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spk15: Greetings. Welcome to Tilray's second quarter 2023 earnings call. This time, all participants will be in listen-only mode. Any question and answer sessions will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Barron Narada, Chief Corporate Affairs Officer. Barron, you may now begin.
spk17: Thank you and good morning. By now, everyone should have access to the earnings press release, which is available on the investor's section of the Tilray Brands website at tilray.com and has been filed with the SEC and CDAR. On today's call, 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. The earnings press release contains a reconciliation of each 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 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, Tilray Brands, Inc., and Carl Merton, Chief Financial Officer, who will provide a quarterly financial review as as well as reaffirm our full-year free cash flow and adjusted EBITDA guidance. Also joining for the question segment of this call are Denise Faltacek, Chief Strategy Officer and Head of International, Blair McNeil, President, Tilray Canada, and Ty Gilmore, who recently joined the team as President of our U.S. Beard business. And now I'd like to turn the call over to Tilray Brands Chairman and CEO, Erwin Simons.
spk12: thank you baron and hello everyone we appreciate you joining this morning and hope everyone had a nice holiday season and a great start to 2023 we head into this new year with momentum and a real line platform centered around three priorities to create the world's leading and most diversified cannabis lifestyle and consumer package good company in the world across adult use medical cannabis, beverage alcohol, and wellness consumer products. These priorities include pursuing our most profitable core business to drive growth now and over the long term, which we're well on our way to realizing this. Maintaining our number one leadership position and growing market share in recreational cannabis in Canada, the largest federated legal market in the world. Maintaining our leadership position and growing market share in medical cannabis across Europe and a strong position to capture the adult use market when legalization does occur. And winning in the U.S. despite delayed federal cannabis legalization, which we do not expect to happen at any time in the near future. We've invested in leading and profitable cannabis adjacent CPG lifestyle brands across craft beverage alcohol and wellness consumer products that resonates powerfully with consumers that are ideally positioned in key markets. When federal cannabis legalization does occur, we will leverage our U.S. brands and business, their distribution and marketing networks to enter and capture opportunities by essentially creating a broad set of cannabis infused and focused CPG brands. We are also, of course, diligently focused on optimizing our global operations while remaining that low cost producer. And last but not least, strengthening our industry leading balance sheet and driving our cash position because it affords us opportunities for growth, expansion, including through cannabis adjacencies within the context of economically uncertain environment. I want to emphasize the value potential of Tilray Brands, built on growth opportunities and our foresight to diversify, both organic and acquisitive. I am confident in the fundamental potential of Tilray Brands as the most diversified cannabis lifestyle company and consumer package good leader. We have already made notable progress in quarter two, exceeding against these priorities, as it is evident by significant improvements in operating cash flow, despite a challenging top line performance. We have, of course, a long view generating free cash as an integral part of our business model, in turn, enable us to deliver on our highest priority, delivering sustained, durable shareholder value. Close observers of Tilray Brands and our team know one thing. We move quickly and decisively to adapt to the market changes. And I'm proud to highlight that even with the breadth of the platform and our sheer scale, we remain agile, pivoted quickly, making smart strategic decisions, and executed against them with our free cash flow objective accomplished. For example, during the quarter, we opt to build cash by temporarily slowing down production in our cannabis facilities because of the longer-than-anticipated march-to-war legalization in key markets. This included cutting headcount and reducing other operational costs. I want to highlight at the outset our bottom-line initiatives first and our top-line initiatives second. This is appropriate given the market and the incredible progress we have made to drive efficiencies and a lean built to last platform. I want to start this discussion with our cost optimization plan. We have already removed over $100 million of cash costs when compared to a year ago. These cost reductions, which I'll detail shortly, have guided us to achieving over $29 million of positive operating cash flow and $25 million of positive free cash flow this quarter. The components of this effort include cost synergies realized from the Afria-Tilray business combination, which closed nearly two years ago, represents the starting point for building an efficient and agile foundation. Recall that our revised post-closure target was increased to $100 million from $80 million in cost savings, which as of Q2 has been completed. Beyond the Afria-Tilray synergies, we launched an additional $30 million cost optimization plan, of which we have already achieved $19.6 million. on an annualized run rate basis to further solidify our status as the industry leading low cost producer. And finally, our robust balance sheet consists of approximately $433 million of cash and marketable securities with over 70% of our debt set with fixed interest rates. The solid financial foundation enables us to be opportunistic in capturing market share across global cannabis and CPG adjacencies as we watch what unfolds with respect to legalization in the U.S. and elsewhere. Having discussed cost-structured initiatives and our commitment to maintaining a strong balance sheet, I would now like to focus your attention to our potential to seize top-line opportunities across both geographies and business lines specifically. In Canada, we maintained our number one market share position in recreational cannabis despite pressures caused by difficult operating conditions, ongoing price compressions, and high excise tax, forcing both industry consolidation and a reduction in roughly 925 licensed producers that are operating today. Despite these challenging conditions, Tilray remains the number one cannabis market share position with an 8.3% market share in Q2. In Q1, Tilray led the next largest licensed producer by 54 basis points, while in Q2, we expanded the lead to 176 basis points. Our share was up 28 basis points outside of Quebec. Recall that this data is sourced from HIFIRE for all markets except Quebec, where we utilized WeedCrawler for more accurate reflection of the marketplace. We continue to build a thoughtful approach to innovation, quality over quantity. In Q2, we launched products in regions, segments, and categories where we had gaps in our portfolio. We leverage our leading proprietary consumer research to ensure we understand clearly what consumer values are in those regions, segments, and products. As an example of this, we relaunched RIP flour, focusing on a segment where we had gaps in our portfolio. Moving forward, our thoughtful innovation will also be easier on the environment. In 2023, Tillway will convert all flour, vape, pre-roll packaging to hemp, diverting 158,000 kilos of plastic away from landfill sites. In Canada today, we have the leading internal capabilities in low-cost flower production, infused and non-infused pre-roll automation, BHO, live resin distillate, vape production, and state-of-the-art beverage formulation and production. And further, manage overhead more efficiently helps stabilization and sustain Canadian cannabis industry. We have reached out to numerous industry partners, to leverage our expertise, low-cost environment, and existing capacity in coal manufacturing partnerships. We understand the challenging nature of cannabis in Canada. Our investment in consumer insights, innovation, cost optimization, and market-leading sales coverage have allowed us to be stable during a time of instability. From our vantage points, we think we're best situated to thrive as these dynamic playouts, and we intend to stay the course for the long term. In Europe, we are seeing momentum across the continent that we expect to result in 27 countries working together to establish a collaborative effort on cannabis regulations. The EU has already embraced medical cannabis with broad-scale adult use legalization expect to follow over the next couple of years. When this happens, we're strongly positioned to further seize on the opportunity European cannabis business offers, having built a non-rival platform through our growing facilities in Portugal and Germany. The shift is supported by growing acceptance of medical cannabis for treatment of numerous conditions and followed by growing support for cannabis legalization of adult use as well. We believe we're exceptionally positioned to benefit from the meaningful economic growth that will come to our industry as a result of these positive changes because of our end-to-end EU GMP supply which enables us to leverage existing assets to meet demand for medical and adult-use cannabis when legalization does happen. However, in the near term, our industry, along with almost all others, are contending with a difficult economic environment in Europe because of soaring inflation, which is due at least in part to the ongoing war in Ukraine. This is affecting all key cost inputs, but particularly energy prices, and is doing so negatively affecting consumer behavior. In Germany, artillery-branded medical business increased in the second quarter over the prior year quarter by 4% and 20% on a constant currency basis. In Poland, we completed our first two shipments of medical cannabis in Q2 and submitted, additional dossiers for new products. In Italy, we expect to commence the distribution of our T25 medical cannabis extracts in quarter three. Consistent with our approach of all our businesses, we are relentless focus on both improving the quality and consistency of our medical cannabis products, as well as our cost structure in order to be that low-cost producer in Europe. Therefore, we have developed a plan to take approximately $7 million of cost out of our European business. We strongly believe that our competitive differentiators in Europe are being that low-cost producer of high-quality, consistent cannabis. Our integration of CC Pharma, our medical cannabis teams to enhance and improve our sales function with CC Pharma's strong pharma relationships, both in Germany and throughout Europe, bringing credibility to cannabis. Our regulatory expertise to navigate the challenging regulatory landscape throughout Europe will continue to solidify our leadership position. In summary, while there's some near-term headwinds, we view this as an exciting time for us across Europe, anchored by our strategy, our people, assets and resources, and the tremendous opportunity we see ahead. Turning now to the U.S. and our CPG portfolio, in the U.S., participation in the adult-use cannabis market has always been very important to us and integral to our long-term strategy. However, as long as cannabis remains federally illegal in the U.S., we will not engage directly in business that touch the cannabis plant. To fully optimize the value and strength of our U.S. business, We appointed veteran beer and beverage industry executive Ty Gilmore as president of Tilray's U.S. beer business, a newly created position. Ty joined us from Glazer Beer and Beverage, where he served as an executive vice president since 2020. And prior to that, he spent the majority of his career at Diageo. As you may already know, Sweetwater is the 10th largest craft brewery in the U.S., now available in 42 states. including most recently California. Our past year, Sweetwater and our two iconic Southern California brands, Green Flash and Alpine, have vastly expanded distribution throughout our partnership with Reyes, the largest beer distributor in the U.S. In November, we acquired Montauk Brewing Company, the fastest craft-growing beer and number one craft brewer in Metro New York. Its success has been driven by its beloved product portfolio, premium price point, and over 4,700 points of distribution, including top national retailers, including Target, Whole Foods, Trader Joe's, Stop and Shop, King Cullen, Walmart, and 7-Eleven, also Costco, BJ's, and Speedway convenience stores. The Montauk Brewing transaction was immediately accretive to EBITDA, and we expect it will deliver strong revenue and adjusted EBITDA growth. as we move forward. Additionally, we are already leveraging Sweetwater's existing national infrastructure to significantly expand Montauk Brewing Distribution Network beyond its concentrated presence in the Northeast, further driving Montauk growth across key national markets, including California, Georgia, Florida, Connecticut, and while rounding out the presence of our craft beverage portfolio across the U.S. I'd like to briefly discuss our leading lifestyle bourbon and spirit brand business, Breckenridge Distillery. Despite headwinds in the spirits industry, this brand is poised for accelerated growth through Republic National Distributing Company with expansive distribution network on and off-premise retailers and customers across 38 states and the District of Columbia. Now turning to our wellness segment, which is a very important segment for us as we move forward. Our wellness segment continues to grow. It's branded hemp food business, Manitoba Harvest, in quarter two. Manitoba Harvest is the world's leader in hemp-based foods with product distribution across 17,000 North American stores and present in 15 established international markets. The Manitoba Harvest brand expanded its U.S. market share leadership position in quarter two, continuing to deliver a better than 50% dollar share within branded hemp seed and growing over 10% in multi-outlet retailers in the last 12 weeks, reporting. Manitoba Harvest is now delivering dollar growth in each of its top 10 U.S. retailers. Whole Foods, Sprouts, Walmart, and Kroger. Manitoba Harvest market share in Canada remains near 80%. The drivers of growth include distribution expansion, a strong innovation pipeline, and pricing put in place in quarter two, coupled with our increasing consumer interest in hemp products, given the key role they can play in plant-based, low-carb, and keto diets. Tilray Wellness will be launching a new CBD wellness beverage, Happy Flower. via direct-to-consumer e-commerce platform in early 2023. Through our partnership with Southern Glazer, the leading distributor of beverage alcohol and CBD beverages in the U.S., we will look to expand the brand into key markets throughout 2023, focusing on states where CBD is permissible. In short, we continue to build out our wellness business of hemp foods and beverages with more to come. And with that, I will now turn the call over to Carl Martin, our Chief Financial Officer, to discuss financials in greater detail.
spk11: Carl? Thank you, Erwin. Our focus on operating efficiency or adjusted EBITDA and free cash flow have always been critically important, but even more so in today's economic environment. As we balanced our business decisions between adjusted EBITDA and free cash flow in the past, we often chose adjusted EBITDA over free cash flow. In the current year, our focus has shifted and we are prioritizing free cash flow, even if it occasionally comes at the expense of adjusted EBITDA. These decisions are evidenced through our ability to generate positive operating cash flow of over 29 million and free cash flow of almost 25 million in the quarter and almost $50 million improvement from the same period last year. Before I review our quarter, Let me first remind everyone that our financials are presented in accordance with U.S. GAAP and are in U.S. dollars. And throughout this call, we will reference both GAAP and non-GAAP adjusted results. Our earnings press release also contains a reconciliation of our reported results under GAAP to the non-GAAP measures identified during our remarks. For the quarter, net revenue was $144.1 million. down 6% from the sequential quarter of $153.2 million, and down 7% from the year-ago quarter of $155.2 million. These declines are due to lower net cannabis distribution and wellness revenue that were only slightly offset by higher beverage alcohol revenue. Similar to recent quarters, our revenue, income, and adjusted EBITDA are being impacted by the strength of the U.S. dollar particularly given our largest revenue sources currencies are the Euro and the Canadian dollar. On a constant currency basis, our net revenue rose slightly to $157.6 million with our distribution and beverage alcohol businesses also up in their base currencies compared to the year-ago quarter. Reported gross profit was $40.1 million, a 22% increase from $32.8 million in the year-ago quarter. Adjusted gross margin held at 29% despite the reduction in net revenue. This was made possible by our success in implementing numerous cost savings programs, offsetting part of our allocated overhead from intentionally reducing production, coupled with the revenue realized from our HECSO transaction. Net loss was $61.7 million compared to a net loss of $65.8 million in the prior quarter, and net income of 5.8 million in the year-ago quarter. Our adjusted net loss improved to $35.3 million, or six cents per share, compared to 45 million in the prior quarter and 38.8 million in the year-ago quarter. Reported adjusted EBITDA was $11.7 million, down 15% from 13.8 million in Q2 last year. Still, we were able to extend our track record to 15 consecutive quarters of positive adjusted EBITDA. The decrease was due to the negative impact of our cannabis gross margin as well as an increase in bad debt expense. As we have stated over the past several quarters, we are keenly focused on being free cash flow positive and this is evident by our significantly improved operating cash flow during Q2, even if it resulted in a reduction in adjusted EBITDA. Further, Absent the one-time charges we took in the quarter for the return allowance and existing business relationships, adjusted EBITDA would have been $14.8 million, up $1.3 million from the prior quarter. Turning to our business segments, gross cannabis revenue was comprised of $6.4 million in Canadian medical cannabis revenue, $52.4 million in Canadian adult use revenue, which marks 5.7% growth from the prior year quarter, 7.7 million international cannabis revenue, all offset by 16.8 million of excise tax. This resulted in net cannabis revenue of $49.9 million, representing a 15% decline from the year ago period, largely related to reductions in international cannabis revenue, including a charge of $3.1 million related to international cannabis returns, which we do not expect to reoccur. On a constant currency basis, The decline was only 11%. The decline in the Canadian dollar and the euro resulted in $2.3 million of the revenue decrease compared to the prior year quarter. Cannabis gross profit increased 37% to $18.6 million from $13.5 million in the prior year quarter, while the gross margin percentage increased to 37% from 23%. In Q2, we also recognized a one-time sales return adjustment, which reduced our top line as well as an inventory disposal incurred as exit costs from both Israel and Uruguay. Together, these had a combined impact of reducing gross profit by $4.2 million or gross margin by 7.5%. Also impacting the decrease in the adjusted gross cannabis margin is a shift in strategic priorities to focus on pursuing cash flow generating activities previously discussed. We consciously decided to lower production in our cannabis facilities as a result of slower than anticipated legalization globally by reducing operations, reductions in headcount and other operational costs, and continue to assess other cost-saving initiatives. We view these activities as temporary as supply requirements stabilize in the Canadian cannabis market and as European cannabis markets proceed with legalization. Distribution revenue, which is derived predominantly through CC Pharma, declined 13% to 60.2 million from 68.9 million in the prior year quarter. This was primarily impacted by the strengthening of the US dollar relative to the Euro. On a constant currency basis, revenue would have actually increased 3% to $71 million for an additional $10.8 million of revenue. Adjusted distribution gross profit increased to $7.7 million from $7.6 million in the prior year quarter, while distribution gross margin increased to 13% from 11%. This was the result of a positive change in product mix and our focus on higher margin sales. including the decision to exit the medical device reprocessing business line. Looking ahead, we think we can continue to drive larger business profit margins despite not increasing revenue as we approach full utilization of our facility. Turning to our beverage alcohol segment, we generated $21.4 million in net revenue, which was 56% higher than the prior year quarter of $13.7 million. This was primarily due to our acquisition of Breckenridge and the Green Flash and Alpine beer brands in December 2021, coupled with our more recent acquisition of Montauk in November 2022. We remain bullish on expanding this segment over time as we leverage our increased distribution, regain brand acceptance with Green Flash and Alpine, foster brand acceptance with Sweetwater in California, build out an extensive innovation pipeline, and of course, potentially pursue other acquisitions. Beverage alcohol gross profit increased 28% to $10 million from 7.8 million in the prior year quarter. Adjusted gross profit, which includes $1.1 million in purchase price accounting step-up, rose 42% to 11.1 million. However, adjusted gross margin of 52% decreased from 57% in the same period in the prior year. This decline is a result of the Sweetwater, Colorado expansion, which is still in the startup phase of operations compared to last year when the expansion had not yet begun. Also, the Breckenridge and Montauk acquisitions were not completed in the prior year comparison and operate at a slightly lower margin than Sweetwater. Finally, for our wellness segment, revenue decreased 8% to $12.7 million from $13.8 million in Q2 last year. Adjusted wellness gross profit was $3.9 million, up slightly from $3.8 million in the prior year quarter, while gross margin increased to 31% from 28%. Turning back to the topic of free cash flow, we took steps during Q2 to pivot from business lines in both our distribution and European cannabis businesses that were no longer accretive so that we can focus on areas of the business that generate positive cash flow. This, along with a strategic decision to reduce production in our cannabis facilities, have provided the necessary cash savings to achieve free cash flow of almost $25 million in the quarter, a roughly $50 million improvement from the same period last year. Our cash, cash equivalent, and marketable securities balance as of November 30th was a healthy $433.5 million, a more than $100 million increase from the year-ago period. Our working capital balance, which allows us to meet our operational and capital requirements, decreased to $388.2 million from $393.4 million over that same time horizon. For fiscal 2023, we are reaffirming our expectations of generating $70 to $80 million of adjusted EBITDA and being free cash flow positive across all business segments for the year. In conclusion, I am focused on improving our industry-leading balance sheet, continuing to reduce our debt, driving free cash flow, aligning product with demand, minimizing capex, and properly aligning our expenses with revenue expectations. With that, I will conclude our prepared remarks and open the lines for questions from our covering analysts. Afterward, we will take a few questions from our retail shareholders through the SAVE platform. Operator, what's the first question?
spk15: Thank you. If you'd like to ask a question today, please press star 1 from your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is from the line of Vivian Azar with Cowen & Company.
spk13: Let's just see what your question is. Happy New Year, guys, and good morning. This is Victor Ma on for Vivian Azar, and thank you for taking the questions. So first off, based on high-fire trends, it seems like the U-turn share recovery is continuing as you gain dollar shares sequentially in 2Q. But there are still some losses in pre-rolls and vapes. I know innovation will address these losses over time, but can you maybe offer some color to dimensionalize the headwind from legacy pre-roll and vape SKUs and then the tailwind from new SKUs and also comment on the stickiness of new innovation. Thank you.
spk12: Good morning. So I'm going to let Blair jump in here because he's on the call with us to talk about it. But I think a lot of it has to do with timing and when we're able to get these products into the different provinces. And, you know, Blair will tell you how many new products that we have and the timing. Blair, you want to jump in and just go through what's happening with vapes and pre-rolls and just how many new products that you have coming out?
spk04: Yeah, thanks, Erwin. And thank you, Victor, for the question. Certainly what we've noticed in vapes, I'll start there, is the higher potencies and fruit forward nature of vapes. So we definitely have a plan to build up on the potency side and To Irwin's point, you'll see over 150 new listings from us in vapes and pre-rolls over the next two quarters. On the pre-roll side, you're really moving to fruit forward, infused pre-rolls, really stealing share from traditional pre-rolls. We have some big news coming in Q3 and Q4 on good supply that you'll see us be very consistent with that trend. And then just a comment on the stickiness of innovation overall. If you look at Q2 in Ontario alone, there was 859 new products in a market that was sequentially, at least from a quarter standpoint, flat. So there's definitely some dilution of SKU productivity moving forward. We're calculating that into our innovation pipeline. We're cognizant of the dilution effect of that, and we feel very confident that with leveraging our insights, leveraging our category dynamics, and leveraging our coverage model, we'll be very strong in these categories over the next two quarters.
spk12: Thank you, Blair. Victor, just let me emphasize two things. You know, we have the number one share. We're 176 basis points ahead of our closest rival, number one. Number two, this year versus last year, in our revenue, it's almost $12 million of price compression, where prices have come down over a year ago. And I think as we see the market settling out and Blair has a plan in place between new innovation, new distribution, taking share, and, you know, potentially other acquisitions in the Canadian market, you know, how he gets to a double-digit share back in that marketplace. So, you know, listen, yes, we lost some share. I think it's timing. But considering what price compression, considering the marketplace, I think, you know, where Tilray is situated in Canada today is in a very, very good place. And, you know, the innovation that he has coming out is tremendous, and that should, you know, help share in growth overall.
spk13: Thanks for the caller. And just pivoting to beverage alcohol for my second question. With down trading in beer and wine apparent annual census data, just curious if you've noticed consumer weakness in your beverage alcohol portfolio. And could you remind us of your annual pricing algo for Sweetwater and Breckenridge? And now also Montauk. Thank you.
spk12: So, again, I'll switch it over to Ty for a second. But, you know, we're still from Sweetwater, the 10th largest craft brewer in in the u.s montauk which we just acquired in december you know is the number one craft brewery in new york city tremendous brand and basically only sold in new york with some sold in new jersey and connecticut and putting these together um you know from a pricing standpoint and i'll let ty talk about it there is some pricing opportunities we probably have been a little slower on taking price increase and but it had to you know, endorse some of the higher costs. From a Nielsen standpoint, I think we've picked up some distribution. Recently, we picked up a lot from a Kroger standpoint. So, Ty, you want to jump in here for a second and introduce yourself?
spk01: Yeah. Thanks, Erwin. Good question, Victor. Yeah, we're definitely, you know, there is some down trading going on, but we're also seeing some consumer trade-up going on. across several segments, super premium domestic Mexican imports, flavors, and higher ABB. So we continue to see some tailwinds with the space that we operate in and expect as we go into Q1 of 2023 that there will be continued pricing opportunities that we're going to take advantage of both in the on and off premise, which will be beneficial.
spk12: And there is also a major pipeline and 1 of the things we've done in Sweetwater and Montauk is now on our timing of when we can launch products. And, you know, we have numerous new products that will be launched as we move into the spring. We have our 425, which is coming up. So there's a lot of event marketing based around our beer business. The other thing Victor just let me mention, we've seen some nice increase. you know, in our Breckenridge distillery, our bourbon business, some great increase in our vodka business, moving over to RNDC and, you know, some of the new distributions. So we're quite happy, and you can see, you know, we're up nicely on our, you know, beer and our spirits business quarter over quarter and year over year.
spk16: Great. Thank you. I'll jump back into the queue. Thank you.
spk15: The next question is from the line of Nadine Sarwar with Bernstein. Please receive your question.
spk02: Hi, morning, everybody. Two questions for me. So, first of all, you called out that weaker international cannabis business in your prepared remarks. Could you perhaps break down the factors driving this in more detail and how we should think about this part of the business performing in the remainder of the fiscal year? And my second question, nice to see the Canadian adult use sales actually growing year on year. could you break down this growth between volume mix and price since there's a lot going on there and how are you thinking about that over the coming quarters? Thank you.
spk12: Great. So number one, you know, let, let me, I'm going to switch over the piece on Europe to Denise who runs our European operations. But I think, listen, a lot going on in Europe, you know, whether we can blame it on the war, we can just blame it on, you know, the economy over there. We can, you know, blame it on in regards to cost. But I think as we're situated in Europe today, you know, with our facility in Portugal, our facility in Germany, you know, where we sell in over 20 countries from a medical standpoint, we're well situated. We spent a lot of time on Europe, and you heard me say how much costs were taken out, some of the countries that we're going to de-emphasize. Do we believe legalization is going to happen in 2023? No. Do we believe it will happen sometime in 2024? Yes. But we've now combined our businesses in Europe to one business unit between our CC Pharma, which is our distribution business, into 13,000 drugstores and our operations in Portugal and our operations in Germany. So we have a strong business in Europe with distribution, with brands, with Crow. Unfortunately, controlling legalization is not something that's in our hands, but it's something that we're going to focus on how we grow our business. Denise, you want to jump in and add to that?
spk18: Yeah, thanks, Erwin. So just building on what Erwin said, in terms of our business in Europe, Very strong business in Europe, as Erwin mentioned, deprioritizing certain countries. We really, in the last few quarters, as we've talked about in the past, we've made some active decisions to not pursue certain revenue in Israel, given the volatile market that is currently going on in Israel. And if you look at the prior quarter last year, we had about $4.6 million of revenue in the prior year quarter as it related to Israel sales. So we are deprioritizing certain markets in lieu of chasing more profitable and sustainable business. And just building again on how confident we feel in terms of Europe, while we are very much closely following adult use legalization efforts by Germany, we are also very confident that even in the absence of adult use, we are still very well positioned to win in the medical business. We are with our CC Pharma business. We have credibility when it relates to medical cannabis. And as we pursue doctors and pharmacies, we take that credibility with us when we visit with them. We are also well positioned with our two EU GMP facilities. one located in Germany, one located in Portugal. And the medical market in Europe is going to be a $13.8 billion market by 2028. So we do feel very, very confident about the business.
spk12: And I think as we look at Europe, I like Europe as opportunistic. I think, you know, there's over 600 million people. There's a big population there. And if you come back and think, no different than the U.S., Europeans want cannabis legalized, okay? And I think it's just working through, you know, the EU and. I'm sure if Ukraine didn't happen, Germany might be legal today, but we're ready and we'll be ready. And we're going to look at other business opportunities in that European market. Cause we got that infrastructure. Um, we've, you know, spent a lot of time and taken a lot of costs out, have streamlined our business, you know, with our facilities in Portugal and Germany, we're looking at other opportunities there where we can grow. And, you know, we're profitable there, and we're going to look how to grow that business. In regards to your second question, in regards to our mix and volume, listen, in Canada, flour is still number one. The good news is the Canadian market is really the only market in the world where adult-use cannabis is legalized, okay? And from a positioning standpoint, we're well-positioned with our growth facilities there. We have 12 plus brands. We have tremendous innovation there. And that's the key to that marketplace. And you're going to see a lot of falling out of that market with other LPs. It's a tough market to do business from an excise tax. We still spend a dollar a gram. We paid as a company over 120 million dollars in taxes. In Canada last year, an excise tax in the last two years, we paid almost a quarter of a billion dollars. So it's a tough market, but again, it's the only legal market. And whoever wins there, which we believe we're going to, there's big opportunities. Blair, you want to just talk about your mix and pricing from a standpoint in Canada?
spk04: Definitely. Thanks, Nadine. Yes. You've largely got it right. Or when, in terms of the, the dynamics in the marketplace, I would say just in general, you can look at a year ago. There was over $12 million in price compression at the market. So generally you are seeing volumes on the Tilray side go up relative to the industry. Although those segments definitely are experiencing a lot of price compression. So from a, from a volume standpoint, It's really driven for us by the resurgence of our flower business. You'll recall that I talked on earlier calls about having 46 strains in alpha and beta programs that are now commercialized, that are now starting to hit the marketplace. So we expect to have a real pipeline of flower moving forward. And to Erwin's point, flower is still the biggest segment. It's about 40% of the total business. So we continue to have a very robust pipeline of innovation, but also of genetics for flower moving forward.
spk12: And I think the big thing is, I think the big thing, I'm glad I largely got it right, Blair, but I think the big thing is, You know, we now have the facilities to grow and taking those costs continuously out. And you heard us mention the quarter. We're going to run these businesses and drive them for cash. And that affected our EBITDA because, you know, we have all these fixed costs and we will be out there looking to sell cannabis products. You know, to other will be out there looking to grow for for others, but we are that low cost producer there and that's something we're going to focus on. The other thing is, we're going to focus on innovation and what's new and that's sort of what drives a lot of the growth in Canada is new innovation.
spk02: Got it Thank you. If I could just squeeze 1 more given that you mentioned it on Germany. What are you seeing with regards to adult legalization? About use legalization in particular with a focus on the EU commission. When do you think it could be a realistic outcome? Thank you.
spk18: Yeah, so so we originally expected that we might see adult adult use legalization take effect as early early 2024. Based on where we are, I think we view that it might be later in 2024 than originally expected.
spk12: And I think if Germany could make that decision for Germany without the effects of the rest of the yield, it would happen much quicker. But as we all know, you know, borders are open. Once it's legal in Germany, how do you stop it from going into other borders are some of the biggest issues there. So, and listen, we have a plan in place. You know, how do we expand? are medical business, and ultimately that is partially recreational. In Israel and other countries today, even though it's sold as medical, the biggest percentage of the use is in recreational.
spk02: Perfect. I'll pass it on. Thank you very much.
spk16: Thank you.
spk15: Thank you. As a reminder, to allow as many as possible to ask questions, please send yourself to one question. You then may re-queue for any additional questions. The next question is from the line of Andrew Carter with Stiefel. Please receive your question.
spk05: Hey, thanks. Good morning. I'll ask one question this morning, just kind of multi-part, I guess. Looking at the sequential, you've reiterated EBITDA guidance for the year, $70 to $80 million. Regarding the step-up that you need to achieve that in the second half, could you walk us through the, number one, incremental cost savings? Again, the bad debt expense isn't going to repeat. The Canadian adult use was shipments well below consumption give us any idea of the magnitude of what that hit was and then incremental EBITDA from Montauk in the second half as well as kind of give us a reminder on the seasonality of beverage alcohol thanks
spk11: Thanks, Andrew. So just trying to walk through as many of those pieces as I can. There was about $3.1 million impact on sales in the quarter related to the return. We had about $4.2 million that came out of my script on the slowdown in production, which is the effectively, you know, unabsorbed overhead. And then we see all of the optimization plans, the majority of those benefits are coming late in Q3 and Q4. And so we had the $100 million from the Afria-Torre optimization plan. I think we've got about another $20 million of that that has to hit the income statement still. It's been achieved. The full year savings hasn't flowed through. on the AFRIA 1 optimization plan or the Canadian cannabis optimization plan. That's $25 million in total. The vast majority of that was back-end loaded as we got systems in place to be able to realize those savings. And then we have the continued impacts of HEXO.
spk12: And Andrew, I think the big thing is, as Pearl was saying, is a lot of our Cost savings are back and loaded. There's additional cost savings coming out of Europe. In regards to beverage, alcohol, our beer business is back end in regards to sales there. And same with our bourbon business with RNDC now getting into distribution expansion in more and more states. But back to your point, we talked about it before. Canada has a major plan in place with a lot of innovation, a lot of growth in its back half, and that's a big part of it. You know, it's about growing our volumes, growing our distribution, managing our costs. And I can tell you, you know, we've done a great job of taking our costs out of the business with the free until Ray was over 100 plus million dollars. um we've stepped up again as we look at europe right now and taken out you know another seven plus million dollars um we've taken out other costs in the company you know getting cost savings working with hexo but the key is getting that growth in these marketplaces and volume is ultimately what's doing that and being that low-cost producer you know in our growth facilities is very very important so it's a combination of all those As you know, things do happen out there, but as we look into our crystal ball, that's what we see today.
spk05: Thanks. I'll pass it on.
spk16: Thank you.
spk15: The next question is from the line of Aaron Gray with Alliance Global Partners. Please receive your questions.
spk07: Hi, good morning, and thank you for the question. So just for me, I want to talk a bit on M&A opportunities available to you, specifically in Canada, as you mentioned, getting back to double-digit share in your prepared remarks. You know, you talked about the tough market doing business there for excise tax, you know, obviously impacting a lot of the smaller players in addition to yourself. So I just want to know if there's any more attractive opportunities that you've seen come up in the market. You know, there appear to be an increase in CCAA. So from your standpoint, you know, are you starting to see somewhat of a shakeout come through? You guys might have more M&A opportunities available, and there may be different parts in the supply chain that you might see those in the Canadian sector. Thank you.
spk12: So in the Canadian sector, absolutely, I think. You know, we have two major facilities in Leamington, Ontario. And what you heard us say before, you know, it affected us from an absorption standpoint. You know, there's a cash benefit to it. But bringing more and more grow into our facilities is absolutely, you know, very much, you know, accretive to our gross margins and accretive to our earnings. Um, it also as, you know, competitors come out of the marketplace, there's less competitors out there. Um, and it also helps with some of the price compression. So, um, absolutely. It's got to make sense. It's got to fit within our grow facilities. And it's got to be accretive to Tilray and its Tilray shareholders. So, you know, we're very interested. Listen, the Canadian market is the only market out there. It's a $10 billion projected growth at retail. It's still a big market. And it prepares, you know, a lot for when legalization does happen in the U.S. And just to step back, you only asked me about Canada. You know, as you see in our headlines today, Is we don't rate and how see anywhere in the near future legalization happening in the US. We very much like beer and spirits business with great margins in those business. We see great growth opportunities. We have an excellent management team, both with Brian and with Ty Gilmore now in running those businesses. And we'd love to find some more Breckenridge's or some more Montauks and Sweetwater. We're now also focused on that wellness business. We've been very successful with Manitoba Harvest. And we think with that, you know, from an acquisition standpoint, the whole wellness area is an area we're going to focus on and look at acquisitions there and upon legalization. You know, there will be foods that will be infused with hemp. There'll be foods that will be infused with THC. And that's why the name of the company is Tilray Brands. We're a diversified company focusing on adult-use cannabis, medical cannabis, beer, spirits, and wellness products. And we as a team have a lot of experience in that, so there's a major focus on additional acquisitions to diversify this company. Because we don't know when legalization is going to happen in the U.S., and we want to grow this business, as we've always said out there.
spk16: Okay, great. Thank you very much for the call. I'll jump back in the queue. Thank you.
spk15: Our next question is from the line of Owen Bennett with Jefferies. Please proceed with your question.
spk10: Morning, guys. Hope everyone's well. I just wanted to come back to your comments around exploring manufacturing partnerships with other LPs in Canada. And you said, I believe, if I heard correctly, you've been reaching out around this. Could you maybe give some more details here what these agreements would look like exactly? Have you had any initial interest? And then obviously you're able to do this due to spare capacity in your facilities currently. What would happen when demand increases and you perhaps need that for your own product again? Thank you.
spk12: So I'm going to let Blair answer that because he's the one out there, you know, doing that. But let me tell you something. We have the ability to grow in our facilities over 265,000 kilos per We have, you know, facilities in the West Coast in Vancouver, and we have other facilities that we've taken down, you know, since the Tilray acquisition. So right now, I'm not worried that we'd run out of capacity. And let me tell you something, filling up to 265,000 kilos will change our financial needs tremendously. And with that, we have the ability to grow. The other thing is we look at facilities today. You know, there's food shortages in the world of lettuce, tomatoes, strawberries. And, you know, we're looking at utilization potentially of where do some of these facilities, if we're over capacity, how do we start growing, you know, fruits and vegetables in some of these facilities and supply food to the world where there's major shortages and there's price opportunities there. So one thing I want to make sure is we're utilization assets, we're you know, giving cash, we're generating cash, and we're growing the Tilray Brands Company. Blair, do you want to address that in regards to some of the stuff that you're working on in Canada? Yeah, thanks, Erwin. And thanks, Owen, for the question.
spk04: You know, very fair. Erwin hit it right on the nose. We've got a tremendous amount of capacity on the flour production side at a low-cost opportunity. We've got beverage capability. We have vape capability, not just distillate vape, but BHO live resin. We have just a tremendous facility. The team has done an unbelievable job of building world-class facilities that can operate at a very low cost. And We know in the industry today, a lot of our competitors are focused on survivability and not sustainability. So for us, it's an opportunity, I think, to utilize some of our excess capacity and help our industry thrive and get to that $10 billion industry in Canada and $100 billion globally. In terms of the conversations, yes, they're very productive, fruitful. There's a lot of interest. We've got a few different LPs that we're talking to today as of right now, and I think we'll partner up in the near future with those opportunities moving forward.
spk16: Great. Thanks, fellas. Thank you, Owen.
spk15: The next question is from the line of John Vamparo with CIBC. Please proceed with your question.
spk03: Thanks. Good morning. It's a relatively simple question. It's on the guidance, which implies a pretty significant step up in EBITDA, even if you account for Montauk. And you outlined some of the cost measures you have underway, but I wonder, can you get to the EBITDA guide with the current level of revenue, or does your guidance assume some pretty meaningful sales growth?
spk11: So if you remember from the start, John, we talked about the one-time sales adjustment that we had. So obviously we're using that more as a base than the 144 that was in our financial statements this quarter. But the answer to your question is yes, with the cost savings we have coming with the addition of Montauk, with the $7 million cost reduction that we're that we're looking at in Europe, more than half of which will be achieved by the end of the year. We see that as the basis for reiterating our guidance.
spk16: But, John, yes, we're looking at absolutely sales growth, and sales growth is a part of it. Got it. Thank you very much. Yep.
spk15: The next question is from the line of Michael Laffery with Piper Sandler. Please proceed with your questions.
spk14: Thank you. Good morning. Good morning. I wanted to come back to a comment you just made about some of the capacity and how to think about opportunities there. And you mentioned things like fruits and vegetables as an opportunity. But you also had just a little bit earlier reiterated how you think about the company's name and tell right brands. And you don't really see branded produce, at least not with kind of any margins. And there's not any of those companies who have multiples that are really interesting. So You also touched on just some of the fixed costs as a consideration for EBITDA. I guess maybe instead of trying to be a farmer, would you just rationalize more capacity? How do you think about weighing those tradeoffs?
spk12: So I think there's multiple going into it. I think we're working on a plan on rationalizing our facilities. versus and then how do we focus on our brands and is there two businesses here, et cetera. So I think as we come back today, utilization of facilities is important today for us. We're not going into the branded vegetable business and don't take that away for a second. But, you know, one thing I want to make sure is we have facilities out there that we've invested a lot of dollars in and they're world-class facilities. And getting utilization, you know, if you look at it just in this quarter or amortization on our facilities, you know, is in the 3040Million dollar range. Okay. So we got to make sure we're utilizing our facilities to grow something out there and hopefully it's cannabis. But we don't want them to sit idle and, you know, we're again sitting here looking at ultimate multiple. Multiple opportunities as these facilities. are world class. So that's what I'm saying. And there's lots of things that we're looking at to do with these facilities. But growing cannabis is first and foremost for us and growing branded cannabis is first and foremost for us. Being in diversified businesses, whether it's spirits, you know, beer or other wellness products is what's our priorities.
spk16: We're not, you know, out there saying we're going to become farmers.
spk12: uh so i guess maybe can you just clarify how you thought about that is it i mean i think you pointed to it as an opportunity is that maybe just under the right circumstances or as a temporary kind of bridge under the right circumstances or as a temporary bridge ultimately to make sure our facilities are being utilized that's what's the important thing here and they're contributing cash sitting there idle doesn't contribute anything, just contributes cost. And we, as a company, are focused on, you know, driving our top line, driving our growth, and utilizing our facilities to, you know, contribute cash.
spk00: Okay, thanks so much. Thank you.
spk15: Our next question is from the line of Pablo Zonic with Cantor Fitzgerald. Please receive your question.
spk09: Good morning, Erwin. Look, two questions. The first one, just remind us how you're thinking about the target of $4 billion in revenue by fiscal year 24. I suppose that's being delayed. But, you know, without holding you to it, I suppose that there were different pieces you had talked about there, you know, North American cannabis, Canadian, U.S., international, TPG wellness. That's a mixed change. And the reason I'm asking the question, given all the delays and legalization you're talking about, Could there be a scenario where you decide to bulk up the branded high-margin beer and alcohol business, right? And I'm not saying you're going to buy Molson Coors, but, you know, would we have a scenario in 24, 25 that, you know, we had an alcohol account for, you know, 90% of our Tilray brand's revenues? And the second question, and I know it's hypothetical, if we go about what Canopy Growth has said that, you know, if NASDAQ doesn't allow them, doesn't approve the Canopy USA structure, they would potentially the list and just remain listed in the TSX, would you consider following and they start buying U.S. assets on the cannabis side, that could put you at a disadvantage potentially, right? If they were to do that, start buying U.S. assets, release from NASDAQ, remain in TSX, would you consider a similar move just not to be a disadvantage when they are buying U.S. assets and you are not? Thanks.
spk12: Pablo, thank you. Good questions here. Number 1, you know, I, I've said before the 4Billion dollar mark and set that out that, you know, I believed legalization would have happened in the US and I believe legalization would have been a part of Europe. And I always made sure that was contingent on legalization. You know, listen, The spirits business has been a very good business for us so far. It's very profitable, good margins. You know, other companies, whether it's Constellation or Diageo out there, you know, I like their multiples, I like their margins. And I think one day, and as I've been out there meeting with, you know, alcohol distributors and other, everybody is focused on cannabis because they realize one day upon legalization, the cannibalization in the whole spirits beer business is going to come from cannabis. And Trust me, all these major alcohol companies have an eye on cannabis, no different than the tobacco companies. So with that, if I today can't do anything in the U.S. and have to sit there, why not get bigger into some of these craft brewers like a Sweetwater, like a Montauk, like a Breckenridge like we did? And you know what? I like the wellness area. You know my past in the wellness area. So With that diversify our portfolio with adjacencies. So we can't buy cannabis assets. We can't grow cannabis assets in the US and right now look what's just recently happened in New York in regards to valuations, how they've come down. On the other hand, you know, the store that opened in Manhattan, there was lines and lines and lines around the corner. You see the demand for it, you walk down the streets of Manhattan, you smell cannabis on every corner there. So, with that, absolutely. We're going to look to grow and I very clear in our headlines of our press release today. We're going to diversify this company into multiple categories that have adjacency to the cannabis business. And no, we're not out there buying Molson Coors, but we want to be that large craft brewer out there that owns multiple brands like we did with Sweetwater, like we did with Green Flash, like we have with Montauk. like we have with Breckenridge and looking at other spirits businesses and like we have with Manitoba Harvest. So you're absolutely correct on that. Your second question.
spk16: Your second question. No, no, no, I got, no, I just, no, I was going to answer your second question.
spk12: Listen, right now, Being on the NASDAQ is important for us. Having the trading volume, having the shareholders that we have, right now it would not be of interest to us to be exiting the NASDAQ and moving to the TSX or an exchange that allows us to own U.S. assets. And if Canobie does it, good luck to them. But right now, our focus is to diversify our business, grow where we have strong, strong cannabis opportunities in Canada, where we have strong opportunities in Europe, and grow our consumer packaged goods business. Because one day you will see beer with THC in the U.S. One day you'll see spirits with THC in the U.S. And if anything, where's the cannibalization going to come from? It will come from the spirits businesses. So our focus is not to move away from the NASDAQ now.
spk16: Thank you. Thank you.
spk15: The next question is from the line of Matt Bonley with Canaccord. Please proceed with your questions.
spk08: Good morning, everyone. Just wanted to pivot back to the M&A side of things, particularly in the U.S. So, you know, clearly you guys have had a very specific strategy of acquiring, you know, adjacent businesses to THC that are self-sustaining. But when you look at some of the other deals that have been done in the space for sort of optionality, I know that the deal you guys had done with MedMen, there were some financial cash flow considerations to that that made it make sense. But do you think just given the frustration of nothing happening at the federal level changes your view on how to allocate capital or how to position yourself given some of the headlines or lack thereof in December? And then also just, Erwin, on your comment of anticipating a legalization event in 2024, do you think that's more likely from what Joe Biden had said with respect to some of his initiatives, or do you think something could actually happen in this new Congress, which is now split?
spk12: So I... I wish the Speaker of the House, cannabis was one of his focuses, but it's absolutely not. Listen, you know, I come back and I've said this before, you know, we are not going to buy options and buy pieces of U.S. companies. There's a lot of good things happening with MedMed. And, you know, we're excited about how the cleanup has been going there and what is ultimately happening. And upon legalization, you know, we'd be very interested, you know, in having that asset as part of Tilray upon legalization. In regards to legalization, listen, I'm frustrated that legalization or nothing, whether it's safe bank, whether it's more act, whether it's the scheduling, whatever, nothing has happened within cannabis and almost, you know, all the different fakes out there. So with that for our business, We've got to focus on Canada where it's legal. We've got to focus on Europe today and change some of our strategy in Europe, which we're doing upon legalization, but focus on that medical business. But there's a whole third market out there where they're using cannabis as recreational but buying it from the medical market and really focus on integrating now our CC Pharma business from a distribution standpoint. We've been successful with Sweetwater. We've been successful with Breckenridge. The Montauk was a great asset for us to buy these niche little beer businesses. And we've seen a great turnaround in our wellness business. So right now in the U.S., we're going to focus our acquisitions on buying adjacencies to the cannabis business. And if it's 24%, 25%, or 26%, We're not depending and sitting here waiting for Congress and the Senate to make decisions, and that is ultimately the results of – going to affect the results of our business because I don't want the effects of the results for our shareholders and our business be affected by politicians in Washington.
spk16: Okay, appreciate all that. Thanks. Thank you.
spk15: Our next question is from the line of Federico Gomez with ADB Capital. Please receive your question.
spk06: Good morning. Thanks for taking my question. Just on the price environment in Canada, you know, in 2022, we continue to see price compression. And obviously, as you mentioned, it has been almost unsustainable with excise taxes and so on. So my question is, do you expect any significant shift in Canada in 2023 in terms of pricing? What could be the driver there? Is there any chance of that happening? Or, you know, do you believe that sort of price pressure will persist in 2023? Thanks.
spk12: So I'm going to answer it partially, then I'll turn it over to Blair. And, you know, we can also talk about what we see in price compression everywhere else. I think cannabis is probably the only product out there where inflation hasn't hit, okay? But, you know, again, that's going to – and, you know, quarter over quarter, we've seen very little price compression out there. year over year we've seen almost 12 million dollars from our standpoint but the focus got to be building brands and brands do have to matter um at the same time innovation got to matter and that's coming out with different potencies um you know different types of products and and innovating product and that's ultimately where you're going to get the right pricing and as you're going to see other lps go away you're going to ultimately see that too and us being that low-cost producer we'll be able to be that price leader in the marketplace out there. Blair, you want to add anything to that?
spk04: Yeah, so just overall, I would say it is going to be unlikely to see rate changes in pricing over the next 12 months. What you may see is category mix, a little bit of a shift to pre-roll, which can improve the pricing from a mix standpoint. or just volume across provinces. And then finally, to Erwin's point on the brand side, I referenced it in my answer earlier, but if you look at how we're approaching innovation, we're really thinking about those consumer segments where we have opportunity to grow and those sub-segments within categories. RIF is a great example of where we're entering into a category with a higher quality offering, which will drive some average revenue up. But it will take time. I would say from a when do we see it changing? I think I've been saying for 12 months that as we see industry consolidation, as we see the number of LPs start to go down or normalize and the inventory levels over the industry normalize, I think then you'll start to see a real sustainable push in terms of being able to build great into your economics year over year.
spk12: And Frederico, I think the important thing is, listen, let's step back for a second. Cannabis in Canada is only a four-year-old business, okay? And, you know, the same with the U.S. So we're building out a whole new industry, no different than tech, no different than electric cars. At the same time, You know, we're building brands, and brands take a long time to build out. Brands take a long time for consumers to get used to it. At the same time, and trying to get the right, what's the right price out there? Today, there's bourbon prices out there at $300 a bottle. There's bourbon prices out there at $39 a bottle. And I think it's just ultimately settling out the consumer. You know, the Canadian cannabis business that retails between $7 to $10 billion. And I think, how does it get to $10 billion? One of the biggest opportunities that we have not talked about is the whole beverage category, where you can walk into a convenience store and ultimately buy a drink with THC. You can walk into any store and buy THC products. You can go into a bar and buy THC beer on tap. So it's going to be an evolving industry. And I think that's the important piece of it today. And some of the things that we have to deal with, there's over 900 LPs out there. The excise tax is a dollar a gram, no matter what the price is. The infrastructure that was spent on building out these, you know, grow facilities were billions and billions and billions of dollars. The shakeout will happen, but there's going to be a winner and it's going to be Tilray.
spk16: Thank you. That's really helpful. Thank you. Are there any additional questions at this time?
spk17: Thank you. And now we will take questions from the SAIT Technologies platform. The first question is, what are some positives to look forward to in 2023?
spk12: Listen, I think, you know, as I've said throughout all these, you know, questions today, there's a lot of positives out there. As Tilray is today, it's a diversified company with the number one adult-use cannabis business in Canada, has a medical business. As we move into the drinks business, the edibles business, and we have a lot of innovation behind it. We're number one in the medical business, sold in over 20 countries in Europe today with a lot of great growth facilities out there. We have a CC Pharma business, which will integrate into these businesses. So we could have a strong European business and continuously focus on that. As a company, we diversify and gone into the spirits business, have gone into the beer business and have a wellness business in regards to Manitoba Harvest. We've built out our balance sheet. We have over 400 plus million dollars of cash today. And we have a strong, strong management team in place that knows how to execute. And I must tell you, it's not an easy industry. There's no industries out there. That's easy. But it's an industry today where we have brands. We have a strong management team. We have a strategy. And, yes, strategy has to change. And I've said I wanted to be a $4 billion business out there by the end of 2024. But, unfortunately, if legalization happened tomorrow, that's possible. Without legalization, it's not going to be achievable just with the cannabis industry. If we diversify and go into other categories, it absolutely can happen. So there's a lot of things happening at Tilray. And there's a lot of good moving pieces out there for us to execute upon in 23 and 24. Thank you.
spk17: And the final question is, what are the plans to increase the stock value in this economic environment?
spk12: Listen, I come back and say this here. I'm proud of a lot of the things that happened at Tilray. I would like to see our stock at a different place. The markets have been tough markets in, you know, 2022. The whole cannabis industry is down over 50-plus percent, and I think there were a lot of expectations out there upon legalization. We just got to do better than that, and that's why we have to diversify and not sit here and wait for the politicians to make decisions on legalization and when legalization does happen. We'll be ready to pounce upon every one of those opportunities with cannabis, whether it's beer, whether it's spirits, you know, whether it's food or other products. But one thing I can tell you is this company, you know, in the cannabis industry, whether it's an R&D, whether it's in quality, whether it's in grow, whether it's in branding, we're well into it and we'll be ready for it upon legalization.
spk17: Thank you. And that concludes our questions.
spk12: Thank you everybody. As you can see, there's a lot going on. And as you've talked, as I've talked about, you know, we have an excellent team in place to help execute upon this. A lot going on in Canada, a lot going on in Europe. You heard from Blair, you heard from Denise, you heard from Ty. Brian Nolte runs our beverage business. Jared Simon, who runs our wellness business. We have excellent teams in our financial area, our operational area. our IT area, our legal area. So there's an incredible team in place that works alongside of me here at Tilray today. And that's what's key. We have a strategy in place. You know, ultimately it's shifting because as we sit and expect legalization, then how do we shift to that? And we're shifting upon that. You know, we focus on our balance sheet. We focus on cash. We focus on how to take costs out. We focus on top line growth. You know, there's a lot of hurdles that get in our way and how do we overcome them? And ultimately, what can we do? You know, we have in Canada 10 different customers and that's it. We can't go to Walmart, Target, Loblaws and Sobeys and go sell our products. There's limitations that we can sell our products in Canada. You know, there's no limitations where we can sell our beer products or spirits products and that. You know, in the U.S., our wellness food, there's limitations where we can sell our European products to the doctors and the scripts. But with our CC Pharma business, there's no limitation that we can sell into 13,000 drugstores. So we want the world to be our oyster to sell products. We want to sell brands. We want to sell consumer brands. We want to sell products that contribute margins and contribute free cash flow. you know, to the Tilray Brands business. We're looking at multiple opportunities and we'll continue to do that. We're looking at multiple acquisitions that will continue to do that. But before I conclude, I'd like to mention that Tilray Brands, you know, has had to adjourn its annual meeting of shareholders to January 18th because we do not yet have sufficient participation from our stockholders. I'd like to urge all Tilray Brands stockholders of record as of September 26th, 2022, have not yet voted to vote today. The charter amendment is intended to simplify Tilray's capital structure and ensure that all stockholders of common shares have equal voting rights or one vote per share. The elimination of Class 1 stock will not be dilutive to stockholders or increase the number of outstanding shares. They're already outstanding there, so it is not dilutive. This is a key initiative to ensure best corporate governance, and that is key for us, and practices that help the company protect influence of our stockholders. Your support is really, really important, no matter how many or how few shares you own. If you need help with voting or you have any questions, please contact our investors at Tilray.com. And with that, I want to thank everybody for joining us today. Thank you for your support. You know, look forward to speaking to you very much in the near future. Have a great day and happy new year.
spk15: This will conclude today's conference. May disconnect your lines at this time. Thank you for your participation.
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