Tilray Brands, Inc.

Thank you for joining today's conference call to discuss Tilray Brands, Inc. financial results for the 2024 fiscal first quarter ended August 31st, 2023. 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 via the Say Technologies platform. Question submission and uploading through the Say Technologies platform has already concluded, and the company will read aloud and answer the top questions. I will now turn the call over to Ms. Barron Murata, Tilray Brands' Chief Corporate Affairs and Communications Officer. Thank you. You may now begin.

Good morning, everyone. By now, you should have access to our earnings press 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. Please note that during today's call, we will be referring to various non-GAAP financial measures that 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 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 those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements. Today, we will be hearing from key members of our senior leadership team, beginning with Erwin Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary, followed by Carl Merson, Chief Financial Officer, who will review our quarterly financial results and maintain our adjusted EBITDA guidance for the 2024 fiscal year. Also joining us for the question and answer segment are Denise Balczaczek, Chief Strategy Officer and Head of International, Blair McNeil, President, Tilray Canada, and Ty Gilmore, President of U.S. Beer Business. And now I'd like to turn the call over to Tilray Burns, Chairman and CEO, Erwin Simons.

Thank you, Barron, and good morning, everyone. We appreciate you joining our quarterly call. At Tilray Brands, we strategically diversify our cannabis lifestyle and CPG company globally, and we've done so for several reasons, including the tremendous growth opportunities we see within the beverage category and across markets like craft beer, ready-to-drink cocktails, non-alcoholic beverages, energy, and nutritional drinks. These product categories and others in our portfolio further allow us to address the ever-changing cannabis market conditions while driving market share in the industries in which we compete. This effort is backed by our portfolio of high-quality lifestyle brands and the strong and growing distribution networks that are behind them. Our goal in doing this is clear, to accelerate our ability to deliver industry-leading, profitable growth and sustainable long-term shareholder value. To this end, our achievements in fiscal 2024 to date and expectations for the balance of the year reflects the strides we're making by focusing on our core fundamentals. Number one, maximizing profitable revenue growth through organic expansion, initiatives, and key strategic acquisitions with strong synergy potential. Number two, realizing the benefits of optimized asset utilization and cost management to ensure a lean, efficient cost structure across all our business segments. And of course, number three, continuing to strengthen our industry-leading balance sheet and cash position. Our strategic execution and achievements affirm that we have emerged as the most diversified cannabis lifestyle and CPG company globally, with four distinct and complementary business segments. These consist of cannabis, broken out into medical and adult use, along with beverages including craft beer, spirits, ready-to-drink mixed cocktails, and non-alcoholic drinks and CBD beverages, wellness products, and a medical distribution business. As a result, we had a record Q1 with net revenue of $177 million, representing 50% growth year over year. We grew EBITDA in our cannabis business and our international businesses. We grew Canadian cannabis revenue by 16.5% in the quarter and remain the leading, strongest, and most profitable international cannabis LP with approximately a 13.4% share in Canada inclusive of HEXO and Trust. 631 basis points ahead of the next LP. From a product category perspective, we continue to lead cannabis sales in almost every market across Canada, the largest federally legal cannabis market in the world. Tilray is number one in cannabis flour, oils, concentrates, and THC beverages, and number two in pre-rolls, number four in vapes, and the top 10 in all other categories. Aggregating all categories in either inhalables or ingestibles, Tilray is number one in both of these groups. We grew international cannabis revenue by 37%, and we are the market leader in medical cannabis across Europe, with leading market shares in Germany, Poland, and Luxembourg. We are a leader in the hemp food industry with a 52% branded market share with Manitoba Harvest in the U.S. and Canadian market share of nearly 80%. With our recent acquisition of eight craft beer and beverage brands, Van Anheuser-Busch, we are growing fast in the craft beverage alcohol industry, solidifying our leadership position as the fifth largest U.S. craft beer brewer with 5% market share in a growing market. And since year end, we've paid down $177 million of our debt. The balance we have brought to our business model by going beyond cannabis has given us a strong position today and is positioning us well for higher growth future opportunities, including when U.S. federal cannabis legalization and German legalization of adult-use cannabis happens. We believe we're in a great place going forward, well-positioned with the resources, infrastructure, and operations required the distribution of brands, sales and marketing, and know-how to lead the revolution of cannabis CBG into the American and European mainstream. Let us now discuss our individual segments with the context of our overall business. Cannabis was our largest segment by net revenue and comprised of approximately 40% of the total revenue. Gross revenue from Canadian adult-use cannabis increased 22%, driven by innovation and share growth in dried flour, bates, and pre-roll. This was achieved both organically and as a result of our recent acquisitions, and despite price compression in the quarter of approximately $3 million from the prior year quarter. Notably, in Q1, according to combined high fire and weed crawler retail sales data, Tilray sold over double the units of the number two and number three LPs combined. In equivalent KGs, we sold double the amount of the number two LP. As pre-rolls continue to grow, we shipped over 18 million pre-rolls, 200,000 per day. That is a lot of pre-rolls. In terms of market share in our core business of Tilray, when we exclude Hexo and Trust, we finished Q1 with 8.76 market share, which is up versus Q4 2023 and year-over-year versus fiscal year 2023 Q1 by 57 basis points and 38 basis points respectively. We maintained our number one market share position and expanded the gap by an additional 20 basis points to an overall gap of 136 basis points versus the number two LP by market share. Our combined market share for Q1 when including Tilray, Hexo, and Trust was 13.4%. Regionally, we grew our share at all four major markets in Ontario, Alberta, British Columbia, and Quebec. furthering our best-in-class market coverage to a highly fragmented retail network. Finally, we continue to have a relentless focus on synergies. We reported planned synergies of $27 million with the HEXO transaction in just two months, we have had already achieved 17.1 of the target through elimination of duplicate costs, streamlining SG&A, and renegotiating key contracts. In Q2, we will complete the integration of HEXO from an operational standpoint, which includes centralizing our packaging and logistics into a free-of-warrant facility, driving further efficiencies. With regard to our MESON facility in Quebec, We've invested in making the necessary changes to convert and optimize the facility to grow cannabis and fruits and vegetables for the Quebec marketplace. This work is on track, and we will begin planting cucumbers this year. On a related acquisition note, in August, we purchased the remaining 57.5% equity ownership of Trust Beverage Company from Mulsons Canada. The transaction further strengthens our number one cannabis market share position in Canada, with a combined market share of approximately 40% in the THC beverage, and positions us at the forefront of the adult-used beverage sector. Our expanded cannabis portfolio now includes the fastest-growing beverage brands, including XMG, Molo, House of Terpenes, and Little Victory. We believe that THC beverages present a significant opportunity. There are nearly 11 million customers in Canada for cannabis beverages, and the category is already roughly $100 million Canadian at retail. In addition to the category opportunity, transitioning THC beverage production to our London facility will generate further cost savings and synergies. Turning to international cannabis, which achieved revenue growth and approved profitability in Q1, our tensions are twofold. Strengthening our leadership position and market share in the medical cannabis category, where we currently operate across 21 countries, and achieving early mover advantage in new countries as medical legalization advances. Based on these trends to date, we are building momentum in Poland, Italy, the UK, and the Czech Republic. As we look to fiscal 2024 for our international cannabis business, our focus is on high-quality medical cannabis brands, which are trusted by patients, healthcare professionals, and government officials around the world. of our best in class cultivation facilities in Portugal and Germany where we are one of only three companies in Germany that can cultivate in country as well as leveraging our Canadian cannabis facilities and expertise our medical distribution network led by our integrated Tilray Pharma and medical cannabis teams with relationships across 13,000 pharmacies from a bottom line perspective We are laser focused on optimizing our European platform, working to remove approximately $8 million of costs from our businesses, of which we've already competed, over $6.8 million. CC Pharma, which we are rebranding to Tilray Pharma, is our established medical distribution platform for traditional branded and generic pharmaceuticals, as well as medical cannabis. This business segment, from a revenue perspective, is currently equal in size to our cannabis segment, comprising slightly less than 40% of the total sales mix. It grew 14% in Q1 from a year ago and expanded its gross profit margin due to a reduction in production costs and improving product mix. Similar to the U.S., we are not planning our business around adult use legalization in Germany. However, There is proposed legislation in Germany for medical cannabis to be declassified as a narcotic, and if the proposed German legislation comes to pass, it may be prescribed as a medicine rather than a narcotic, which is more difficult for healthcare providers to prescribe. This, in turn, would open accessibility to a larger patient population. Now turning to our beverage alcohol and CBG portfolio, a high-quality growing portfolio of lifestyle craft beverage alcohol and wellness brands that have enabled us to build a strong footprint in the U.S. market without engaging in business that touches a cannabis plant. Importantly, beverages are a fast-growing category with significant growth through innovation and M&A and high future growth and healthy margins. Within beverages, for example, the craft beer business is expected to grow to $282 billion globally by 2032, a CAGR of 10.5% between 2023 and 2032, with North America accounting for 40% of the revenue today of that $40 billion in 2023. Given that, it is a market we have been following closely in order to seize on the clear opportunity that exists today. Reflecting that earlier this week, we welcome the newest additions to the Tilray Brands family as we close on our acquisition of eight beer and beverage brands from Anheuser-Busch. These brands, Shop Top, Breckenridge Brewery, Blue Point Brewing Company, Ten Barrel Brewing Company, Red Hook Brewery, Whitmer Brothers Brewing, Square Mile Cider Company, and Highball Energy have enabled us to further diversify. and expand our beverage alcohol segment while elevating our position within craft beer from number nine to projected number five. We are confident that as we layer on our team's deep experience and skills in product innovation and marketing, we will able not only grow our brands, but also evolve the overall craft beer category. where there is clear and strong opportunity to grow the consumer demographics and expand into new products and formats, such as RTV and new channels. Taken together over the last three years, we've added a total of 13 brands to our beverage alcohol portfolio. the eight that I just referred to, in addition to Sweetwater Brewing Company in December of 2020, Alpine Beer and Green Flash Brewing Company in January of 2022, and Montauk Brewing Company in November of 2022. We also own Breckenridge Distillery, the award-winning spirits brand, and the world's best blended whiskey, which was acquired in December of 2021. In terms of overall segment performance, quarterly revenue for the beverage alcohol business was $24.2 million in Q1, representing a 17% growth from last year. And we're just getting started in making this segment a more meaningful component of our financials. We project pro forma revenue for our beverage alcohol segment, including these recently acquired brands, of about $300 million. Finally, our wellness segment is delivering higher gross profit on a stable of top line as it's adjusted to higher ingredient costs through increased pricing from a year ago. It remains an important element of our U.S. strategy because of these factors. strong consumer interest in hemp products, expanded distribution into Whole Foods and Walmart, and product innovation to meet needs of the Gen Z millennial consumer through new hemp-forward foods and supplement offerings in CBD wellness beverage like our Happy Flower. It's also worth noting that Manitoba Harvest is the industry leader in terms of sustainability. Having recertified as a B Corp for the 10th consecutive year, and having launched the first regenerative organic certified hemp hard skew this past spring. Across the board, we are delivering solid performance by optimizing our U.S. businesses and setting the stage for significant growth in the near and longer term future for existing and newly acquired brands. In summary, we think the opportunities afforded by our intentional business diversifications are numerous and exciting as we look ahead. Our goal-forward plan is to execute on what matters most, maximizing revenue and growth, optimizing efficiency, and maintaining our balance sheet strength as we invest in our industry-leading brands. I will now turn the call over to Carl to discuss the financials in greater detail.