Tilray Brands, Inc.

Good morning, everyone, and thank you for joining us to discuss Tilray Brands Incorporated financial results for the 2022 fiscal fourth quarter ended May 31st, 2022. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session for analysts and investment firms conducted via audio and participating retail shareholders conducted through the Say Technologies platform. Question submission and uploading through the Say Technologies platform has already been concluded and the company will read aloud and answer the top questions. Ms. Narada, you may begin the conference.

Thank you and good morning. By now, everyone should have access to the earnings release, which is available on the Investors section of Tilray's website at Tilray.com and has been filed with the SEC and CDAR. On today's call, please note that we will be referring to various non-GAAP financial measures which 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. Today's 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 these forward-looking statements. The text in our earnings press release issued today includes many of the risks and uncertainties associated with such forward-looking statements. And now I'd like to turn the call over to Tilray Brands Chairman and CEO, Erwin Simon.

Thank you, Barron, and good morning, everyone. Thank you all for being with us this morning. I'm joined on this call by several key members of our senior leadership team, who you'll be hearing from shortly, including Denise Faltacek, chief strategy officer and head of our international business, who will discuss our operational strengths across key global markets and the outlook for legalization across Europe. Blair McNeil, President of our Canadian business, who will update you on the Canadian cannabis market. And finally, Carl Merton, Chief Financial Officer, who will provide a financial update, including our progress in realizing cost synergies. Before I turn the call over to Denise, I'd like to discuss three items. First, the work we have done over the course of this fiscal year to optimize our global business and significantly improve our operational performance and lay the groundwork for sustainable profitable growth in 2023 and beyond. Second, I will discuss our strategic alliance with HEXO and the important role it plays in our future growth plans. And third, our plan to generate up to $4 billion on revenue depending upon federal legalization in the U.S. and Germany at the end of fiscal year 2024. With that, let me start off by saying that Fisco 2022 was a period of great execution and accomplishments in building Tilray Brands, world leading cannabis CPG platform. Over the past year, we've been laser focused on optimizing our global operations and pursuing our most profitable core businesses across Canada, Europe and the US. This work has included both deprioritizing and divesting lower growth legacy assets, including duplicate production facilities, while renewing investments across our four pillars, including medical, adult use, wellness, and beverage alcohol. Not only are we world-class brands and businesses in these areas driving recent market share gains and growth, but we have also entered into key strategic transactions that are bolstering revenue through improved cultivation, brand building and distribution, while also driving productive efficiencies. The outcome of this work, as you'll hear about from the team on today's call, is evident on our performance. And to give you some highlights, we had a record year with net revenue growing 22% to reach $628 million. This reflects our market-leading position in Canada, our market-leading position in Germany, and the growth of our international cannabis sales overall by 200%. compared to Q4 in fiscal 2021, and our growth in our Kilray Wellness segment with our Manitoba Harvest business, as well as the contribution from our award-winning beverage alcohol we acquired over the past two years. Adjusted EBITDA increased 18% to $48 million in fiscal 2022. And of note, the fourth quarter of this year marked our 13th consecutive quarter of positive adjusted EBITDA. We ended the year with a strong balance sheet with more than $400 million in cash. and very important we delivered 85 million dollars in cost savings which exceeded our original target of 80 and were substantially accelerated timeline compared to earlier plans we now expect to deliver a hundred million dollars in cost savings by the end of fiscal 2023 and we believe we'll be operating free cash flow positive at that point as well As Carl will walk you through in a few moments, we're taking a non-cash impairment charge of $395 million in fiscal 2022 related to both market conditions and the work that we have done to optimize our operations in order to ensure that Tilray Brands is best positioned to continue to lead the global cannabis industry. And as legalization continues to accelerate, Moving along to HEXO. Our acquisition of HEXO Senior Secured Convertible Notes closed on July 12th of this year. In short, this transaction provides us with broad commercial and financial benefits including strengthening product innovation, brand building and distribution in Canada and international markets and eventually in the U.S. markets upon legalization through leveraging our collective expertise and know-how and capitalizing on growth opportunities that stem from having expanded world-class CPG offerings. In addition to being immediately accretive to our earnings, financial benefits of HEXO transaction, including up to $80 million in shared cost-savings synergies within the next two years, as Tilray will now complete production and processing products for HEXO, and HEXO will source all of its non-Canadian and non-U.S. cannabis products exclusively from Tilray. HEXO will pay Tilray Brands an annual fee of $18 million for advisory services in each of the next four years with respect to cultivation, operation, and production matters. Carl will discuss this in more detail. Also, I want to share that as a result of our foresight and the work we've done to optimize our business over the course of 2022, we believe we have a strong foundation upon which to achieve our strategic plan to reach $4 billion in revenue by the end of fiscal 24, depending, of course, upon federal legalization of adult use in the U.S. and Germany. As we've discussed previously, this will be accomplished by building a truly global CPG and cannabis company with a portfolio of best-in-class medical, adult use, wellness, and craft beverage alcohol brands that address the needs of patients and consumers. In achieving this objective, we are fortunate to already have many enviable attributes, each of which we sharpened over the course of fiscal 2022, that demonstrates the power of Tilray Brands, including our proven brands and complete product offerings, our status as a leading low-cost cannabis producer, our strategic footprint and operational scale, our ability to accelerate international growth opportunities, our growing presence and infrastructure within the U.S. CPG market, and our proficiency in generating substantial cost-saving synergies in pursuit of long-term profitability. Of course, none of this would be possible if I was not surrounded by an experienced management team who can build upon the lessons of Better For You, CPG, and beverage alcohol to execute against repeatable growth formulas within medical cannabis, adult use cannabis, adult use adjacencies, and wellness. To provide an overview of our strategic initiatives by region, in Europe we have a $1 billion opportunity based upon momentum growth, strategic initiatives, and adult use legalization. In Canada, we have a clear path to achieve our goal of delivering $1 billion in revenue. It includes working aggressively to further solidify market-leading positions in adult use, gain back market share through converting illicit consumers to the legal market, and growing our business among current and potential customers, while also continuing to bolster our medical business. Its four pillars include delivering continued product innovation and category leadership, investing in retail partnerships by educating buck tenders through an enhanced outreach and curating offerings to provide retailers with the highest velocity products. producing best-in-class quality products in scaled, low-cost production facilities in which we can implement synergies. And finally, as it relates to medical, expanding our relationship with patients and physicians to bolster our market position while keeping our product assortment fresh and innovative as we work to advance education responsibilities that impact regulation. Blair will discuss the Canadian cannabis market in further detail. And in the U.S., where 91% of adults say cannabis should be legalized for medical or adult use, and 60% of adults across a variety of demographic groups believe cannabis should be fully legalized, we see a market poised for growth supported by a state-by-state trend towards legalization. We believe that we can reach our target revenues by the end of fiscal year 2024 through a broad set of cannabis-focused CBG and craft beverage brands and additional revenue in adult-use cannabis pending federal legalization. Federal legalization would certainly be a watershed event for Tilray Brands and the industry. But given the near-term uncertainty and seeing actual legalization reform, we're pursuing optionality, which we view as the next best thing. We have a considerable adult use adjacency through our craft beverage, alcohol, and wellness business, which include key U.S. and global assets such as Sweetwater, Breckenridge Distillery, Manitoba Harvest, which together are available in all 50 states and Washington, D.C. As we've discussed previously, our investment in MedMen during year 2022 exemplifies this approach, and we can build upon giving our strong balance sheet and leadership expertise in operations, profitable CPG businesses, and growing brands that consumers love to pursue, and additional acquisition opportunities across the U.S. Together, our growing US CPG platform represents a portfolio of award-winning and highly sought-after consumer brands, a strong and robust infrastructure, a broad global distribution footprint, hands-on CPG expertise, and operational excellence. Today, our U.S. CPG businesses combined are high margin, EBITDA and cash flow positive, as well as good adjacencies to the cannabis industry. And upon legalization and collectively, they have generated over $130 million in revenue during fiscal year 2022 and nearly $60 million in gross profit. Our beverage alcohol brands consist of Sweetwater, the number one ranked brewery in the Southeast, and the nation's 10th largest craft brewer. Breckenridge Distillery, which recently celebrated two double gold and one gold medal in the 2022 San Francisco World Spirits Competition, the largest spirits competition in the world. And Alpine and Green Flash, which are two iconic West Coast craft brands. Our wellness business consists of Manitoba Harvest, which is a pioneer and leader in branded hemp-based foods. Through recent expansion, Sweetwater is now available in 42 states, including California, which is the number one beer market in the U.S. Sweetwater also operates a new 32,000 square foot production facility and tap rooms in Fort Collins, Colorado, along with a new tap room at the Denver International Airport. The brand commands a loyal customer. Following and go-forward plans for Sweetwater include continuing to launch innovative products, a new spirit-based ready-to-drink beverages, continued westward penetration in the U.S. while expanding our presence in Canada and other international markets, improving production utilization, and evaluating strategic acquisition. Breckenridge Distillery is widely known for its award-winning bourbon whiskey collection and innovative craft spirits portfolio including bourbon whiskey, gin, and vodka. Distribution already reached across 50 states and the brand is able to benefit from distribution synergies when paired with Sweetwater. We are confident that this will drive growth both now and in the future. And finally, Manitoba Harvest is the world's leading hemp brand with production distribution across 17,000 stores in North America and a 50% share in the hemp seed and 15 established markets. Since the business combination, Manitoba has not only been stabilized but has experienced dramatic trajectory change in measured channel with further opportunities to extend into adjacencies. We have also managed costs, implemented pricing actions amidst a rising input cost environment and decreasing our reliance on big box distribution points. We will leverage these strong brands and their distribution system to grow our U.S. Tilray wellness business that will parlay it into CBD beverages, CBD personal care products, and related adjacencies. And upon federal legalization in the U.S., we'll have a clear advantage to lead in the U.S. market and strategic infrastructure operations in place to parlay into the THC-based products as well. Before I turn the call over to the team, I'd like to reiterate what we announced this morning. The company expects to generate $70 to $80 million of adjusted EBITDA and will be free cash flow positive in our operating business units in fiscal year 2023. With that, let's hear from Denise Baltecek, our Chief Strategy Officer and Head of International Business. Denise?