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Tilray Brands, Inc. (TLRY) reported its financial results for the third quarter ended February 29th, 2024 yesterday. All financial data is reported in U.S. dollars, unless otherwise indicated and in comparison to the previous quarter. Highlights are as follows:

Q3 Financial Highlights

• Net Revenue: down 3% to $188M 
  • Cannabis Business: down 10% to $63.4M ($85.1M Gross)
    • • as a % of Revenue: 33.7% 
    • Canadian Medical: N/C @ $6.3M
      • as a % of Revenue: 7.4%
    • Adult-use: down 14% to $61.6M 
      • as a % of Revenue: 72.4%
    • Wholesale: down 35% to $2.8M
      • as a % of Revenue: 3.3%
    • International: up 21% to $14.4M 
      • as a % of Revenue: 16.9%
  • Wellness Business: N/C @ $13.4M 
    • as a % of Revenue: 7.1%
  • Beverage Alcohol Business: up 17% to $54.7M
    • as a % of Revenue: 29.0%
  • Distribution Business: down 15% to $56.8M
    • as a % of Revenue: 30.2%
• Gross Profit: up 5% to $49.4M 
• Gross Margin: up to 26% from 24%
  • Cannabis Business: up to 33% from 31% 
  • Wellness Business: up to 30% from 29%
  • Beverage Alcohol Business: up to 38% from 34% 
  • Distribution Business: down to 10% from 11%
• Net Income (Loss): up 128% to $(105.0)M 
  • Net Loss/Share: up to $(0.12) from $(0.07)
• Adj. EBITDA: up to $10.2M from $10.1M
• Cash/Marketable Securities on Hand: down 13.4% to $226M 

Management Commentary:

Irwin D. Simon, Chairman and CEO, stated:

“...We have become the most dynamic and diversified cannabis-lifestyle and consumer products company globally as we:

• lead and advance global cannabis,
• fuel consumer needs in wellness foods and snacks,
• and disrupt craft beverages.

We are proud of our position as the:

• #1 Canadian cannabis LP,
• the European market leader in medical cannabis,
• the leader in hemp foods,
• the 5^th largest craft brewer in the U.S.,
• and are now aiming to become a top 12 beer and alcohol beverage company in the U.S.”

We made several notable achievements during the third quarter, including:

• growing revenue across our core business segments,
• increasing our adjusted gross profit,
• reducing our convertible debt balance,
• progressing the integration of our recently acquired craft beverage brands,
• realizing operating synergies in integrating our HEXO acquisition,
• completing our Canadian and international cannabis cost reduction plans,
• and strengthening our balance sheet.”

Operational Highlights

1. Strengthened Operations and Financial Position
   • Significantly reduced convertible debt by $205.5 million of principal of outstanding notes through the first three quarter of the fiscal year 2024, including $50.7 million principal reduction during the third quarter 2024, and a further $41.9 million after the period end and intend to continue to opportunistically repurchase additional notes to optimize their capital structure and enhance financial flexibility.
   • Achieved $27.5 million in annualized run-rate savings (and $15.6 million in actual cash cost savings) as part of the $30-$35 million synergy plan related to the HEXO acquisition.
   • Completed Canadian cannabis business cost reduction plan launched during fiscal year 2022 and international cannabis business plan launched during fiscal year 2023.
2. Growing Leadership Position in CPG and Beverage-Alcohol
   • expanded and further diversified its beverage portfolio by acquiring eight beer and beverage brands from Anheuser-Busch (AKA The Craft Acquisition) in September, 2023 which has elevated Tilray to the 5th largest position in the U.S. craft beer market.
   • increased the acquired brand category by 2.12% overall and increased its market share of total beer in 13 states.
   • became the #1 craft supplier in the Pacific Northwest, the #1 brand family in Metro New York and the #1 brand family in Georgia.
   • expanded its wellness brand's (Manitoba Harvest) leadership position in the U.S. and Canada with increased consumption in both the natural and conventional channels.
   • launched Bio-Active Fiber and protein rich Oatmeal and relaunched HiBall energy drinks within the wellness beverages space to complement our Happy Flower CBD beverage launch which occurred in the second quarter.
3. Leading Global Cannabis Operations, Brands, and Market Share
   • continues to lead the Canadian cannabis market in revenue, sales volume, and market share with a 11.6% position during the third quarter. The Company led with #1 share in Cannabis Flower, Oils, Concentrates and THC Beverage product categories.

   • increased international cannabis net revenue by 21% in Q3.

Updated Fiscal Year 2024 Guidance

• is seeking to become a top 12 U.S. beer and alcohol beverage company through a strategic three-pronged approach that consists of a regional brand growth, national brand expansion, and innovation strategy;
• is focused on growing its leading market share in medical cannabis across Europe and other international markets by capitalizing on its established cultivation and distribution operations and depth of commercial and regulatory expertise;
• is well-positioned to immediately leverage its expertise in Canadian and European medical cannabis to distribute medical cannabis in the U.S. in the event of federal cannabis legalization there and its MedMen investment there will allow it to maximize commercial opportunities there as well;
• is expecting an Adjusted EBITDA target of $60 million to $63 million;
• is no longer expecting to generate positive adjusted free cash flow for the full fiscal year 2024, due to delayed timing for collecting cash on various asset sales and

• has stated that it cannot reconcile its expected adjusted EBITDA to net income or adjusted free cash flow to operating cash flow without unreasonable effort because of certain items that impact net income and other reconciling metrics that are out of the Company’s control and/or cannot be reasonably predicted at this time.

Stock Price

Tilray's stock price had reached $2.91 in the week leading up to the release of the report before the markets opened yesterday only to go down 29.2% by the end of yesterday on the disappointing results. The stock price is down 2% today and is now down 30.9% since its high last week. It is now down 12.6% YTD.

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