Tilray Brands, Inc. (NASDAQ:TLRY) Q1 2026 Earnings Call Transcript

Tilray Brands, Inc. (NASDAQ:TLRY) Q1 2026 Earnings Call Transcript October 9, 2025

Tilray Brands, Inc. beats earnings expectations. Reported EPS is $-0.00022, expectations were $-0.03.

Operator: Thank you for joining today’s conference call to discuss Tilray Brands, Inc. financial results for the first quarter fiscal year 2026, ended August 31, 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 conducted via audio. I’ll now turn the call over to Berrin Noorata, Tilray Brands, Inc.’s Chief Corporate 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 available on the Investors section of the Tilray Brands, Inc. website at tilray.com and has been filed with the SEC and SEDAR. 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 Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary, followed by Carl Merton, Chief Financial Officer, who will review our financial results for 2026. And now I’d like to turn the call over to Tilray Brands, Inc.’s Chairman and CEO, Irwin Simon.

Irwin Simon: Thank you, Berrin, and good morning, everyone, and thank you for being here for our Q1 results. 2026 was a testament to the significant momentum Tilray Brands, Inc. has built across our businesses over the years. I’m proud to report that our strategic focus is continuing to strengthen our profitability, our balance sheet, and leveraging our global platform to drive innovation in cannabis, beverage, and wellness. And continue to deliver solid results for our shareholders. I want to extend my sincere gratitude to our shareholders for their ongoing support and belief in Tilray Brands, Inc.’s vision. It is encouraging to see our stock regain strength this quarter and return to full Nasdaq compliance. Notably, in the months of August and September, Tilray Brands, Inc.

traded well over 1 billion shares each month, highlighting the tremendous interest in our company. And not a lot of companies have a billion shares trading on a monthly basis. We sincerely thank our shareholders for their continued confidence in our and their commitment to investing in our company. Your belief in our long-term vision, and what drives us forward. Now go out there and buy some of our products. Notably, during the quarter, we achieved net income of $1.5 million and earnings per share of zero, highlighting our commitment to sustainable growth and operational efficiency. We achieved revenue growth across all our business segments with the exception of the beverage segment which we remain flat because of deliberate decisions to optimize our craft beer SKU portfolio under Project 420.

Overall, total revenue increased by 5% year over year to a Q1 record net revenue of $210 million fueled by double-digit growth in our Canadian adult use and our international cannabis business, which deliver 12% and 10% growth respectively. We also continue to strengthen our balance sheet by reducing our outstanding debt by $7.7 million this quarter, bringing our net debt to EBITDA ratio at 0.7 times cash due and our cash equivalent to $265 million. Our results are underpinned by our deep understanding of product innovation and evolving what consumers prefer. This expertise allows us to shape innovative offerings and not only meet current demand, but anticipate future needs keeping Tilray Brands, Inc. at the forefront of the cannabis beverage and wellness markets.

Today, Tilray Brands, Inc. owns and operates more than 40 unique brands in over 20 countries, and we are the predominant global cannabis leader trusted by patients, medical professionals, and governments in over 20 countries and number one Canadian cannabis producer by revenue. The fourth largest craft beer producer in The United States and a market leader in branded hemp products across North America, with our portfolio of high protein hemp snacks and better for you products. Holding nearly a 60% market share and now a leader in the new exciting hemp-derived Delta-9 THC beverages across The US. We have built a diversified global platform that is a leader in every industry in which we compete. Let me briefly review each business. Our cannabis business, as I said, grew 5% year over year to $65 million globally.

The cannabis industry continues to evolve, and Tilray Brands, Inc. has the cultivation and manufacturing agility at the right cost to compete and lead in any commercial markets around the world. Recent developments in The US have strengthened our optimism around rescheduling of medical cannabis, and we’ve seen in other countries as we’ve seen in other countries around the world. We believe rescheduling would enhance our patient access and improve the quality of patient care, promote scientific research, and support a responsible regulatory framework. The medical cannabis industry in The US is currently estimated to be at least a $10 billion market, which would create a potential opportunity for Tilray Brands, Inc. to capture at least a 3% to 5% market share, representing a significant $300 million to $500 million business opportunity.

We’ve identified multiple pathways to participate in The US medical cannabis industry positioning ourselves to take advantage of this substantial growth potential when it happens. In Q1, our Canadian cannabis business delivered strong results, Tilray Brands, Inc. reinforced its position as Canada’s largest legal cannabis company by revenue, with Q1 revenue up 4% year over year to $51 million. In the adult use channel, Tilray Brands, Inc. was a top five licensed producer. We grew market share, closing the gap to the number one LP in market share by 53 basis points. We held the number one position in key categories such as pre-rolls, beverages, oils, chocolate edibles, and by the end of the quarter, we also reached the number one spot in flower while maintaining our top 10 positions across all categories.

Congratulations to Blair MacNeil and his team. We believe our extensive scale represents a significant competitive advantage within the Canadian market, where we manage approximately 5 million square feet of cultivation space and currently maintain 210 metric tons of cannabis in production, with additional capacity readily available. This positions us to effectively meet future demand. Furthermore, Tilray Brands, Inc. is well prepared to supply both European and US markets as regulatory frameworks develop these markets and it continues to expand. In Canada, we also foresee substantial potential as regulatory reforms may lead to transformative developments such as expanding cannabis in health care, unlocking new opportunities through proposed cannabis health products and broader insurance coverage, making medical cannabis more accessible to patients.

On-premise consumption for THC beverages, which I believe is big. A rollout of on-site consumption to drive responsible use and create a vibrant experimental cannabis beverage market. And, of course, regulatory modernization, which we’ve been talking about. Updating the outdated policies that restrict competitiveness and paving the way for innovation and growth in the Canadian cannabis industry. Turning to our international business, our international cannabis revenue grew 10% year over year to $13.4 million. And this is with not being able to obtain permits in Portugal to allow us to ship around the rest of the countries. And we remain uniquely positioned to gain market share as global consumer preferences and the regulations evolve. In Germany, we continue to expand our commercial medical cannabis portfolio and are actively leveraging our Tilray Medical and CC Pharma distribution network across pharmacies throughout the country to drive further growth.

Looking ahead, we expect to increase our medical cannabis distribution footprint by threefold in fiscal 2026, significantly enhancing our reach and impact within the German pharmaceutical market. And we have that access through CC Pharma. In Italy, our Italian subsidiary FL Group received the first license from the Italian Ministry of Health to distribute medical cannabis flower for therapeutic use. We also partner with Molteni, a leading Italian pharmaceutical company, to expand access to medical cannabis extracts and provide targeted education through their national network of medical and scientific professionals. We continue to expand our growing capabilities in both Portugal and Germany, strengthening our EU GMP certified cultivation infrastructure to meet evolving global demand.

Currently, we produce 21 metric tons of medical cannabis flower in Europe and have the capacity to significantly increase the amount as demand continues to grow. Our expanded growing operations not only support our leadership in established markets but also position us to rapidly respond to the regulatory environments open across Europe and way beyond. European cannabis reform continues to progress, and we’re seeing that. And we’re excited to witness important developments like the European Union, Canapo project, and Spain’s recent approval of medical cannabis. Tilray Brands, Inc. is proud to already be involved in medical cannabis research in Spain through a partnership with the University of Madrid, supporting advancements in patient care and responsible regulations across Europe.

Now on to our distribution. Our European medical distribution business, CC Pharma, continues to grow with revenue increasing 9% year over year to $74 million. The segment remains a significant driver of our European cannabis operations, and our infrastructure provides a strategic advantage that enables us to capture increased market share as both the regulatory environment and industry landscape evolve across Europe. And as I said before, we have access to over 13,000 drugstores within the German market. We remain confident in our global expansion strategy with Tilray Brands, Inc. well-positioned to drive international growth and leveraging emerging opportunities across cannabis, beverage, and our wellness business. International beverage, which is a new business for us, building on our international footprint, our infrastructure, our growth strategy, we will be accelerating the expansion of our nonalcoholic beverages portfolio across multiple international markets.

We expect our brands, High Balm, Liquid Love, Runner’s High to gain traction with consumer opportunities. We built a dedicated team focused exclusively on servicing our international customers. This specialized team will ensure that our portfolio of leading craft brands is tailored to the taste and expectations of our global consumers while also supporting our long-term growth in high-potential markets worldwide. By leveraging our established distribution networks and brand-building expertise, we are well-positioned to capture growth opportunities in this fast-emerging category and delivering exciting new products to the international markets and the demand for them is high. Notably, we’ve already secured a distribution partner in The UK for High Vol, ensuring rapid market entry and strong support for the brand in this key region.

Additionally, on the beer side, we recognize the growing demand for American craft beers in the international market. To further capitalize on this momentum, we’re actively exploring all opportunities to grow this business including international manufacturing opportunities and potential acquisitions to expand our reach and better serve our global customers. In our US beverage business, we continue to make progress against our beer integration, optimizing our strategy and our Project 420. We see long-term potential for the beverage category based on the diversification of our offerings and the superior products we produce. We’ve improved operations and leveraged acquired brands, supporting positive performance. Notably, many of these brands Tilray Brands, Inc.

acquired were previously in decline and are now showing promising results with healthier growth trends and improved overall performance as we move to regain sales authorizations at retail that were lost. This turnaround underscores the success of our focused strategy and our commitment to revitalizing and growing our beverage beer portfolio. Through Project 420, we’ve realized $25 million in annual savings, moving closer to our goal of $33 million. We’ve continued to work closely with our distributors to concentrate on promoting strong brands in each of our markets. In the quarter, we experienced growth across key brands and regions. Shocktop, the company’s third-largest brand, was among the fastest-growing craft brands with notable increases in both dollar sales and market share.

Driven in part by the successful launch of its variety pack, it has grown to be the number eight most popular new craft beer nationally. Trends continue to improve for Shocktop, with a 30-point dollar trend improvement since Tilray Brands, Inc. acquired the brand in 2023. In the Southeast, Shocktop excelled with a 49% jump in dollar sales, Sweetwater Day Trip IPA stood out as one of the top new items in the region. In the Northeast, Montauk maintained its leading position in Metro New York and gained market share nationally with continued demand for its WaveChaser IPA. Breckenridge Brewery led craft share gains in Colorado, with its top Avalanche seasonal and juice drop brands positioning double-digit growth. And last but not least, Redhook outperformed regional craft beer brands propelled by Big Valor Imperial IPA strong volumes and our velocity gains.

While 10 Barrel Pub Beer 18 packs dominated craft sales in Oregon and 5% of all craft volumes. We also expanded our partnerships including co-brand craft beer with the Oregon Ducks, perfect for college football season. And a new partnership with Auntie Anne’s for the launch of Shocktop Twisted Pretzel Wheat Beer. You gotta try it. It’s great. We’re making beer fun again. These partnerships and co-branding opportunities offer significant runway for us to widen our markets. In the spirits category, which has been tough, we have introduced several world-class innovations, including Mach One, our new line of nonalcohol spirits, and Cozzabrek in the tequila space. We’ve also introduced Mountain Shop, a unique beverage blend, which may take mushrooms available in pouches, which is a unique packaging format to enhance the shot experience and capture the free spirit essence of the Rocky Mountains just in time for ski season.

We also kicked off our fifth-year partnership with the Denver Broncos, with a new line of spirits, including limited editions Bronco’s Honey Whiskey and Bronco’s Orange Creams to go ready-to-drink cocktail. In the non-alc category, we’re proud that our non-alc beer brand, Runner’s High, which we only launched in fiscal 2025, is now recognized as one of the top 15 brands in non-alc beer and ranks the fourth fastest-growing non-alc beer in a hot category in the Southeast, selling across 4,500 distribution points. Following the success of our hemp-derived Delta-9 THC beverages, we’ve expanded Fizzy Jane and Happy Flower product lines to include ten-milligram formats, complementing the existing five-milligram offerings and the consumers want these products.

The innovative HD9 category leveraging our craft beer infrastructure and distribution networks enabling us to deliver high-quality products to consumers across 14 states. Whether they’re new to the category or seeking an enhanced experience. We have established partnerships with retailers nationwide for HD9 brands and now offer distribution to prominent wine and liquor outlets such as Total Wine and More, ABC Fine Wine and Spirits. In addition, in Q1, we saw further growth in regional grocery chain grocery channels including ShopRite, Stew Leonard’s, and Winn Dixie. We continue on building on this positive trajectory as we move into Q2 and the rest of the year. Today, the beverage business operates more than 20 brands including 15 American craft beer brands across seven network manufacturing facilities and 16 brewpubs.

We’re well diversified across craft beer, spirits, non-alc, and now HD9, and energy drinks. We know that there is plenty of opportunity for growth in the beverage category. We have the right leadership and we’re pursuing the right growth strategy. And I’m tremendously excited about the future and the opportunities in the large beverage category. Last but not least, now turning to our wellness business, which is near and dear to my heart. Our wellness business had a strong quarter, growing revenues to over $15 million. We continue to expand our wellness portfolio with many launches of new offerings, new crackers, new hemp portfolios, new other products that are available at Whole Foods and other retailers. We are now in over 17,000 retailers across The US.

These offerings are also launched on Amazon and many other online retailers. I’m highly confident in Tilray Brands, Inc.’s outlook for the remainder of 2026 and beyond with regulatory environments in our industry poised for meaningful evolution. I fully expect positive change ahead. And I’m certain in our ability to adapt swiftly and we will strategically. Our proven approach, robust product portfolio, and exceptional team position us to seize every single opportunity especially in wellness, where we see us with significant expansive opportunities and we’re committed to unlocking new possibilities through continuous innovation, portfolio expansion, and target investments including the opportunities when strategic acquisitions happen. While we’ve made considerable progress, we recognize we have not yet reached our full potential, and we’re far from it in the wellness space.

And that is the same with our cannabis business and our beverage business. There’s lots of room and lots of white space for us. With that, I will now turn the call over to Carl Merton for an in-depth look at our financials. Carl?

Carl Merton: Thank you, Irwin. Please note that we present our financials in accordance with U.S. GAAP and in U.S. Dollars. Throughout our discussions, we will be referring to both GAAP and non-GAAP adjusted results. And we encourage you to review the reconciliation contained within the press release of our reported results under GAAP with the corresponding non-GAAP measures. Now looking at our results. We are reporting record first-quarter net revenue, net income, and a significantly improved adjusted free cash flow for the period. Further, we are reaffirming our 2026 guidance for adjusted EBITDA. Net revenue for the first quarter was a record $210 million, a 5% increase year over year. This growth was driven primarily by increased cannabis sales in both Canada and our international markets, and increased revenue in our distribution segment.

Cannabis revenue increased 5% year over year to $64.5 million driven by 12% growth of adult-use gross revenue and 10% growth in international cannabis. Higher excise taxes and declines in wholesale cannabis offset those double-digit results. We see material potential for the international segment and expect continued growth once we receive several permits that are currently backlogged in a few European countries. Beverage revenue reached $55.7 million driven by innovation and impacted by continued SKU rationalization. We advanced Project 420 and integrated acquired brands. Although craft brands and spirits face challenges, new products contributed 2% to Q1 revenue supporting our belief in the beverage category’s long-term growth. Wellness revenue increased 3% year over year to $15.2 million because of our strategic focus on continued innovations with High Vol Energy, our natural energy drink, high protein super seeds, and better for you breakfast and snacking.

Including the launch of two new offerings from Manitoba Harvest at Whole Foods. Distribution revenue increased 9% year over year to $74 million in the quarter, primarily as a result of the stronger euro. From a contribution perspective, 31% of net revenue was generated by our cannabis business, 27% was generated by our beverage business, 7% was generated by our wellness business, and 35% was generated by our distribution business. This compares to contributions of approximately 31% for cannabis, 28% for beverage, 7% for wellness, and 34% for distribution in the last fiscal quarter. As our international cannabis business continues to expand, we expect to see higher contributions from our cannabis segment over the remainder of the year. Gross profit for the quarter was $57.5 million compared to $59.7 million in the prior year period.

Gross margin was 27% as compared to 30% last year. This decline was driven by lower margins in our beverage and cannabis businesses. Looking at gross margin by segment, cannabis gross margin was 36%, compared to 40% last year as a result of a higher mix of sales in lower margin categories such as infused pre-rolls and vapes, where we reentered some previously margin prohibitive categories. We believe the decline this quarter is temporary and the actions we have taken to drive profitability and improve margins will be effective in the long term. Beverage gross margin was 38% compared to 41% last year. The decrease in gross margin is due to the inclusion of Kraft Acquisition two sales, which have generally been lower margin. Wellness gross margin was flat year over year at 32%.

Distribution gross margin was 11% compared to 12% last year, based on changes in product mix. Net income was $1.5 million or 0¢ per share compared to a net loss of $34.7 million or negative 4¢ per share in the prior year period. Adjusted net income improved to $3.9 million or $0.00 per share compared to an adjusted net loss of $6 million or negative 1¢ per share in the prior year. Improvements in both metrics were a function of reduced SG&A costs including amortization. Adjusted EBITDA for the quarter was $10.2 million compared to $9.3 million last year. Cash flow used in operations improved significantly to negative $1.3 million for the quarter, from negative $35.3 million last year representing a positive change of almost $35 million. We continue to strengthen our balance sheet this quarter in terms of debt and cash positions.

During the quarter, we raised $22.5 million under our ATM program primarily after our stock increased to over $1 per share. Further, we exchanged $5 million of our convertible notes for equity early in the quarter. As we already discussed during our last earnings call. During the quarter, we reduced our outstanding debt by $7.7 million bringing our net debt position down to $3.9 million and our net debt to trailing twelve months adjusted EBITDA ratio to 0.07 times. All while ending the quarter with $265 million in cash plus another $1 million in digital assets. These stronger debt and cash positions provide Tilray Brands, Inc. with greater flexibility for strategic opportunities. We intend to continue reducing our debt and further strengthen our balance sheet as the year progresses.

As already discussed, our confidence in our business, our strategy, and our team has never been higher. And we are pleased to reaffirm our 2026 guidance anticipating adjusted EBITDA between $62 million and $72 million. We can now open the line for Q&A.

Operator: Thank you. Press 1 on your telephone keypad. A confirmation tone will sound. You may press 2 if you’d like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Aaron Thomas Grey with Alliance Global Partners. Please proceed with your question.

Q&A Session

Aaron Thomas Grey: Good morning, and thank you very much for the questions here today. First question for me, I just want to talk a little bit about international growth opportunities in the near term. You offered some commentary in your prepared remarks. I just want to make sure I was understanding them correctly. So first of all, just further understanding in terms of where we stand today in terms of the impacts on some of the permit delays that you’ve been having. And then some commentary you provided in terms of the growth specifically, I think you’re referring to medical cannabis is up three times in fiscal year 2026 and talks about leveraging CC Pharma potentially. Just want to make sure I was understanding that correctly. Were there some things that you’re looking to leverage CC Pharma business that you were not, you know, historically? So just any additional commentary on that would be helpful. Thank you.

Irwin Simon: Great. So a couple of your questions. Number one, in regards to permits, we spent a lot of time with the Portuguese government. We’ve spent a lot of time with Portugal. We’re finally seeing permits coming through. And I feel good about that. Where, you know, the next big issue that we run into is the quota in Germany and just Germany opening up and increasing, you know, more imports into the German market, we think ultimately that will happen. But you know, it’s not business going away. It just may shift from, you know, second quarter into third quarter. As the new quotas move into place in 2026. So with that, I feel we’ve made a lot of headway into the Portuguese permit situation, and we got more permits in the last two weeks than we probably got in the last, you know, two months or so.

In regards to a couple of things, the demand in Europe is there. And with that, it’s the availability and the grow. And with the new with the team, and now we moved some of the Canadian team into international. We look to grow in our facility today, and Portugal is running about 50%. We have the opportunity to double that. At 40 metric tons, and that’s something we’re working on. The other thing is to really increase our growth to probably six or eight metric tons in our German facility. And also where the opportunity is in regards to, you know, bringing product EU GMP product in from the Canadian market. In regards to Germany, what I’ve said and what I was working through, you know, CC Pharma, when we acquired it, it was a big part of our license, and it was something that there was an opportunity.

And what we’re seeing is some great expansion with CC Pharma. CC Pharma delivers to 13,000 drugstores today and that is regular medicines. And the good thing is we’re also seeing some good price increase and some good opportunities on the CC Pharma distribution business. But more importantly, as we integrate these businesses, whether it is on the sales side and the distribution side, we see CC Pharma being vertically integrated and distributing our medical cannabis to a lot more of these drugstores in the German market, and that’s a big opportunity for us.

Aaron Thomas Grey: Thanks for that, Irwin. That’s helpful color there. Second question for me, just in terms of rescheduling opportunities in The U.S. You offered some commentary talking about seeing a number of different avenues that you guys are evaluating. Just curious. Could you provide some color there if things were to open up cannabis was rescheduled to schedule three, you feel like you already have the infrastructure within the existing business to be able to capture some of the opportunity organically, or do you feel like some things might need to be done, you know, vis a vis acquisition to capture on that opportunity? I know there’s a lot in flux in terms of how that could actually look in a scheduled three scenario, but just any commentary on that would be greatly appreciated. Thank you.

Irwin Simon: Well, listen. As I said before, we have, you know, 5 million square feet. We have today over 200 plus million metric tons of cannabis grow in Canada. We have a great Canadian medical infrastructure in Canada already servicing the Canadian market. The Canadian market is 40 million people, so we service clinics up there. Have a group with an infrastructure that sells to the Canadian market today. Talking about Europe, you know, as we look to sell and the objective is to sell close to a $100 million of medical cannabis in Europe, which is all medical cannabis, and there’s plenty of research that we’re doing over there for anxiety, for sleep, for cancer, for epilepsy. So taking that know-how and transferring it to The U.S. is something that’s readily available.

And last but not least, if there was an opportunity to partner with a pharma company or there was something opportunity for us to buy, we’d be ready and willing and able to do that as we have the balance sheet potentially, you know, as we have the balance sheet to do that. So whether it’s taking our current industry, our current people, our current know-how, our current growth, our current research, you know, our current genetics for medicine or partnering with a pharma company or buying something is something we’re, you know, open and ready to do.

Aaron Thomas Grey: Great. Thanks for that color there, Irwin. I’ll jump back into the queue.

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

Bill Kirk: Hey. Good morning, everyone. On the balance sheet, I see the $1 million in digital assets. I guess, were those investments you made or was it crypto that came in from customer payments? And then taking a step back on the topic, I guess, which coins, tokens, currencies do you prefer? And what are your cash allocation plans to the strategy given your cash generation and your equity issuance history?

Irwin Simon: So that is the acquisition of Bitcoin that we acquired three, four months ago. And with that, I’m gonna let Lloyd Breath, right, just take you through some of our strategies that we’re looking at from Bitcoin today as we see relevance with our current investors, our current users, are also, you know, Bitcoin users, and we see opportunities as I’ve said in previous meetings and previous releases, that we see opportunities, you know, with Bitcoin and purchasing our products, and purchasing our beer products and we see opportunities with our current investors. Lloyd?

Lloyd Breath: Hi, everyone. Good morning. Yeah, we actually invested in Bitcoin and we’re also looking at some other assets such as Ethereum and Solana. One of the things part of our strategy that’s core is enabling our websites so that we can actually accept Bitcoin. So that’s gonna be part of our strategy this later this year. Additionally, we’re looking at some investment opportunities from a marketing perspective as well as looking at tokenizing potentially some stock.

Irwin Simon: And, you know, with that, I just want to make sure, listen. We see the opportunities. We see the energy synergies with our products, with our investors, and we’re not becoming that crypto company out there. But we see tremendous synergies as we expand Tilray Brands, Inc. into, you know, many new markets and many opportunities from that. And we’re working with a lot of partners out there and making sure we have the right people that understand crypto and how to do it.

Bill Kirk: Thank you. And going back to Germany, Europe, I guess, when you’re servicing those markets, how much of the product is grown today in Portugal? How much is coming from your Broken Coast GMP facility in Canada? And how much that ends up being sold in Germany and Europe is coming from a non-GMP facility of yours in Canada? And then the bigger question is, what are the risks that Germany changes the way they treat product conversion or product coming from Portugal?

Irwin Simon: So listen. Number one, the majority of our product today that is sold in Europe is coming from our facilities in Europe. Okay? And when the product does come from Canada, it goes into Portugal. It then goes to an EU GMP certified facility. So everything sold there is EU GMP certified. Okay? With that, again, you know, there’s lots of possibilities. We do have a good-sized, you know, German facility that can grow cannabis. We’re one of the few, if and I’m not sure why in the EU that Germany would not allow European products to be shipped into, you know, the German marketplace. So, you know, that ultimately is something we’re continuously talking to the German, you know, government about. And if they did that, there’s not enough role in the German market today to be able to supply the market. So it’s something that it’d be very difficult if the German authorities change the market change the way products come into Germany.

Bill Kirk: Thank you for that.

Irwin Simon: Okay. Thank you.

Operator: Our next question comes from the line of Robert Moskow with TD Cowen.

Victor: Hi, good morning guys. This is Victor on for Robert Moskow. Two questions for me, please. First, can you give us a state of the union for the Canadian adult use market? Curious on your thoughts on market maturity and your pricing power in the context of the 10% growth you saw this quarter? How much of that maybe was like volume versus price?

Irwin Simon: So and Blair, do you Blair, you’re on the line. Feel Blair MacNeil or head of our Canadian market. Blair, do you want to jump in and take that, and I can add to it?

Blair MacNeil: Yeah. Absolutely. Thanks, Irwin. Yeah. So in the quarter, we saw overall market pricing down 1.3%, and volume was up 6.5%. For us, our pricing was actually up two and our volume was ahead of the market. So it was a really strong quarter for us both on the pricing side and on the volume side. As you saw, we were the only LP in the top five to grow share in the quarter. So very, very strong results. In terms of market maturity, what I would tell you is in the current regulatory environment, yes. You know, volume has slowed in terms of growth rates. But still very healthy growth rates in the market. And I think what you’ll see is over the next few, you know, quarters is that and Irwin kind of referenced this, is that you will see the regulatory environment improve, and I think you’ll see growth continue to go.

Overall, household penetration on cannabis in Canada is still at a very low number. So we see tremendous runway for growth in Canada. Within the regulatory framework.

Irwin Simon: And listen. I think and I’ll just jump on that for a second. The Canadian market was the first. And, you know, as we go into our sixth year, with that, again, from a regulatory standpoint, and what are we still sitting with? We’re still sitting with the high excise tax. We’re still sitting with lots of regulation. We’ve been through price compression. We’ve been through COVID. We’ve been through an illicit market. We’ve been through over 1,800 LPs that are out there. A lot of them gone away. A lot of grow facilities. And, we’ve gone through educating the Canadian consumer on the benefits of cannabis and the legality of cannabis without, in actuality, being able to advertise. And we’ve built our good supply today, Blair, which is at retail about a $250 million brand, right.

And from that, that’s what we’ve built over the last, you know, five, six years. We have over 5 million square feet of grow. We have the largest grow facility in Canada with 237 metric tons and maybe even more. So you know, the Canadian market has been a great pivotal point for us. Now what we’re hoping for, is on excise tax, there’s some concessions. We’re hoping that Canadian provincial governments allow us to sell our drinks into other retail outlets like restaurants that need help or, you know, independent retailers or liquor stores? We’re looking for changes in regards to where medical cannabis is sold, where it’s sold directly in through drugstores. And that would change a lot, you know, for our Canadian market. So, we look now for some big opportunities coming to the Canadian market.

And then, you know, Blair and his team have really put us in a good space there to really move beyond and a good role in regards to our products.

Victor: Got it. And then my second question is, so beverage gross margin was about 50 bps lighter than kind of we expected. Can you remind us of your plan on improving profitability in that segment? And also, where are you on that path that 420, you know, path, and what still needs to be done?

Irwin Simon: So as you saw, we’ve taken $25 million of cost out, and there’s more to go. We’ve gone through, and I think, SKU rationalization, you know, $20 million of SKU rationalization, and there’s more to go. We’ve closed three facilities so far. So come back, you know, in acquisitions, we have acquired close to 12, it would close 12 brands. We, you know, have closed we had 10 facilities. We’ve had 18 brewpubs. And, also, we have over 900 plus distributors out there. So bringing this all together under, you know, one management, one infrastructure, and, you know, we’re seeing progress, but there’s a lot of wood to chop there yet to get those margins to where we need to do. And whether it’s the procurement of cans, the procurement of hops, and one of the biggest things, you heard me mention, you know, in my remarks, you know, a lot of these brands, as we were buying them and decisions were made by the previous owners, we were delisted in a lot of retailers out there.

So with that, you saw major declines in these businesses. And we missed the windows of getting these products in the stores. Now these windows have opened up and getting these products now relisted in these retailers is something that we’ve been doing. And that’s why, you know, whether it’s Shocktop, whether it’s Redhook, whether it’s some of our other brands, you’re seeing the growth there. And that’s what’s gonna happen, you know, to get our gross margins up here. And listen. Let’s all face it. The beer category is not one of the easiest categories out there right now. And, you know, we’re fighting through it both on the growth side, innovation side, I’ve said it from the beginning, how do I make beer fun again? And that’s something we’re trying to do.

Along the way, make money with it too.

Victor: Got it. Thanks, guys.

Operator: Thank you. Ladies and gentlemen, our final question comes from the line of Frederico Gomes with ATB Capital Markets. Please proceed with your question.

Frederico Gomes: Hi, morning. Thanks for taking my questions. First question, just thinking about the issues in Portugal. I’m curious how do you see that in terms of managing future risks in terms of your international strategy, you know, whether you’re taking steps to diversify your supply chain there and how would you go about doing that? Thanks.

Irwin Simon: So number one, you know, we got a million and a half square foot facility in Portugal. We’re not picking up and moving it. Okay? I mean, over a couple $100 million are built, and it’s a state-of-the-art facility. So I’m in Portugal. I gotta stay there. I gotta figure out how to work within those confinements. And I must tell you, I’ve had some great meetings with two ministers in Portugal, at the highest levels. And they’re very open. In Portugal, you know, there’s a new government in Portugal and they want business. They don’t want us leaving. They want to build upon our business there, and they’ve been very, very supportive of working with us. And since my meetings, with our people, we’ve seen lots of changes that we’ve been getting our permits.

So I feel good. On the other hand, listen. We do have a facility in Germany, nowhere near what we have in Portugal. We do have the ability to ship from Canada, and, you know, where we would ship it directly into The UK and directly into other markets to ensure EU GMP. So we have options. But first and foremost, we are far from giving up on the Portuguese market.

Frederico Gomes: Thanks for that. And another question here. Just on Germany, could you talk about the proposed change there in legislation in terms of prescriptions and how the market works? How do you think that could impact that market? And, you know, whether you think that draft that’s going there may be approved or not as is, or you expect changes to that draft in terms of timing as well, when do you think, you know, the market there could change in terms of the legislation? Thank you.

Irwin Simon: Listen. We’re supportive of change. But, again, you know, I don’t want to go out there and speculate until I know what the change is. Okay? And I think so far, the good news is what we’re seeing is a continuous demand and online prescription has not been one of the biggest, you know, drivers here. So if there is change, I think patients will find other ways to go out there and purchase cannabis. And, you know, it’s interesting because Germany has strong independent drug chains out there. There’s no, you know, CVSs. There’s no Walgreens. You know, individuals are allowed to own, like, six drugstores. They’re all independent. So like I said, there are multiple stores out there. It’s not online. So I see even if it did change that you can’t buy it online, there’s still the retail outlets to go to out there.

And I would like to see some of the changes, lots of changes that we continuously talk about that didn’t. And we, with our lobby groups, are out there working with the German government on what’s the right thing for the patients. Because this here is important too. The difference in medical cannabis is like medicine. If you didn’t give patients access to get medicine, that’s a problem. If you couldn’t get your medicine, and didn’t have access, a patient that’s sick or dependent on it, that’s an issue. So this is being sold as medicine from a medical standpoint, not from a recreational. If you don’t get your cannabis from a recreational standpoint, that may not be as an issue. But you’re not getting your medicine, and the government has to take that, you know, into view when they’re deciding what they’re gonna do here.

Frederico Gomes: Thank you very much.

Irwin Simon: Great. Let me just say this here. I know a lot of have joined now. Unfortunately, not us. There was a technical problem with our provider. And those that were online did not hear my comments. Sorry about that, guys. You missed some great comments and Carl’s comments. Okay? If you want to hear me again say it, you can go online and listen, and I encourage you to do that because there’s some really good information that both Carl and I delivered today. And I apologize. And the carrier, they’ll hear from us, and, definitely disappointed. I know you heard music, so we had a lot more to say than the music. But please, it has been recorded. It is online. And you’ll get every bit of it. And for some reason, there’s an issue, let Berrin know we’ll make sure you get it.

I’m really sorry about that. In regards to the analyst questions, I think you heard most of those. You’ll be able to get those, the analysts that were here. You know, were able to hear Carl in our remarks. So I apologize profusely for that. With that, thank you very much for your time today. I hope some of it wasn’t wasted by not hearing our comments, but now you’ll have to go online and listen to it. It’s only Q1 in 2026. You know, one of our smaller quarters. There’s a lot to do. And as you can see, we have a lot of good things in place. And trust me, there have been times, like, you look at and sort of say, you know, what the heck are we doing here? When you look at your stock price, you look at different things. But this team, in over five years, really have brought a lot together here.

In rebuilding a Canadian cannabis business basically from scratch. Building facilities, building brands, building products, building different strains, genetics, new innovation, and some of the new innovation that’s coming out of there. Building infrastructure and sales and marketing teams, again, going through price compression, going through COVID, going through, you know, the illicit market as one of your biggest competitors out there, and I really want to commend the Canadian team and what they’ve been able to do. In regards to our international cannabis business, same thing. It has come together basically with the acquisition of Tilray Brands, Inc. And it is, you know, really a business that I see tremendous opportunities. And we now are getting requests, you know, in different countries, whether India, Middle East, and places like that in regards to medical cannabis and the opportunities there.

And there’s a lot of countries, and there are a lot of different, you know, countries out there that are realizing the benefits of that. And also realizing the benefits of medical cannabis versus medicines in cost of drugs and that out there today. And what the benefits will be. So I see big opportunities for us today. You know, Rajnish Ohri has joined us as now head of Europe. And is bringing the teams together. And we’ve done a lot with our Canadian teams to integrate these businesses to get synergies and savings to get a lot of the know-how. Because one of the things cannabis is agriculture. It’s growing. It’s yields. It’s the size of the flower. It’s the potency. And that is something that’s important out there. And this is not an industry that’s it’s an industry that’s spread around the illicit market for many, many years, but it’s not an industry that’s been around from a legalized market.

It’s not industries that have been around from a grow, from a research and development that’s all coming together. And countries are realizing the opportunities and what they’re doing, you know, not allowing their citizens and patients to be able to buy these products. The other thing they’re realizing is there’s tax dollars. That they’re missing and if tax dollars are being sold through an illicit market. In regards to rescheduling, President Trump, with his different tweets and his different comments, I think, realizes that something has to happen here in rescheduling. Last week with his tweet or two weeks ago in regards to CBD. You know, in regards to senior citizens, and I can’t tell you how many people tell me in using CBD and THC products.

You know, in regards to pain and anxiety and that and the benefits for what we’re seeing today on our Delta-9 products and being sold in limited states and the demand for it again, what Blair has seen in the Canadian market with building, you know, a 40 plus million dollar business and today just being sold within, you know, cannabis stores. And, again, at prices that are not the cheapest prices out there. So we see tremendous opportunity in the beverage business. In regards to our beverage business, it’s work, you know, it’s work we gotta do. And, we got into it in 2020 with the acquisition of Sweetwater. You know, acquired Montauk, acquired other brands and the businesses from ABI. Then the business in Molson’s. We got some great brands. But bringing it all together is a lot of work.

Bringing the facilities together, getting the cost out, getting the margins out, getting the right facilities. And that is something that, you know, Tilray Brands, Inc. is doing and the team is doing out of Atlanta to bring all this together. And as I said before, not an easy business today with changes happening, but we will be in the beverage business, not just the beer business. And with that, there’s a lot of interesting products we’re working on. In regards to our spirits business, the team is working with our distributor, RNDC, and we’ve really put them plan in place with RNDC to be in our major markets. Yes. The bourbon category is a tougher category today, than it was, but Breckenridge bourbon is a great tasting product out there, and there’s great demand in certain markets at the same time.

Our vodka has great demand and our gin and some of our new products that we’ve come out with are really, really good products. And some of the first time are innovation. And last but not least, you hear me talk about our wellness business. What Jared and team have done on wellness. We acquired this, it was a negative EBITDA about $56 million, and we’re turned around to today. And somebody that’s been part of the wellness category since 1992, 1993 and see the growth, it’s all we talk about, the wellness, wellness, and food. Regards to, you know, the Trump administration and taking colorings out of food today, higher protein, protein, protein, protein, and some of the highest protein is in hemp foods because it’s a plant that’s grown. So we’re in a lot of different categories.

We’re in a lot of unique places. You look at our balance sheet in regards to our debt to equity, it’s in a great place. We ended the quarter with $260 million of cash. So there’s a lot of good things happening. But there’s a lot of work to do. I really want to thank our team that really makes this happen and rolls up our sleeves. Even though there’s 2,500 employees around the world here, not a lot for a lot we gotta get done. So with that, I want to thank everybody for listening. Please go back and relisten to our comments. There’s a lot of good comments that came out of today. Thank you to our shareholders for your support. And get out there and vote as we have our AGM coming up. With that, have a great Thursday, and look forward to speaking to you in the New Year with our Q2 results.

Thank you.

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