Tilray Brands, Inc.

Good morning, everyone. Thank you for joining us to discuss Tilray Brands, Inc. Financial results for the fiscal year 2023 first quarter ended August 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 Safe Technologies platform has already been concluded, and the company will read aloud and answer the top questions. Ms. Narada, you may now 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 the Tilray Brands 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. Today, you will hear from key members of our senior leadership team. Erwin Simon, Chairman and Chief Executive Officer, Tilbury Brands Inc. Denise Faltacek, Chief Strategy Officer and Head of our International Business, who will update us on global market developments, including the increasingly sanguine outlook of legalization across Europe. Blair McNeil, President of our Canadian business, who will update us on the focused, impactful investments we are making to grow our leadership position in the Canadian market, and Carl Merton, Chief Financial Officer, who will provide a financial review, including details on our strong balance sheet. And now, I'd like to turn the call over to Tilray Brands Chairman and CEO, Erwin Simon.

Thank you, Barron, and hello, everyone, and good morning. Thank you all for joining this morning for our fiscal year 2023 first quarter results. Our first quarter results reflect early tangible returns on what we discussed at length during our fiscal 2022 report, namely realigning the business around three priorities. Pursuing our most profitable core business across Canada, Europe, and the U.S., optimizing our global operations while taking out over $100 million in cash cost savings, and strengthening our industry-leading balance sheet, that affords us distinct opportunities for growth and expansion amid market challenges. These are differentiation foundation steps for profitable and sustainable growth for our worldwide cannabis CPG platform across medical, adult use, wellness, and beverage alcohol. And while we certainly made great strides through the 2022 fiscal year, including growing distribution across our core businesses In Canada, the U.S., and internationally, our Q1 2023 results validate the approach and our overall execution. Our success is most evident in our significant work in reducing operational costs and strengthening our balance sheet, which has been our focus given the challenging macro environment. We know that an efficient and agile foundation will pay incredible as the cannabis industry matures. It's instructive to think about our efforts in these categories, all which complement and build upon the other. The first and most impactful are the cost synergies from the Afria-Tilray business combination. As announced during our fiscal year 2022, we've revised target of $100 million in annualized cash cost synergies, And through Q1, we've realized $95 million in cash cost of that $100 million goal. The remaining $5 million will be delivered by the end of fiscal 2023. It's important to contextualize this achievement. $95 million in achieved cash cost synergies represents approximately 14% of the combined pro forma revenue of $682 million at the time of a Freya and Tilray transaction. With these specific synergies, I want to spotlight the G&A costs, which fell by nearly $9 million in Q1 compared to last year. Highlights here include large savings on office and general expenses. Our work is far from done in this respect, and we continue to target specific line items in our G&A that can improve margin and maximize efficient operations. Alongside the Afria and Tilray synergies, we launched an additional $30 million of cost optimization plan for existing cannabis business in Q4 of last year and to further solidify our status as the industry leading low-cost producer. This involves identifying opportunities to leverage technology, supply chain procurement, and packaging efficiencies while driving operational efficiencies and significant savings. As of the end of the first quarter, we've achieved $13 million in savings on an annualized run rate basis related to this next level cost reduction plan. When complete, these aggressive yet purposeful measures will have removed approximately $130 million in costs without compromising our ability to deliver growth and capture opportunities. Second, Tilray Hexo Strategic Alliance, that closed in July, is expected to deliver $40 million to Tilray, including $31 million in revenue and $9 million in interest over the fiscal year. And finally, with the strength of our balance sheet, with approximately $500 million in cash, $638 million in working capital, and over 70% of our debt set with fixed interest rates, Tilray Brands is now in the best position to capture leading market share across the global cannabis industry where opportunity abounds. The totality of this work is that we anticipate delivering significant growth in our adjusted EBITDA to between $70 and $80 million in fiscal 2023. which at the high end of the range would amount to 67% growth compared to fiscal 2022. And as previously stated, we also forecast generating positive free cash flow across all our operating segments this year. Our cost structure initiatives and the strength of our balance sheet provides our key differentiators. To be sure, but the promise and potential of Tilray's brands is also predicated on top-line opportunities and the specific purpose of our strategy plan, which we set in place in fiscal 2022. This involves seizing opportunities across both geographies and business lines specifically. In Europe, where I recently just spent some time with the team, in Portugal and Germany, our opportunity is based upon an on-rival platform, smart, disciplined, and strategic planning and execution and pan-European momentum towards adult use legalization. The European market, which is estimated to be worth as much as $37 billion by 2027, has already embraced a medical cannabis business and is nearing broad-scale adult use legalization. Germany, in particular, is taking concrete steps towards adult use legalization. with German lawmakers from the country recently toured Canada and California cannabis businesses to hear from provincial leaders, state officials, experts, and advocates about lessons learned from cannabis legalization. With two EU GMP certified operations positioned ideally in Portugal and Germany, Tilray is positioned for significant advantages as legalization spreads. In Canada, With difficult trading conditions in a high-tax environment and putting pressures on many licensed producers, Tilray is uniquely positioned to thrive as the industry consolidates. And in the U.S., we've set the stage and the footprint for a broad set of cannabis-focused CPG and craft beverage brands and additional revenue in adult-use cannabis pending federal legalization. While it seems elusive, we continue to see signs of progress. Just this week, of course, President Biden said he would pardon federal offenders for simple cannabis possession and asked for a review on marijuana's current status as a Schedule I controlled substance under U.S. law. It is important to recognize these initiatives for what they are, relatively modest, but any sign of progress is important at this time. In the current environment, if legalization was to occur, we believe we are best positioned, given our strong balance sheet, our cultivation know-how, our CPG experience, our global footprint, and our existing investment in MedMed. On that note, the biggest component of our craft beverage business, Sweetwater, is available in 42 states across the U.S., including most recently in California, which is the number one beer market in the U.S. The brand also operates a 32,000-square-foot production facility in Taperoon in Fort Collins, Colorado, and a Taperoon at the Denver International Airport. Stop by on your way through Denver. Sweetwater's West Coast presence and brand awareness remains in nascent stages, but we are confident that our work with the nation's largest beer distributor, Reyes, will yield tangible results. Their networked marketing acumen and deep relationships throughout the region will ensure broad availability at restaurants, bars, supermarket chains, liquor stores, and other retail outlets. On a go-forward plan for Sweetwater, it includes launching innovative products, new spirit bases ready to drink beverages, expanding our presence in Canada and other international markets, improving product utilization, and evaluating strategic acquisitions. In the meantime, we're also pleased with what we're seeing with our iconic West Coast brands, Green Flash and Alpine, which have also added and brought new distribution across the U.S. Ahead of football season, Breckenridge Distillery, which is one of the most highly awarded craft bourbons in the U.S., launched two new limited editions, Mile High Bourbon Blands, as the official bourbon of the Denver Broncos. These blends pay homage to the Broncos' Mile High era and include the team's classic 1962 logo on their label. This collaboration is now in its second year and is one that bourbon consumers love. Last month, we announced a renewed and expanded distribution agreement with Republic National Distribution Company that provides Breckenridge with direct access to our expansive distribution network on- and off-premise retailers and customers across the U.S. in 38 states and the District of Columbia. This opens new doors for Breckenridge and gives us full access to their premier distribution network, setting a new stage for accelerated brand growth. Finally, turning to our wellness business, Manitoba Harvest is the world's leader in hemp-based foods with production distribution across 17,000 North American supermarkets, 50% share in hemp seeds, and a presence in 15 established international markets. Our go-forward strategy on this evitable scale and consumers' interest in hemp production align with plant-based, low-carb, and keto diets In the near term, we are launching culinary oils, plant-based protein blends with hemp and pea protein, along with a snack bar and other product extensions with super seeds. We further plan to enter new international markets later this year with Manitoba Harvest. We also recently signed a distribution agreement with Southern Glazer, the leading distributor of beverage alcohol and CBD beverages in the U.S., to serve as the exclusive distribution partner for Tilray Wellness CBD beverage portfolio across 13 states in the U.S., with additional opportunities to scale nationwide. The strategic agreement allows Tilray Brands to launch a wanted U.S., CBD beverage portfolio within familiar retail channels, such as independent national grocery chains, convenience stores, local bars, restaurants, and gas stations. Beyond CBD beverages, we intend to grow our U.S. Tilray wellness business into CBD personal care products and related adjacencies. And upon federal legalization in the U.S., we will have a clear advantage to lead the U.S. market with strategic infrastructure and operations in place to parlay into the THC-based product as well. With that, we'll now hear from Denise what's happening in Europe. Denise.