits. Compared to cannabis 28%. So just looking forward in terms of M and A, you still need, to make acquisitions in the case of cannabis, whether in Canada or overseas, or is it more about expanding the beer business and pretty much doubling down on beverage exposure? Thanks.s.
Irwin David Simon: So you know, I think, again, you gotta come back and see how they are complementary. You heard what I said about Canada. Canada. Number 1, yes, we will continue to grow recreational medical cannabis in business in Canada. But Canada is only so big in size. But what is the opportunity is the synergies in the beverage business in growing other products in Canada. Okay? And I think that is a big, big opportunity. Like I say, if I could get our beverages into multiple additional outlets in the Canadian market, that is big for us, and something will happen there. So, again, as I put these businesses together. And what happens Pablo, as beverages and cannabis can come together, there is lots of overhead sharing. there is lots of cost savings, lot of infrastructure that we put together that is gonna be beneficial for this company. You know, the same internationally. Now as we look at different countries, internationally, whether it is India, whether it is Israel, whether it is Poland, whether it is Spain, as we go in there with medical cannabis, the same team that is focusing on medical cannabis will focus with our beverage team and look for partnerships or franchises along with our BrewDog products and some of our American beers. So, yes, again, as we put these 2 businesses together, they are complementary, and they both will absorb overheads that we have to put in place. For 1 business. And that is that is the big thing for us today, scale. As we get to that billion 2, listen, Being a cannabis company today, you know, we are stuck with much higher insurance costs. We are stuck with much with much higher IT costs, much higher grow costs in regards to r and d and quality know, what Health Canada makes us do. So we can take a lot of those costs and share them among other business. it is a big, big, big benefit for Tilray. Thank you. And can.
Pablo Zuanic: If I may, can I ask I am gonna add just 1 more? In terms of the changes in Germany on reimbursement, on extracts and flower, I believe that started July 1. Can you frame that? Did you see any impact from that, or is your business mostly cash payer? Versus reimbursed? Thank you.
Irwin David Simon: So number 1, you know, majority of our business there is flower. And most of our, you know, patients are paying customers. In regards to different oil it is for new patients coming in, not the existing patients. So you know, will there be some impact? Yes. But is it you know, extremely impactful to our business? No. Thank you.
Operator: Thank you, Pablo. Our next question is from the line of Brenna Cunnington with ATB. Please proceed with your questions.
Brenna Cunnington: Hi. Thanks for taking our questions this morning. So regarding the recent cultivation expansions, based on my analysis, on the. Like, for the size of the current and pending EU-GMP facilities that Tilray has, I am estimating that Tilray has, like, 1 of the largest, if not the largest, EU-GMP footprint of the peer group. So I would just love to get a little bit more color on when and how you think we might be able or we might see the real power of this footprint show through in Tilray's international sales.
Irwin David Simon: So, again, number 1, you are seeing the power and with Masson in Gatineau, Quebec. That just coming on now. And ultimately, within the year, that will become EU-GMP certified. And in regards to you know, what we are growing today, you know, in Europe. As I said before, the power is we have the product. And the thing is this here, in talking to our patients, in talking to our you know, customers and distributors out there, they want consistent it is not like they wanna be buying from 5 or 6 different growers out there and not what they are getting. So again, you know, in Portugal, I mean, from a standpoint in regards to how many. What do we grow? what is the side? What? We have over 40 metric tons, and then we have 4 or 5 metric tons. Know, that will come out of Germany. So we have plenty, plenty of capacity. And with that, as you can see, we are 1 of the lowest cost producers out of our Portugal facility today. So, again, you are seeing it. that is why you see our margins improving, and that is what you will continuously see. And the big thing is this here. This is 1 of our smaller quarters in regards to selling. You know, cannabis, you cannot look at it quarter over quarter. So, again, you know, from a sales standpoint, as sales continuously increase, And the big thing is our margins even grew. Even with price compression out there which is pretty amazing.
Brenna Cunnington: Okay. that is great color. Thank you. And then just tapping on to 1 of the previous questions on the potential for THC beverages in The US. We just love to get any color on what you are hearing if there might potentially be a carve out for this segment in the Farm Bill that we are expecting in the fall.
Irwin David Simon: Listen. Again, if I go to the political markets, and maybe I should, and guess see what they are saying is this here, And I never wanted to guess about politics. Know, everything we are hearing is there is 2 different things. There will be an extension, and it will go to the next congress. And the new congress will approve. So I do not believe that hemp this whole hemp business will go away. there is too many jobs. And there is too much. You know, from the farmer's standpoint, it is too big for farmers just to be shut down on this business. So I think there will be another extension beside. Beyond December 11. And then I think the new congress will approve where there is a certain amount of know, milligrams that could be sold.
Brenna Cunnington: Okay. Understood. Thank you.
Irwin David Simon: I think the big the big thing is Mhmm. You know, Tilray is hanging around the hoop there. We have products. We are selling We are not out there aggressively doing anything. You know, we are staying in the marketplace waiting to see what happens, and we can turn on pretty quickly. Depending on where it goes.
Brenna Cunnington: Perfect. Thank you so much. I will jump back in the queue.
Operator: Thank you. The next question is from the line of Ryan Neal with TD Cowen. Please proceed with your questions.
Ryan Neal: Good morning, everyone. This is Ryan on for Vivien, and thanks taking my questions. Just to start off, apologies if I missed this off the top, but do you have an idea of what beverage segment growth would have been excluding BrewDog?
Carl A. Merton: Our beverage business would have been down excluding BrewDog. And that is because we have gone through SKU rationalization and brand rationalization.
Ryan Neal: Okay. Great. Thanks. And just as a follow-up, I am just curious on the gross margin compression we saw in wellness this quarter. Is that a function of any promo spend etcetera? And how should we think about margins in that segment moving forward?
Carl A. Merton: So that compression was really caused by a 1-time organic seed shortage that was feeding our ecommerce business, and so we had a slight change in mix.
Ryan Neal: Okay. Great. Thank you.
Operator: Thank you. At this time, I will turn the floor back to management for further comments.
Irwin David Simon: Thank you very much, everybody, for getting on our call today. As you can see, there is a lot going on at Tilray. And there is a lot to understand within Tilray, and I am not sure you know, on a regular basis as we try to explain our business in regards to our different businesses as we explain our businesses in regards to our different categories. And the other thing is geographically, today, know, we sell in over 25 countries around the world. We deal with multiple currencies. You know, we have wars that are going on that affect us. From the utilities, from fuel standpoint. And, you know, we have different teams as we pull together. But I think the big thing is this here, is you really look at what is under the hood of Tilray, there is some incredible brands We have we produce 95% of our own products around the, you know, around the world. We grow, which growing cannabis in over 6 million square feet. And today, you know, over the metric tons that we could. You know, we really grow. And we step back in what we are doing in regards to cannabis from a medical standpoint and research out there in regards to sleep, anxiety, pain, PTSD, you know, epilepsy, are some of the exciting things that we are doing and building awareness out there. And as things expand, whether it is peptides, psychedelics, Tilray will continuously look at that. You know, Canada is the only country in the world where cannabis is legal from a recreational standpoint, and I think that is ultimately the way it is it is gonna stay. So we really have, and we are positioned so well in the cannabis industry. We do not have to go to buy cultivation. We do not have to go and buy anything for other countries. We really can expand our business today in so many different ways in flower and oils, You know, we have tremendous amount of research development and scientists that work with us in regards to the cannabis industry. In regards to The US, listen. it is been waiting and seeing. And, you know, we are used to delays, not used to things happening. But the thing is this here. there is 3 or 4 new things. Number 1, if The US happens, it will be great for Tilray, and we would be ready to pound and jump in for whatever way it happens. Number 2, if something happens with the hemp drinks, we are ready to go, and there is a big opportunity for us. There. Number 3, is this year, if nothing happens and it continues to drag along, you know, we have businesses all over the world that will know, fuel our growth. We will continuously look at acquisitions, and the proof is you know, what we have done with BrewDog very quickly And, yes, it is not you know, as quick as with our beverage business, but it is on that is a great infrastructure, and you see. Still see acquisitions in multiple of valuations. And I think we have created something very unique up there. So there is a lot within Tilray that we are doing. We have over 40 pubs and restaurants around the world that sell our products, both, you know, BrewDog and our American beers. That we learn a lot from our consumers. We have in place tremendous amount of research that we continuously get from these pubs that we know what consumers want. In regards to cost today, as a stand alone. As a company today, that is size, there is tremendous cost in regards to IT, AI, Like I said, be. Insurance, and what we have in place today to cover it as a public company and be in a small company out there today and not have a scale is difficult. And that is a big thing today. Tilray could easily absorb another $500 million to $1 billion of sales with its place. And I think that is the big advantage that a lot of companies do not have today is the scale to absorb all the additional SG&A costs, whether it is being public or just being a company out there today, that can support the growth, that can support the R&D, that can support the infrastructure, that can support the process of the analysis, the finance, that is needed within a public company or what is needed in any company today. So I am proud of what we are doing. Yes. Sometimes there is frustration, how the stock reacts just on a cannabis multiple. it is not a cannabis news. But at the end of the day, when I step back and I look at our brands, I look at what we do, I look at how strong our balance sheet is, and we have opportunities, lots of levers. We have an incredible team. I am proud of where is today and where Tilray go. Can go. So thank you very much for your support. And I look forward to speaking to you in the near future. Thank you.
Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.
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