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spk15: Greetings, and welcome to Tillray's third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Rafael Gross, Investor Relations. Thank you, sir. You may begin.
spk14: Good afternoon, and thank you for joining us on Tilray's third quarter 2020 earnings conference call. With me today are Brendan Kennedy, Chief Executive Officer, and Michael Krutek, Chief Financial Officer. Before we begin, please remember that during the course of our discussion, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events and those described in these forward-looking statements. Please refer to Tilray's reports filed from time to time with the United States Securities and Exchange Commission and Canadian security regulators along with the earnings press release issued today for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements. On today's call, management will also refer to adjusted EBITDA and gross margin, excluding inventory valuation adjustments, which are non-GAAP financial measures. While the company believes that these non-GAAP financial measures are useful information to investors. 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. Today's earnings press release contains a reconciliation of each non-GAAP financial measure to the most comparable measure prepared in accordance with GAAP. And now I'd like to turn the call over to Brendan.
spk08: Hello, everyone, and thank you for joining us. I would like to cover three items today. First, I will review highlights from Q3, including how we have continued to significantly improve our financial performance by optimizing our cost structure. Next, I will provide an update on our strategic priorities and the current state of our business. And finally, I will discuss what's next for Tilray as we look ahead to 2021 and beyond. As I've discussed on prior earnings calls, 2020 has been a transitional year at Tilray, a year during which we have realized significant accomplishments by focusing on profitable growth in our three core businesses, International Medical, Canada Adult Use, and Manitoba Harvest Hemp Foods. At the same time, I'm proud of the challenging work that our team has done to optimize our cost structure and mitigate the impacts of COVID-19. In doing so, we have strengthened our financial position against the challenging industry backdrop, better aligned ourselves with market demand, and established a foundation which we can leverage to generate enhanced shareholder returns. We are encouraged by our progress in Q3 as we substantially narrowed our adjusted EBITDA lot compared to both Q2 and Q1. Based on our Q3 results, we believe our current momentum positions us to achieve our goal of breakeven or positive adjusted EBITDA in Q4. As we have stated throughout 2020, this has been our objective and is now clearly within reach. Sequentially, adjusted EBITDA in Q3 improved to a loss of $1.5 million from a loss of $12.3 million in Q2. or 87 percent improvement. And when compared to Q1, adjusted EBITDA loss improved by 17.2 million, or 92 percent, from a loss of 18.7 million. These results demonstrate the significant impact we have achieved with our broad-based cost-cutting measures. Notably, and as I will explain in more detail, this was accomplished with Q3 revenues of 51.4 million which is moderately better than Q2. We remain focused on growing our top-line sales despite our cost-cutting efforts and continue to invest in our business where we see opportunities for reasonable returns. Importantly, our new cost structure and improved balance sheet will allow us to leverage future sales growth without adding significant SG&A. For reference, we have reduced our quarterly SG&A including R&D, from approximately 48 million in Q4 2019 to roughly 26 million over the past two quarters, a remarkable improvement over a short period of time. Although we will continuously evaluate opportunities to optimize spending, the heavy lifting is now behind us. As I indicated, we have refocused our business on three key areas of growth, international medical, where we have built an enviable track record and are a leading provider. Canadian adult use, which is making tremendous inroads in converting the illicit market to the legal market, but still has a long way to go. This transformation provides a catalyst for expansion as more value-added and illegal cannabis products come to market and become more accessible and affordable through increased points of distribution, including the number of brick and mortar retail stores. I should add that the transition to e-commerce ordering curbside pickup and delivery in the current COVID environment, coupled with a heightened concern for quality and safety, appears to be accelerating the migration from the illicit market. Manitoba Harvest Hemp Foods, which provides us with a hemp and CBD products platform in the United States and 19 other countries around the world. Now let's discuss each of these segments in greater detail. International medical sales were flat compared to Q2. Although there was good demand in the marketplace, the market experienced two unexpected setbacks. First, there was an approximately four-week period in early Q3 when cannabis imports to Germany were curtailed market-wide due to International Narcotics Control Board, or INCB, quotas. Second, we were subject to COVID-related administrative delays for import permits on products entering Germany. While we were able to recognize some of these sales later in the quarter, some activities shifted to Q4. We remain bullish on our competitive position and business potential in the EU and Germany in particular. However, the EU market may remain volatile in the coming quarters due to recently reimposed COVID restrictions. We are continuing to see increases in both the number of patients in Germany with cannabis prescriptions, as well as the number of doctors who are writing prescriptions for these patients. While these increases are off of a relatively small base, we believe that we are effectively building brand awareness, similar to the way that we did in Canada four years ago, and expect to see continued patient and revenue growth given Germany's large population base. In fact, we believe that the adoption curve in Germany is occurring at a faster pace compared to Canada during 2014 and 2015. Recently, we have seen a number of competitors either cease European operations or significantly reduce their presence there. We believe this will become a long-term strategic advantage for Tilray. The commitment we have made to the EU market with our Portugal GMP campus and regional leadership team based in Germany position us well to continue to capture market share in Germany and more broadly in Europe. In Portugal, our phase two construction is all but complete. Given its warmer climate that is amenable to year-round cultivation and a lower cost of labor, our facility in Portugal has an annual capacity of roughly 40 metric tons of dried cannabis that can be shipped to other countries around the world. With full GMP certification, it is our international hub for medical cannabis exports and R&D. Looking ahead, we are optimistic about our opportunity in France. We will be submitting our application and will wait to hear if we have been selected as one of the suppliers for the country's medical cannabis trial. The French government recently published their decree that provides details on how the medical cannabis experiment will be administered. The French authorities have indicated that approximately 3,000 patients will be able to participate and that the selected companies will supply medical cannabis that complies with pharmaceutical standards, including GMP. The first prescriptions are expected to occur in early 2021. Given our experience with GMP practices and the reputation we have established in Germany, we believe Tilray is well positioned to be selected as a supplier for the program. This will allow us to establish the foundation for future business in France. We're also encouraged by the possibility of participating in the Dutch coffee shop experiment. The Dutch government is currently determining whether and how controlled cannabis can be legally supplied to coffee shops. The program is called the Controlled Cannabis Supply Chain Experiment. We recently applied for one of the 10 licenses that will be awarded, which would be another international revenue opportunity for Tilray. Our medical cannabis sales in Australia and New Zealand continue to benefit from patient growth, broader distribution, and stable pricing, all of which have resulted in solid gains for the business. On September 28, we announced that Australian researchers published preliminary results indicating that one of our GMP-produced products may reduce nausea and vomiting for cancer patients undergoing chemotherapy. The pilot phase of the study ran for two and a half years with 81 participants enrolled. The trial will now move to a phase three clinical trial to determine with much more certainty the effectiveness of medical cannabis to combat nausea and vomiting and determine if it should be considered for use in routine cancer care. In summary, we are committed to long-term profitable growth in Europe, as regulations continue to change and country markets develop. Our early partnership approach with government agencies, our emphasis on clinical data, and our ability to produce high-quality GMP manufactured cannabis products at scale in the EU for the EU puts us in a leading position. As new international market opportunities are presented, we will leverage the knowledge and experience of our medical advisory board to determine what is best for the company. Turning now to Canadian adult use, our Q3 revenues increased 13.1% compared to Q2. This demonstrates how we can grow this business without focusing on the deep value segment of the market. We attribute our success to several strategic decisions, including partnering with Kindred as our exclusive sales agent, evaluating our portfolio pricing, introducing new 2.0 products, and improving our operations. Relative to operations, we have made significant improvements, which have resulted in increased yields and potency. In 2020, our yields are up approximately 42% at our NSGO and Ontario facility relative to 2019, and all of the harvests have been above 20% THC potency. Our Kindred partnership has established us to leverage the breadth and depth of their sales force to grow distribution with both existing and new provincial buyers and retail partners. While we continue to focus on higher premium categories, we evaluated our pricing strategy to ensure our product offerings are priced appropriately in all category segments. Our combined mainstream and premium product offerings now make up over 70 percent of our adult use business, compared to mid-50 percent in Q1. as we continue to deprioritize value product offerings. In late September, our wholly-owned subsidiary, High Park, announced the newest addition to its cannabis-infused edible product line, Chally Wally gummies. Chally Wally gummies are handcrafted using clean and simple ingredients, are vegan and gluten-free. THC watermelon gummies and balanced THC CBD pineapple mango gummies are currently available in six provinces across Canada. A THC sour cherry gummy will be available in Q4. The gummies complement our already existing impressive array of 2.0 offerings, including vapes under our Kanaka and Marley Natural brands, chocolates under our Good Chip and Chowdhury-Wowie brands, CBD beverages, every, sold by Fluent Beverage Company, our JV with Anheuser-Busch InViv, We continue to work on additional form factors and plan to introduce additional innovative products to Canadian consumers that meet the needs of this growing industry. As indicated, our adult use strategy is focused on profitable, long-term growth. Consequently, while we introduce the value segment product offering, we are not aggressively fighting for market share gains in a segment that offers little or no profit potential. Instead, We continue to manage our product offerings and margin with the goal of maintaining rational pricing and sensible margins. During Q3, we were pleased to have grown our share of the market and were encouraged by the fact that we did so, while selling approximately 90 percent of our products in the mid- to high-potency categories. At the beginning of the year, we were estimating an end-of-year store count between 800 and 1,200. We have been pleasantly surprised that the count has exceeded the high end of our range, with approximately 1,250 stores currently open. This is a positive for both fill-raise growth and the growth and evolution of the broader adult-use market in Canada. We are also hopeful any potential COVID-related restrictions will not negatively impact store count growth going forward. Coming off of a solid Q3, we are bullish on our prospects for continued growth in the adult use market in Q4 and beyond. Q3 revenue for Manitoba Harvest was slightly below Q2. As we had said before, we view this business as a relatively predictable revenue and profit engine to help fund other growth initiatives. We continue to drive for additional distribution and sales but are cautious about COVID-related impacts to our consumer behavior and the effects they may have on retailers that carry our products. Our team is working hard to broaden distribution and grow the direct consumer business to offset any negative impacts we may see from reduced retail traffic. As we head into the final quarter of 2020 and look forward to 2021, we see opportunities in our business that will enable us to deliver revenue growth improved gross margins and break even or positive adjusted EBITDA in Q4. We were disappointed with the results of the recent adult use legalization vote in New Zealand. However, we remain optimistic. Over the next three years, we see the possibility of 40 additional countries legalizing medical cannabis and four additional countries taking serious steps towards legalizing adult use cannabis. The acceptance of cannabis will provide opportunities for us to expand the reach of Tilray brands around the world. In the United States, we saw several state measures pass with a strong majority of the vote in Arizona, Montana, New Jersey, South Dakota, and Mississippi. The number of states with a legal medical market now increases from 34 plus Washington, D.C. to 36. The number of states with adult use now increases from 11, plus Washington, D.C., to 15. The case for federal legalization and cannabis reform emerges stronger from this election. We now believe that it is only a matter of time. An additional five Republican senators now represent a state whose constituents have legalized cannabis. Adult use legalization in New Jersey is likely to have a domino effect upon the states of New York, Pennsylvania, and Connecticut, as elected officials are worried that their residents will go to New Jersey to purchase product and thereby not generate tax dollars in their home state. For now, we will build and strengthen our portfolio of trusted CBD brands in states where legally permitted CBDs we will address the federal CBD market upon further clarity from the FDA. To conclude, we are operating in an efficient manner across our entire business, global medical cannabis, Canadian adult use cannabis, and global hemp. With the completion of our significant cost reductions, we are now poised to leverage our cost structure and ensure we are one of the global winners in this industry. We have ample cash availability on our ATM to execute our strategy. With our infrastructure in place, we will continue to focus on building brands and developing products that resonate with consumers and establish Tilray as the most trusted cannabis and hemp company in the world. With that, I will turn the call over to our CFO, Michael Krutek, to review our financials.
spk17: Michael Krutek Thank you, Brendan. and thanks to everyone joining us on the call this afternoon. Please note, all the financial information we provide today was prepared in accordance with U.S. GAAP and is in U.S. dollars unless otherwise indicated. Before we get into details, I'd like to reemphasize that the Tilray team has made remarkable progress in Q3 and year to date. The team has been successfully and safely managing the challenges presented by COVID, growing our core business, reducing our cost structure, improving margins, and positioning our company to leverage future revenue expansion. We have experienced unprecedented circumstances, and our employees around the globe have responded by staying focused and delivering strong financial results. Now to some details. Q3 2020 total revenue of $51.4 million was flat compared to the same quarter last year. Looking below the surface, however, Robust growth in our adult use, international medical, and hemp products channels was offset by our decision to discontinue any meaningful bulk sales, all of which were recorded in Canadian medical sales last year. Excluding the year-over-year impact of bulk sales, total revenue increased 25%. Including bulk sales, cannabis segment revenue decreased 11% to $31.4 million, compared to $35.5 million. in the same period last year. The decrease was almost entirely driven by the lack of bulk sales in the current year compared to 10 million of bulk sales included in the prior year period, as well as a 12.8% decline in Canadian medical sales to $3.4 million. On the other hand, adult use sales grew to 20 million, or 25.8%, while international medical contributed $8.1 million during the current quarter. a 42% increase year-over-year. Excluding the impact of bulk sales, our cannabis segment revenue increased 23.5%. As previously indicated, we expect continued growth in both the adult use and international medical channels and minimal, if any, bulk sales as we focus on higher margin opportunities. We will take advantage of bulk sales on an opportunistic basis and in cases where it helps us rebalance inventory levels in certain products. Going forward, we expect cannabis to continue to grow at a faster rate than hemp and to reflect a higher percentage of our total revenue. The growth in adult use sales is attributable to several factors, including improved presence in retail outlets, the launch of our Cannabis 2.0 product starting in December 2019, the start of our kindred relationship in June 2020, and a recent review of our pricing strategy. Year-to-date, 2.0 products accounted for approximately 19% of adult use sales and are expected to contribute to our growth in the adult use channel as we continue to introduce new form factors. Our cannabis segment sales mix continues to evolve and is now characterized by 63% adult use in Q3 2020 versus 45% in Q3 2019, and 58 percent at the end of Q2 2020, 11 percent Canadian medical in this year's Q3 versus 39 percent in the year-ago period including bulk, or flat at 11 percent excluding bulk and compared to 13 percent in Q2 2020, and 26 percent international medical in Q3 2020 compared to 16 percent in the year-ago period and 28 percent in Q2 2020. As mentioned earlier, there were no bulk sales in Q3 2020, while bulk represented 28 percent of cannabis revenue in last year's comparable period. Hemp segment revenue increased 27.7 percent to $20 million, compared to $15.7 million for the same period last year. The increase was generally due to greater promotional activity in large format retail and increased e-commerce sales. Going forward, and despite the significant year-over-year growth, we expect Manitoba Harvest Business to deliver relatively consistent revenue unless there is more clarity from the FDA on CBD in the U.S. Until CBD can provide a growth catalyst for the business, our team continues to explore expanded distribution for our hemp-based products and other ways to generate sales growth, despite the negative impact COVID-19 may have on our retail partners. Segment revenue mix during Q3 2020 was 61% cannabis and 39% hemp, compared to 69% cannabis and 31% hemp in Q3 last year. In Q2, our segment revenue mix was 60% cannabis and 40% hemp. As indicated, we expect an ongoing shift to higher percentages of cannabis sales over the coming quarters. On a sequential basis, Revenue increased 2% in Q3 2020 to $51.4 million from the $50.4 million in Q2 of this year. This was driven by a 13.1% increase in adult use sales, which was offset by an 11.4% decrease in Canadian medical sales, a 1.3% decline in hemp sales, and a 2.6% decline in international medical sales. The declines in Canadian medical and hemp sales were largely consistent with market trends, some of which were due to COVID-19 related patient and consumer behavior changes. The decrease in international medical sales was primarily due to German quota related and import export approval related delays during the quarter. Recent activity indicates we may be able to recover a portion of the lost sales attributed to these delays during Q4. Total kilogram equivalent sold decreased 53 percent to 5,107 in Q3 2020 from 10,848 in the prior year's Q3. The decrease was primarily due to the discontinuation of bulk sales. Our average net selling price per gram of cannabis in Q3 2020 was $6.15, an 89.2 percent increase, or $2.90, from the $3.25 during the same period in 2019, and a 133% increase from our reported selling price of $2.64 in Q2 of this year. As you may recall, we had a one-time transaction in Q2 related to the settlement of a supply contract, without which our reported selling price would have been $5.03. Compared to the normalized figure, the Q3 net selling price per gram increased by 22.3%. The increased selling price during Q3 was due to a shift in distribution channels and product mix, including the continued growth of our international medical business, a shift in sales to higher potency and higher-priced products, and the continued growth of our 2.0 products in Canada, which did not exist in the same period last year. Going forward, we expect our average selling price per gram to remain stable or increase over time as sales of international medical cannabis continue to make up a larger percentage of our sales mix. While we remain optimistic on international markets, given the recent resurgence of COVID-19 in European countries and the restrictions that are likely to follow, we are cautious about the potential impacts and are taking whatever measures possible to ensure the uninterrupted supply of product to our distributors and patients. Our average cost per gram of cannabis sold in Q3 2020 was $4.23 per gram, an 85.5% increase from $2.28 during the same period in 2019 and $2.06 during the Q2 of this year. Please recall, the cost per gram in Q2 of this year was skewed by a one-time bulk transaction associated with the settlement of a supply contract. Excluding the one-time transaction, the cost per gram in Q2 2020 was $3.42. The year-over-year increase is due to a combination of fewer kilograms sold due to the lack of bulk sales, the sales growth of higher-cost cannabis 2.0 products, our decision not to attribute any cost to byproducts starting in 2020, and the limited absorption of fixed costs at our Portuguese facility while we ramp up cultivation. As previously indicated, we made the decision to stop attributing any cost to byproduct produced in our Hyde Park and Portugal facilities. This decision should reduce our need to make future inventory adjustments. However, this decision also had the impact of increasing our cost program on the flower and derivative products that do have value. We continue to implement process improvements at all our facilities to reduce production costs. Our efforts have included the closure of Hyde Park gardens and enhancement to our cultivation methods that have improved yields by over 40% at our growing facilities. As we expand our 2.0 offerings in Canada and as adult use sales continue to grow, we anticipate better throughput and cost absorption at our Hyde Park Holdings processing facility. In Portugal, we should see future improvements in our production costs as we see our international medical sales grow and our cultivation assets come fully online. Gross margin for Q3 2020 including inventory valuation adjustments, was 7.3 percent compared to 31 percent in the same period last year and negative 10.7 percent during Q2 2020. During Q3 of this year, we took a charge of $13.4 million related to inventory. Approximately $8 million was the result of an exhaustive review of all products and stock, cannabis and hemp, and a thorough evaluation of their potential use or demand in the market. The other roughly $5 million was related to a payment made to settle a supply contract and was disclosed as a subsequent event in our Q2 10Q. The terminated contract relieved us of future purchase commitments totaling $17.4 million. Gross margin for Q3 2020, excluding inventory valuation adjustments, was 33.4%, which represented a 200 basis point increase from the year-ago period of 31.4%, and a 720 basis point increase from Q2 2020 of 26.2%. Gross margin for cannabis, excluding inventory valuations and adjustments, was 27% in both Q3 2020 and the year-ago period, and increased from 10% in Q2 2020. Looking ahead, we expect to see expansion of gross margins due to lower costs at our facilities resulting from our cost-cutting measures and additional operating efficiencies for more throughput and better fixed cost absorption, supplemented by the availability of low-cost third-party supply on an as-needed basis. Gross margins for hemp, excluding inventory valuations and adjustments, was 43% in Q3 2020, compared to 43% in the year-ago quarter and 50% in Q2 2020. The sequential decline is due to a labor and overhead rate adjustment made in the previous quarter. Excluding the rate adjustment, Q2 gross margins were 41%. As previously indicated, we expect hemp margins to fluctuate between the mid to high 30s and mid to high 40s, depending upon the nature and timing of discounting and promotional activities. Moving to expenses, excluding impairment charges, of which there were none during Q3, total operating expenses were $36.5 million in Q3 2020, a 3.1 million or 8% decrease compared to the prior year quarter, and a 5.5 million or 13.1% decrease from Q2 2020, excluding the 28.4 million of impairments incurred last quarter. However, the savings are even more significant if we compare Q3 to the annualized SG&A run rate of Q4 2019, which results in an 18.5 million reduction, or 48%. These favorable expense comparisons reflect the significant progress we have made over the past few quarters in aligning our cost structure with the current business environment and strengthening our position as a leaner and more efficient leader in the cannabis and hemp industries. To date, during 2020, we have eliminated 482 positions throughout the company and are on pace to achieve an annualized savings impact net of severance costs of $38 million. These headcount reductions combined with our already implemented efforts to achieve operating efficiencies have resulted in $55 million annualized cost savings versus our Q4 2019 run rate. All our efforts began before the onset of COVID and were not in response to the pandemic. While this challenging and hard work is behind us, we will continually look for ways to increase our efficiency and optimize our cost structure as we adapt to the dynamic business conditions of a fast-evolving industry. Importantly, and while our focus on cost cutting over the last three quarters may have moderately distracted our efforts to grow sales, we do not believe any of the implemented reductions will have a negative impact on our ability to generate growth in any of our segments. On the contrary, We believe we are now better positioned to invest in opportunities that will generate the highest expected returns. In particular, we expect ongoing growth in international medical, a category in which we have established a proven track record, additional growth in adult use driven by increased listings of our flour products and sales from our new and existing 2.0 products, and continued baseline sales of hemp products until we can launch CBD nationally throughout the U.S., As we increase sales, we are now positioned to realize the benefits of our new cost structure. Net loss for Q3 2020 was $2.3 million, or $0.02 per share, compared to a net loss of $36.4 million, or $0.37 per share, in Q3 2019. This marked a $79.4 million improvement compared to Q2 2020 and a $181.8 million improvement versus Q1 2020. We do expect to experience volatility on the net income loss line due to the ongoing revaluation of the outstanding warrants associated with the equity offering completed in March of this year. Adjusted EBITDA loss for Q3 2020 was 1.5 million compared to the adjusted EBITDA loss of 21.9 million in Q3 last year. The improvement in the year-over-year adjusted EBITDA loss was primarily due to lower operating expenses and better revenue mix. On a sequential basis, our adjusted EBITDA loss was an 87.4 percent improvement from the 12.3 million loss in Q2 2020. The reduced loss is mostly attributable to our cost reductions and operational efficiencies. As indicated in prior quarters during 2020, we remain focused on achieving break-even or positive adjusted EBITDA by the end of Q4 2020 and believe we have the momentum to realize this goal. Turning to the balance sheet, we ended Q3 2020 with cash and cash equivalents of approximately 155.2 million, representing an increase of 18 million from 137 million at the end of Q2 2020. This included proceeds from our ATM offering program of $45 million during Q3 2020. Between our cash balance, future access to the ATM program, and increased efficiencies in our business, We believe we have sufficient capital and access to capital to manage our operations and execute our plans for the foreseeable future. Our estimated cash flow need for Q4 2020 is approximately $30 to $33 million, which primarily consists of operating cash needs of $8 million to $10 million, plus interest and principal payments of approximately $15 million, and CapEx of approximately $7 to $8 million. These numbers assume no meaningful additional impacts due to COVID-19, and the remaining CapEx assumes completion of Phase 2 in Portugal this year. As we look ahead, we intend to leverage our 2020 achievements by generating significant revenue growth with a lower cost base that will allow us to deliver solid shareholder returns. We are still in the early stages of the legal cannabis industry, and while meaningful revenue opportunities currently exist, we believe future opportunities will continue to surface as more countries legalize medical and or adult-use cannabis. We also believe there will be additional revenue opportunities related to CBD in the US once the FDA provides more clarity on nationwide regulations. While 2020 has been a transitional year for Tilray, the actions taken will enable us to expand our presence in existing markets for cannabis and hemp and capitalize on future opportunities in new and emerging markets. We are well on our way to being recognized as the most trusted cannabis and hemp company. Thank you for your interest in Tilray. Brenda and I are now available to take your questions.
spk15: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation form will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Pablo Zuanick with Cantor Fitzgerald. You may proceed with your question.
spk00: Good afternoon, everyone. Can you just touch on the German market? I mean, we're hearing different things, right? The data for the third quarter showed a sequential drop of 28%. You spoke partly about it. But just what has to happen in terms of catalysts for growth to accelerate in that market? And then remind us about your edge in that market, right? Because other peers also talk about being or entering that market. You have companies from other parts of the world also talking about that. So just a reminder of your edge and then key catalysts that help to drive that growth for the market there. Thanks.
spk08: Great. So when we look at the German market, we look at patient prescriptions. and compare them to Canada back in 2014-15, the growth in Germany is steady, obviously off of a much larger population base, more than double the population. And so we're confident that we'll continue to see patient growth there. In Q3, we were set back slightly by some issues regarding Germany's IMCB quotas. And so we had some product that we were scheduled to ship from Canada and from Portugal to Germany in Q3. that because of the fact that Germany was at its core, that we had about a four to six week delay. And so some of that revenue pushed over into Q4. When we think about our edge, we have invested heavily in our GMP facility in Portugal. So we have a a medical cannabis cultivation and processing facility in the EU for the EU. And so we've been able to historically ship products from Portugal to Germany. And we believe that European campus gives us an edge not only in countries such as Germany, but also in countries such as France that will implement their medical cannabis program here this quarter. And we expect to most likely ship product from Portugal to France in the first half of next year, hopefully in Q1. And so when you look at the two largest economies in Europe, Germany and France, you know, over 140 million people, we think that that's a long-term opportunity. And both are just starting, but clearly we think all the countries in the EU will begin to implement and grow their medical cannabis programs.
spk00: And if I may just follow up, you know, I understand the hemp food CBD strategy, but You know, when you think of the U.S. market, other companies are trying to use their brands, whether it's beer or CBD products, to raise awareness for their own THC brands. So someday, when they can sell in the U.S., they have already brand awareness, right, and supposedly an advantage there. Do you think along those lines also? Or obviously, I don't think Manitoba Harvest is a brand we would be using for THC, right? Is that something you have to be focused on right now, or is that something more long-term that's not a priority right now? Thanks.
spk08: It's something we discuss on a regular basis. Clearly, Manitoba Harvest has CBD products in market in the U.S., and we do think that there is brand awareness and that Manitoba Harvest as a CBD brand has great potential, but it's most likely not a THC brand. We do think about the long-term opportunity and our strong desire to get our brands into the U.S., not only the Tilray brand, but other adult use brands. The big question for the U.S. is what will the eventual distribution model look like? Right. Thank you.
spk15: Our next question comes from the line of Aaron Gray with Alliance Global Partners. You may proceed with your question.
spk09: Hi, good evening, and thanks for the questions. You know, first one for me is just in terms of, you know, kind of the shift away, you know, from the value segment into more of the premium pricing. You know, it certainly makes sense just given kind of the margin profile, but just given the fact that, you know, value has been, you know, growing so much kind of overall within the Canadian market, could you just kind of speak more to it? more to the reason to why you're not going to kind of focus as much on the value, you know, or you're just not able to get kind of the product out there at a reasonable profit or kind of what the strategy is just given the value segment continues to grow there. Thanks.
spk17: Yeah, thanks for the question. You know, I think that as we've looked at the value segment and we look at the pricing that's going on there and the opportunity to actually capture some margin of products, We just don't see it as an opportunity for us to go ahead and continue to enter with new products in that market. We do have the batch in that particular segment of the market that we do quite well with, but we just don't think that there's real need for us to go ahead and try to grow that significantly with very low, with any margins. Instead, we've been focusing on the premium sector of market, and we're now selling a significant portion of our of our products in both the mid to high potency as well as the mid to premium categories. The other thing is I just think that we're seeing significant price compression in that value segment, and it's too costly to chase it.
spk09: All right, great. No, thanks for that, Collar. And then the second one for me quickly, congrats on kind of getting closer to that EBITDA profitability. I just want to know, kind of help us think about kind of the EBITDA margin, you know, improvement kind of over the next, you know, 12 to 18 months. Where do you think the EBITDA margin profile could go from here? Thanks.
spk17: Yeah. I don't know that we've got kind of a forecast of the EBITDA margin. I mean, we're still focused on delivering Q4 in terms of the breakeven or positive EBITDA as we talked about. And I think that we'd like to look to make improvements on that as we move into 2021. But I don't have the visibility to provide you guidance right now.
spk09: All right, great. Thank you.
spk15: Our next question comes from the line of Vivian Ever with Cowan. You may proceed with your question.
spk13: Hi, good evening. Thanks for the question. So my first one is just a housekeeping item. Thank you very much for all the detail on your uses of cash. I've certainly been getting a lot of investor questions around your balance sheet and liquidity broadly. So I apologize if I missed it, but did you guys tap into your ATM after closing the quarter?
spk17: After closing Q3?
spk13: Yes.
spk17: No, we did not.
spk13: Okay, great. And then my real question is a follow-up to Aaron's. So I fully appreciate, you know, this, you know, pricing exercise and portfolio kind of pivot, if you will, or reprioritization makes a lot of sense for you guys from a margin perspective. But I am curious what kind of competitive landscape assessment you guys have done. Like, do you feel that, you know, you are as well placed to go after a smaller portion of the market successfully? Like, what's your assessment there? Like, are you thinking about your competitors in price segments increasingly? Because everyone wants to sell premium. It's the highest margin. So, just curious how, like, an evaluation of the competitive landscape informed that decision at all, if at all.
spk17: Ben, do you want to take this? You want me to start? Yeah, so thanks, Vivian.
spk08: You know, we launched the bat about a year ago because we saw it as an opportunity. And in that value segment, we've seen price compression. You know, we are waiting a bit to see how it plays out over the long term. We've had success with Marling Grail. We continue to do really well in the In the 2.0 categories, whether it's edibles, vape, you know, in the edible category, chocolate, we've launched gummies in Q3. We'll continue to release a number of new form factors in Q4 from additional gummy products a hash product, new beverages, vapes, topicals, which will be Q1. And so we see that as a long-term opportunity, and we'll continue to evaluate how much we want to pursue that value segment over the long term.
spk17: Yes. I mean, I guess I'd add just a little bit of color to that also relative to the premium segment. I think that we have looked at kind of where we sit in that space, and we did make some price adjustments to be competitive in the space so that we can go ahead and capture our share. I think that when we look at it, we're probably not in as many retail locations as we could be right now, and that's the benefit of our relationship with Kindred, that we are getting additional points of distribution on a pretty aggressive basis. And we feel like there's a lot of opportunity for us still in the higher price segment just by being in places where we don't currently exist. And so that's a good opportunity for us. And so we're still focused on capturing our fair share of the market in that particular space. And we'll keep a presence in that value segment, but just not look to win there in the sense of trying to work on market share growth there where we don't think it's sustainable.
spk13: Gotcha. That call out on incremental points of distribution is really helpful. Thank you.
spk15: Our next question comes from the line of Graham Cranler with 8 Capital. You may proceed with your question.
spk16: Yeah. Hi. Good afternoon, Anne. Thank you for taking my questions. I wanted to follow up on the comments made regarding the international market and specifically some of those bottlenecks that were experienced in the Q3 period. regarding shipment restrictions and import permit delays. I'm wondering, based on the facts you have right now or the outlook you have right now, would there be any sort of disruption in terms of the outlook on international revenues outpacing the domestic revenues because of it? And I was wondering, based on those disruptions in the quarter, is it possible, could you give us the magnitude, what the adjustment would be if those didn't exist where the international growth might have gone? Thank you.
spk08: So our international – thanks, Graham – our international medical has seen significant growth compared to medical growth in Canada. The delays that took place due to INCB in Germany, I sort of see that as a one-time, one-quarter delay. Not only a delay between Q3 and Q4, but a longer-term one-quarter delay as we look at the size of the international medical market and when that international market will exceed the market opportunity in Canada.
spk16: Okay, and then just to follow up on that, I mean, you know, the timing remains, you know, outstanding and it's difficult to actually pin. But when you talk about that point about, you know, when it ultimately exceeds what's being generated in Canada, what is the real winch pin for that? You hit a construction milestone in Portugal right now. You know, I would assume that's part of the equation here. Is it part of sales and marketing and education efforts on the ground in Europe? Maybe you could lay out some of the steps here to understand what the building blocks are as you hit a milestone on capacity. What else comes in behind that to really get to that inflection point? That would be appreciated. Thank you.
spk08: Yeah, I think the two biggest drivers are going to be patient growth in Germany and France. So we're hopeful that we will ship products from Portugal to France in the first half of next year, in the first quarter of next year. And the market size there is 83 million people in Germany, I think roughly 67 million people in France. So 140, I guess 150. That's not right. That's what I get for doing math on the fly, not Steve Kornacki. Roughly 130 million. And the opportunity there is that we will see other opportunities legalize medical cannabis following behind Germany and France? And how long will it take for all of those countries to legalize? I think that we'll see possibly the entire EU legalize cannabis for medical use. over the course of the next, you know, let's call it 18 months. And so we need to see regulatory change in the EU. We need to see doctors and pharmacists embrace medical cannabis as medicine. I think if I'm going to look at one key example, driver for the rest of Europe, it would be how quickly does the patient count in France exceed 2,000 patients. That will be a good indication of how quickly that market is going to grow. In Q4, COVID is the real unknown for the EU. not only in terms of growth but in terms of patient acquisition. You know, are fewer patients going to see their doctors because of COVID? The answer is likely yes. And so that may reduce growth from what it would be in a non-COVID environment. And all of this growth is really focused on medical. I am optimistic about our chances in the Netherlands. And I do think we will see a number of countries in Europe legalized for adult use throughout 2021 and 2022. Thank you for that.
spk16: And maybe I'll ask one follow-up question to that. When you're talking about the a wave of regulatory reforms in Europe in terms of unlocking more market value. Do you see potential development in the United States, particularly on the medical cannabis side of things? Do you see that as a potential catalyst for further reform in the EU, or do you look at those two markets as being exclusive to one another? Thanks.
spk08: I really look at those markets as being exclusive from one another. I don't think they... I don't think any medical cannabis change in the US will drive medical cannabis change in the EU. You could potentially argue that medical cannabis change in Europe might drive medical cannabis change in the United States. It's not absurd to think that at some point there could be an opportunity to export medical cannabis from Canada or from Portugal to the United States for medical cannabis purposes, just like we export from Portugal and Canada to countries such as Germany, New Zealand, Australia, and the UK.
spk16: Understood. Appreciate it. Thank you.
spk15: Our next question comes to the line of thoughts with Lost Capital Partnerships.
spk02: Good afternoon. Real quick, just follow up on that, you know, kind of leveraging your partnership over there in Novartis and kind of expanding any call-outs to the other countries you think will expand in Europe, and then are you leveraging your partnership in Europe for launches and ramping up that side of the business?
spk08: We use a number of different, besides our relationship with the SAMHSA's division of Novartis, we use a number of different pharmaceutical partners in countries around the world. So we use a half dozen pharmaceutical partners partners in Germany, from our importer, Paisel & Wara, to PharmaPrivat, Novada, Gehi, Phoenix in Germany. We partner with government agencies in some countries, such as Croatia. We use PCI in Australia, CBC in New Zealand. and four different partners in Latin America from Megalabs, Solco Brands, Hypera. There. And so we continue to build relationships with pharmaceutical partners in individual countries around the world. We continue to have a healthy pipeline of product registration in countries around the world. So we're registering our products, you know, anywhere from a dozen to two dozen of our pharmaceutical products on a regular basis in additional countries so that we can export from Canada and Portugal, whether it's an oil product or a flour product, based on whatever individual distributors are looking for in individual countries.
spk02: Okay, thank you. And then real quick follow-up, kind of the clinical studies or the medical studies you've done, are we going to see more data come out in 2021 that continues to drive that side of the business potentially? How are you looking at the clinical studies going forward here?
spk08: We are. We saw a clinical trial in Australia move from Phase 2 to Phase 3. So I believe Phase 2 was about 81 patients, and Phase 3 is more than 200. I can't remember the exact number, but it's more than 200. It's somewhere in the range of 200, 350. We've seen a slight delay in two of our U.S. clinical trials entirely due to COVID. So it was those research institutions in the U.S. in New York had a slight delay recruiting patients in the middle of COVID. But they have recovered from that initial delay, so we may see some of the data coming out of those two U.S. trials delayed by a quarter in 2021. Thanks for the call.
spk02: Thanks.
spk15: Our next question comes from the line of Mike Hickey with the Benchmark Company. You may proceed with your question.
spk03: Hey, Brendan, Michael, congrats on the quarter, guys, and thanks for squeezing me on. I've got three questions, but they're pretty small, Brendan and Michael, so I think you can speed through them. Just one, I was hoping that you could remind us of the size of the Canadian cannabis market and how much of that market is the black market, still illegal sales, and what you're seeing in terms of possible conversion of that black market to the legal market. I thought for a while maybe COVID would do that. Maybe it's not, but obviously location, price, selection. The second one, Brendan, I know you look at the U.S. a lot. Michael, you're based in Boulder. You look at the Colorado market that was considered mature. It expanded 13% in 19 and 23% year to date. through August. So when you see that sort of market growth, double-digit market growth on a market that was considered mature, what does that tell you about the possibilities of accelerated growth or more growth than you originally thought in Canada, your home market? And lastly, curious about the pick-up and yield, 42%. That's pretty significant with high-potency markets. Can you remind us who is your head of cultivation there if you've had any changes on your team or what exactly you're doing to get those sort of strong results? Thanks, guys.
spk08: Great. So your first question was around the size of the Canadian market. I think that the latest data I saw was that 2020 – 2020 retail sales were going to be somewhere in the $2.6 billion range. The overall Canadian market is roughly sized. I believe Floyd sized the illicit market and the legal market a few years ago in the $6 to $8 billion range. I think it's My guess is in a fully mature Canadian market, it's likely to be $8 to $10 million. And so one way of thinking about the Canadian market is that there's roughly a 100% growth opportunity to take us from you know, $2.8 billion to $5.6 billion is certainly a possibility over the course of the next, you know, let's call it one to two years. The question will be, does a mature and really sort of tie in question one to question two. I think the question will be, what does the illicit market look like in a fully mature Canadian market? And so if you think about, you know, let's pick, you know, $10 billion of the size of the Canadian market in Canadian dollars, you know, $5.6 billion, we got to, you know, 56% of the total market being legal versus 44% illicit. I think we can get to a stage like in Washington State or Colorado where the legal market, the regulated market is 80 to 90% and the illicit market is 10 to 20%. So there's still tremendous upside in the Canadian market over the short to midterm. The question will be, two years from now, three years from now, five years from now, does the Canadian market look more like Colorado and Washington State, where the illicit market has essentially been stamped out? Or does it look like California, where there is still a robust and thriving illicit market? And so that's how we think about the long term. opportunity and compare it to a place like Colorado where you still see significant growth on a year-over-year basis. In terms of cultivation, at our end-of-sillage facility, you're right, our yields are up 42% compared to last year. Almost all of the product, actually all of the product coming out of that facility is above 20% CHC. And we have a head of cultivation, Francoise Levesque. She does an amazing job. And then a team of, you know, Kirstie, Brooks, Gary in Ennisville, Ontario that have figured out how to dial in that facility. And Each one of these facilities is a unique machine, and it takes a little while to fine-tune all the different variables, whether it's nutrients, soil, temperature, humidity, CO2 that we pump in. It takes a while to dial it all in in order to maximize yields, maximize productivity. So we're proud of what we've accomplished there. and hope to continue to improve both the quality and the potency of our products and continue to decrease our costs.
spk03: Nice. Thanks, guys. Good luck.
spk15: Our next question comes from the line of Andrew Carter with Siebel. You may proceed with your question.
spk17: Hey, thanks. Good evening. Appreciate the cash flow guidance you outlined for next quarter. I just wanted to check real quick because it says there's $69 million non-cancelable inventory purchases in the QED or $78 million last quarter. I assume that was part of the write-off. Could you help us understand kind of what's happening with those and what's being negotiated or kind of how that fits within the cash plans? So, Andrew, I'm happy to answer the question. I had a really hard time hearing you and understanding all the details of your question. $69 million in non-cancellable inventory payments in the queue. Could you hear that? Yeah. Yeah. Yeah, so, I mean, there are some longer-term contracts that we've got in place. We've done a good job of negotiating out of a significant portion of those, and we continue to work on what we can do to go ahead and get ourselves into a favorable position with any remaining contracts that we think are not necessarily in our favor. So we're focused on it, and it's one of those things we've had success, and we continue to look at what we can do going forward. Okay, thanks. And I guess the second question is, and I guess this could be put to other LPs, with all the time spent on these calls talking about the U.S., I guess I don't understand what the fundamental right to win is here. I mean, we have the Canadian template. Everything's taken longer, and I don't hear an affirmation of adjusted income guidance which was 25%, 30% or more in terms of this platform and why that cascaded to the U.S. And then kind of speaking specifically, and this is the first question you get from investors on the story here, I mean, the insider sales have been pretty significant here. So could you talk about what your confidence is and how you recruit investors for kind of investing towards the U.S., which wouldn't be required? Thanks, and I'll pass it on.
spk08: Thanks, Andrew. I think that I would segment the opportunity with this industry into three categories. We have seen the Canadian industry, whether medical or adult youth, grow over the past over the past several years. While we have been operating internationally since 2015, 2016, it's very early days. When I think about long-term opportunity, I don't focus on the 37 million people in Canada. I'm much more focused focused on the 700 million people in Europe, where there's clearly a long-term medical cannabis opportunity, and we're well positioned, as well positioned, if not better positioned, than other LPs to win there. And then there's the third category is the U.S., and When we look at the U.S., we have built a brand and a portfolio of products that we think can be successful in the U.S. Most of our executive team is based in the U.S. I feel like I know that market well. The real question that I have besides besides our U.S. CBD strategy that's part of Manitoba Harvest. The real question that I have is, in the long term, how will this product be distributed in the U.S.? Will it be distributed like the current MSO model? Will it be distributed like a chocolate product? Will it be distributed using a distribution channel that's more similar to tobacco, or will it be distributed like an alcohol product, like beer? And the answer to that question really determines the right U.S. strategy. You know, I happen to be of the opinion that I think in the long term, this product's not distributed in the U.S. like the current... MSM model. It's not distributed like a chocolate product in retail locations throughout the U.S., but I do think it's distributed more like tobacco, more like beer and alcohol on the adult use side. And I think on the medical side, the product is distributed more like our medical products in Europe and less like the current MSO model. I think that gives a huge leg up on the existing US MSO company.
spk15: Thanks. Our next question comes from the line of Glenn Mattson with Lattenburg. You may proceed with your question.
spk05: Hi, thanks. I realize it's late and most of my questions have been answered, but just a question quick on the ATM that I think Vivian referenced. You guys said you hadn't tapped it since the end of the quarter, but can you just give us an idea of what your plans are going forward, if you intend to continue to use it, or if you feel like you're well-positioned as far as the balance sheet goes? And that's it for me. Thanks.
spk17: Yeah, thanks, Glenn. You know, we look at the ATM as an opportunistic way for us to go ahead and raise capital, and I think it's one of those things that we will use at points in time to go ahead and continue to strengthen the balance sheet. And we'll just kind of when it suits us and when it seems appropriate, we'll go ahead and continue to layer in additional cash.
spk15: Our next question comes from the line of Bill Kirk with MKM Partners. You may proceed with your question.
spk11: Hey, so I guess my question is the cost structure looks ripe for leverage, but what gives you confidence you can get Canadian growth or share without having to re-increase spending? I guess because your spending slowed and with it your Canadian market share and kind of region sales were stagnant. So how does it increase without a return of spending?
spk17: So I'll take a stab at this first, and then Brendan, go ahead and fill in where I missed some things. But one of the things is, as I indicated earlier in one of the questions that was asked, is that I think we've got an opportunity to go ahead and expand our distribution pretty significantly still. We've got in, I think in Q3 alone, we added over 46 listings, and I think between Q3 and into October, we've got over 110 new listings that we've gone ahead and increased, and that's on the basis of working with our partner, Kindred, because as we indicated earlier, as we went through the cost-cutting exercise, we had 18 internal salespeople that were working for Tilray that were out in the field, and by moving to Kindred, we got 43 people in the marketplace go ahead and enhancing the reach of our products. And so I think that's one of the ways that we just don't, and that's a variable cost for us. And so we benefit, they benefit. And so I don't think that that really has a significant impact on the cost structure going forward. The other thing is that we're going ahead and we've actually narrowed our focus in terms of our brands. And so we are focusing more dollars, I guess the same dollars on fewer brands in the sense of making those win for us. And we think that that's another opportunity for us in terms of moving forward in the Canadian marketplace. And I would say that when we look at where we are, we actually are growing pretty nicely now. I think in Q3, we had some pretty good momentum in particular in certain categories. And we looked at that will continue into Q4. We've seen promising results into the beginning of this quarter without really committing additional dollars, and we think that that'll continue as we go forward into 2021.
spk11: Super helpful. Thank you. That's it for me.
spk15: Our next question comes from the line of Rupesh Parikh with Oppenheimer. You may proceed with your question.
spk07: Good afternoon. Thanks for fitting me in. So I guess just going back to your cannabis 2.0 efforts, You did give some color in their comments. So as we look towards next year, what are some of your key priorities? And then if you look, I guess what's already happened this year, just here is what's gone well and maybe areas that maybe haven't met your expectations as far.
spk08: Yeah. Looking forward, in Q3 we launched two different chihuahua gummy products. So that's our entrance into the gummy segment. We expect to launch a third gummy product this quarter, a hash product this quarter. We've seen Every emerges as Canada's number one CBD beverage, which is now selling in nine of ten provinces. Every will innovative CBDs again with Every Mint Tea launching in Q4. A little further out, we anticipate launching a few additional vape topical and chocolate products in Q1. And so we've seen success really across the board in 2.0 products. We think we've got a good lineup. I think that if I were to... If I were to change something in terms of 2.0 in relation to your question, we actually would have brought more form factors to market faster. And vape was crowded as we expected, but we would have launched more innovation in terms of edibles, concentrates. There were less 2.0 products in non-vape categories. fewer 2.0 products in non-vape categories than we anticipated. So I would have changed our strategy a bit and launched a few more of the initial products to be held back.
spk07: Okay, great. Thank you.
spk15: Our next question comes from the line of Mike Grendal with Northland Securities. You may proceed with your question.
spk04: Hi, this is Michael on the mic. Thanks for taking our question. Maybe just one quick one. On the extracts revenue growth year over year, can you just give us an idea what the mix was there from adult use versus international?
spk17: I'm sorry, you're asking for the extract revenue growth?
spk04: Yes.
spk17: And the difference between the adult rec and international?
spk04: Yeah, just the kind of mixed difference between those two and how they contribute to that.
spk17: Well, so I've got the extract compared to flour on the international side of things, but I don't necessarily have it compared to Canada in terms of – I've got Canada mix in terms of the REC, but I just don't think that I've got the comparison of Germany to Canada. So if you want, I can follow up with you on that one. I just don't have that comparison handy.
spk04: Got you.
spk15: Our next question comes from the line of Michael Lavery with Piper Jaffray. You may proceed with your question.
spk06: Thank you. Good evening. Just one quick follow-up on your thoughts on the U.S. given some good color on how you think that market will evolve and a distribution model similar to alcohol or tobacco in some form or another, but if that's not how it exists today, obviously, whenever permissibility or legalization comes, would it be right to assume that you would rather wait until the market evolves to something more like you expect and hope for rather than try to make any entry into the current state-by-state model?
spk08: Yeah, so we continue to evaluate potential options for entry into the U.S. and evaluate those opportunities on a regular basis. Based on being a U.S. Delaware, C Corporation and listing on NASDAQ, you know, obviously we're prohibited from entering the U.S. market in the way that the U.S. MSFs have. But we do continue to evaluate options similar to the way that some of our competitors have. I think that we will continue to see more clarity in terms of how cannabis products, both adult use and medical, will be distributed in the U.S. In terms of medical, we do think we have clear opportunities to export from other countries into the U.S. In terms of adult use, a little more clarity into the distribution model would severely drive the path we would use to enter the U.S. market.
spk06: So just a way to leave for the most part and have to know what you're up against before you really can make some decisions, I guess, is a big part of it.
spk08: That's right. You know, I'm optimistic about the U.S. You know, when I started in this industry, 10 years ago, 50% of Americans thought that cannabis should be legalized for adult use. That was Gallup's number back in 2010. Today, I saw 68% as of this morning. And so that's pretty significant growth. And more than 90%, I think 94% of Americans believe that medical cannabis should be legalized. And so it's clearly the change in terms of public opinion. I think that the the ballot measures. You know, cannabis was undefeated this election cycle. And I think that we'll see five Republican senators now, you know, five additional Republican senators now represent a state where their constituents have legalized cannabis. And that's how you drive change in the U.S. Senate.
spk06: That's helpful. Thank you very much.
spk15: Our next question comes from the line of Angad Damija with Jefferies. You may proceed with your question.
spk12: Hi, guys. Evening. Thanks for taking my question. I'm filling in for Owen right now. I just have one on Germany. I just want to get a sense about how the competition is building up over there and if that has any near-term implications on the selling price over there and the kind of trajectory you're seeing for price development over there. That would be quite helpful.
spk08: Michael, I'll let you start on price.
spk17: Yeah. So, yeah. So, in Germany, I'd say in terms of price things, we're seeing, I guess, stability in prices relative to the oils that are sold there, and we're seeing some price pressure on some of the flour, although I will say that in general what we saw, for us at least, is that we were able to take some pricing on our flour in Q3, and so we actually increased it over Q2, and the pricing for the oils was relatively stable. What we were able to do also is that we saw single-digit growth in terms of prescriptions there, and we picked up roughly 200 basis points of market share. And so from a competitive perspective, I think that we're holding our own and obviously growing at the pie growth, which is a good opportunity for us, and we continue to see that So I think that we're, that's generally what we're seeing. But I would say that from the beginning of the year, we have seen some price pressure, but we were able to go ahead and increase prices a little bit in Q3.
spk12: Okay, thanks.
spk15: Our next question comes from the line of Sam Gerwitz with Carrionate. You may proceed with your question.
spk14: My question was answered previously.
spk15: Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Mr. Brendan Kennedy for closing remarks.
spk08: In conclusion, thank you to our Tilray team for their work and dedication to our mission of improving people's lives and the power of cannabis and hemp. We appreciate your interest in Tilray's participation on our quarterly call. in which you all have an evening. Thank you.
spk15: Thank you for joining us today. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great rest of your evening.
spk10: Hey. Thank you.
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