Tilray Brands, Inc.

Once again, we thank you for dialing in. Please continue to hold. The conference will begin shortly. Thank you for joining today's conference call to discuss Tilray Brand's financial results for the third quarter of fiscal year 2024. Ended February 29, 2024. 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. I will now turn the call over to Ms. Barron Narada, Tilray Brand's Chief Corporate Affairs and Communications Officer. Thank you. You may now begin.

Thank you, Operator, and good morning, everyone. By now, you should have access to the 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 Merton, Chief Financial Officer, who will review our quarterly financial results for the third quarter and update our financial guidance for the fiscal year 2024. Also joining us for the question and answer segment are Denise Falcicek, Chief Strategy Officer and Head of International, Blair McNeil, President of Tilray Canada, and Ty Gilmore, President of our U.S. Beer Business. And now I'd like to turn the call over to Tilray Brands Chairman and CEO, Erwin Simon.

Thank you, Barron. Good morning, everyone, and thank you for joining us. At Tilray Brands, we take great pride in our mission to be the most responsible, trusted, and market-leading cannabis and consumer products company across the globe. Today, with our complimentary business units, we believe Tilray Brands is the best positioned company in the world to take advantage of all the positive regulatory tailwinds happening globally with cannabis legalization and drug policy reform. In Canada, Tilray continues to lead the cannabis industry with the leading portfolio of adult use brands and the number one market share. In the event the current excise tax regime were to be replaced with a 10% ad valorem tax based on the value of the product sold and not a per gram tax, we expect an annual savings of $80 million. We also expect to benefit from additional cannabis-related regulatory reforms around marketing and THC potencies. I'll take a deeper dive in the Canadian market shortly. In Germany, Tilray has the leading cannabis market share by revenue for the trailing 12 months, and we believe we are best positioned to capture a large portion of the expected growth in the medical market with both our in-country cultivation facility in Germany and our state-of-the-art facility in Portugal. We also have the ability to ship products from Canada to Germany. In the U.S., Tilray has multiple options, and in particular is well-positioned to benefit from the federal legalization of medical cannabis as a result of rescheduling. Yes, we believe that the rescheduling of cannabis from Schedule 1 to Schedule 3 in the U.S. would provide a path for Tilray to sell pharmaceutical-grade medical cannabis in the U.S., subject to doctor prescriptions. This is a different strategy from what MSOs are doing today. We believe there's an opportunity to supply medical cannabis products from our existing operations into the U.S. for medical purposes. Further, in the event of a future federal adult use and medical cannabis legalization in the U.S., we believe Hill Ray is well-positioned to immediately leverage its strong global leadership position, know-how, and strategic strengths across operations, distribution, and brands to sell EHE-infused products across its robust distribution network and sales channels in the U.S. Today, Tilray is a clear outlier in the global cannabis industry because we're the only company with global expertise in both adult use and medical cannabis. Our innovation comes from GMP certified pharmaceutical grade medicines to all recreational cannabis formats, including THC infused beverages, which also parlays into our beverage strategy. We have rigorous cannabis quality control, regulatory affairs, branding, marketing, sales, and distribution. We also have the number one cannabis market share in Canada, the number one cannabis market share in Germany, as measured by revenue. And we distribute medical cannabis in over 20 countries around the world. Since 2019, we quickly developed a diversified and award-winning portfolio of brands, backed by best-in-class operations in Canada, the U.S., Europe, Australia, and Latin America, that supports our goals of becoming a multibillion-dollar cannabis and consumer products company that addresses the needs of consumers and patients we serve today. As you know, the leadership team at Tilray has the expertise of buying TPG brands and building them into somewhat greater than they were before. Our creative portfolio of beverage brands includes craft beers, spirits, ready-to-drink cocktails, ciders, and non-alcoholic beverages. We are now the fifth largest craft brewer in the U.S., with a 4.5% share of the craft beer market. With over 500 beer distributors alone, Tilray is now dominating key regions across the U.S. with our craft beer brands in the Northeast, Pacific Northwest, Midwest, and Southeast, along with one of the most awarded bourbon brands with Breckenridge Distillery, which continues to gain market share across whiskey, vodka, and gin products. Our wellness brands include Manitoba Harvest, Hemp-based food products, ingredients and snacks, as well as our happy flower, our CBD-infused beverages, and our recently relaunched highball energy drinks, which in its first month on Amazon received over $1 million in orders. With appropriate approvals, we're also looking to introduce hemp-based Delta 9 beverages and products with our happy flower brand and across other wellness brands in the U.S. And finally, we own and operate a European medical cannabis and pharmaceutical distribution business in Germany, DC Pharma, also known as Tilray Pharma, with a robust footprint reaching 13,000 pharmacies in Germany alone. With broader medical cannabis use, doctor prescriptions in Germany, we expect there to be tremendous demand for medical cannabis within pharmacies. I can't predict the future. But my belief is there will be a lot of cannabis regulatory changes we've seen with Germany in Canada and the U.S. And Tilray is best equipped to reach these underlying opportunities. And we have the assets and the tools to reach our goal for Tilray Brands to deliver industry-leading profitable growth and sustainable long-term shareholder value through our focus on these three fundamentals. maximizing profitable revenue growth through organic growth and strategic acquisitions with strong synergy opportunities, realizing the benefits of optimized asset utilization and cost management to ensure an efficient cost structure across all our business segments, and to strengthen our industry-leading balance sheet and cash position. During Q3, we achieved net revenue of $188 million, representing approximately 30% growth over the previous year. We grew our revenue across our core business segments. This was achieved by focusing on organic growth of legacy brands and enhancing the performance of our more recent strategic acquisitions. Gross profit was $49.4 million, despite impact of the newly acquired craft beverage brands, which have a lower margin. Our net loss was $105 million, which only $4.5 million represented lost from operations, and cash used in operating activities was $15.6 million. Adjusted gross profit was $51.6 million. Adjusted EBITDA was $10.2 million. Adjusted net income of $900,000 and adjusted EPS of zero cents. We delivered positive adjusted free cash flow for the quarter. Over the last three quarters, we significantly reduced our convertible debt by $205 million, decreasing our net debt to approximately $175 million, and we'll work to continue reducing our indebtedness, optimizing our capital structure, and enhancing our financial flexibility. The net reduction in our convertible debt will decrease our annual interest expense by $9.8 million, which flows directly to adjusted net loss and adjusted free cash flow. Let's now dive deeper into each of our business segments. We grew our global cannabis net revenue by 33% to $63.4 million in Q3, compared to the previous year quarter, driven by our acquisition of Hexo and Trust, as well as our international business and innovation in the Canadian markets. Net Canadian cannabis revenue grew 31%, to $49.4 million in Q3 compared to the previous year. We achieved this growth with the HEXO acquisition despite price compression totaling $3.1 million from a prior year quarter and a crippling tax structure that has allowed taxes to spike while prices declined by more than 50%. Excise tax increased by $8.2 million and amounted to $21.8 million or 32% of our gross Canadian cannabis revenue in Q3, compared to $13.6 million or 26% in the same quarter last year. Recent enforcement efforts by Canada Revenue Agency, garnishing LP payments from the provincial boards, is already having an impact on our competitors, over 1,000 of whom have negligible market share. The continued enforcement by CRA, we believe, will lead to further and necessary industry consolidation, perhaps on a mass level. Canada continues to be the largest federal legal and commercial adult use cannabis market in the world. And Tilray Brands maintains that number one market share position in the country. We are number one in Ontario, number one in Quebec, number one in British Columbia, which together represents over 60% of the population of Canada. We're also number one in cannabis flour, oils, concentrates, and THC beverages, number two in pre-rolls, and number four in vapes, and in the top ten in all other categories, all while operating under rigorous, high-quality control standards. Our focus in Canada is on two things. First, growing sales primarily through continuous launches of new product innovation, and second, taking more and more costs out of our businesses. On the latter, a large part of our acquisition strategy for Hexo and Trust involves removing legacy costs and skew rationalization from these businesses. For Hexo, we originally target $27 million, but then increased that to between $30 and $35 million, of which we've already achieved $27.5 million in savings on an annualized run rate basis, of which $15.6 million is realized cost savings during the period. Our HEXO integration plan includes dreamlining our Canadian operations, improving utilization of our core facilities, improving margins, and maximizing cash opportunities by pursuing divestitures and consolidating facilities. We plan to close the Cayuga facility and move its cannabis cultivation to our existing Canadian production lines, sell our Maison facility in Quebec, which is currently cultivating cucumbers as a vegetable operator, and sell the Belleville facility and move our manufacturing to our London facility for our beverages. We expect this plan to result in one-time $70 to $85 million of Canadian cash inflow opportunity and accretive to margins and net income by $5 to $7 million on an annual basis. From a regulatory standpoint, the expert panel appointed by the federal government clearly highlights three areas of focus which Tilray would benefit from once implemented. First, excise tax reduction, which I've talked about, both in adult recreation and medical, would benefit Hill Ray $80 million. Secondly, there is a proposed opportunity for pharmacies to carry CBD and medical cannabis for medical patients, which would move plant-based medicines into the mainstream as an option for patients to treat ailments. And finally, enforcement against illicit websites, dispensaries that don't contribute to excise tax, and put you at risk through unregulated product channels available easily online with e-transfer and Canadian Post email. We think Canada Post and the Canadian banking systems are responsible for shutting down access to these unlawful establishments. Turning to international cannabis, we grew net revenue organically by 44% year over year to $14 million, and we remain the number one market leader in medical cannabis across Europe with a leading market share in Germany and Poland. Hill Ray's international growth has also been driven by increased sales in our existing markets such as Portugal, Italy, the UK, Australia, and New Zealand. The new German medical market opportunity is projected to be approximately $3 billion in the medium term, while the European opportunity could represent a potential $45 billion medical market alone in the long term. Our presence in Europe allows Tilray to grow our global brand portfolio to a base of over 700 million people in Europe, which is twice the population of the U.S., While much of the media attention related to the new cannabis reform in Germany has been centered around cultivation for personal use and the establishment of cannabis social clubs, the new opportunities for Tilray flow mostly from the removal of medical cannabis from the Narcotics Act. This descheduled change is expected to significantly expand the medical cannabis market in Germany as it would allow for more doctors to prescribe medical cannabis more easily to patients and potentially allow for broader health insurance coverage. We will therefore be increasing our educational efforts to bring more and more health professionals on board with medical cannabis as therapeutic options. We estimate that in less than 0.4% of the population in Germany are presently buying medical cannabis compared with 4% in states like Pennsylvania. In Germany, we also stand to benefit from the abolishment of the tender process for in-country cultivation of medicinal cannabis, which is being replaced with a licensing scheme. We are currently one of the only three in-country cultivation facilities in Germany today. And these legislative changes would allow us to better meet patients' needs by expanding our medical cannabis product offerings. This would, in turn, significantly increase our cannabis production in Germany by five times more than double our revenue opportunities. Tilray opportunities in U.S. cannabis remain strong. Over the past several years, our playbook of expanding our business beyond cannabis to adjacencies and complementary markets has positioned Tilray well for the current environment as well for future growth opportunities. While we currently do not engage in any U.S. cannabis operations because of federal regulations, We're well positioned to participate and win in a federally legalized market when that changes either rescheduling or medical cannabis or the passage of federal cannabis legalization. Given our deep knowledge, global expertise in medical and adult use cannabis, and the regulatory compliance implied, Tilray's playbook in the U.S. is to build and deliver iconic sought-off brands in the beverage alcohol and the CPG backed by product excellence and innovation. Educate consumers about our brands and our stringent quality standards to encourage trial and foster loyalty. And last but not least, to drive and scale and distribute to get our brands into consumer hands to grow our market share. Moving to our beverage segment, which is quickly approaching approximately $300 million annualized. As mentioned earlier, Hillary Brands is now the fifth largest craft brewer in the U.S. with a 4.5% craft beer market share, and we aspire to be a top 12 beverage company in the U.S., Q3 beverage alcohol net revenue was $54.7 million, representing 165% growth year-over-year. Kilray now holds 4.5% of the craft beer market share in the U.S., and we're just getting started and ramping up. Of this are legacy brands of Sweetwater, Montauk, Alpine, Nelson, and Green Flush. Demonstrates our ability to successfully grow existing brands along with our recent acquisition of 12 craft brands from ABI InBev. We have gained in scale and see further expansion opportunities. Wheatwater remains the number one brand family in Georgia, multi-outlets. Montauk remains the number one brand family in Metro New York, having increased its distribution by 28% versus last year. Tilray is now the number one craft supplier year-to-date in the Pacific Northwest. 10 Barrel's volume growth increased by 413 basis points since Tilray took over the brand, and we're now capitalizing on the success of 10 Barrel pub beer brand extensions by adding pub ice, pub cerveza line extensions. Both innovations we're extremely excited to launch. Growing 24% of beer is now of a top 20 brand on the West Coast, with only half the distribution of top competitors due to its focus on the Pacific Northwest states. Still, our ambition is to be much higher as we're aiming and uniquely positioned to become a top 12 beverage alcohol business. This will be accomplished by leveraging our portfolio to win more occasions through core products such as craft beer and beyond, through innovation to categories like flavored malt beverages, ready-to-drink cocktails, and spirits. But ultimately, our plans go beyond alcohol, as we will be expanding into sparkling water, energy drinks, and other categories. This is important because we have the manufacturing facilities, the distribution, and the sales and marketing infrastructure to drive tail-rated businesses. Working with BCG, we developed a clear and focused strategy to drive top-line and bottom-line growth for our beverage businesses. The three-pronged approach will deploy a regional strategy called Dual to stabilize scale brands such as Sweetwater, Montauk, Bluepoint in their respective key adjacent regional markets across the U.S. and maximize their potential to gain market share from competitors. Juul is already paying off. According to BI sales to retail data, Hill Ray has increased its market share of total beer in 13 states, including key beer markets such as Oregon, Washington, Colorado, Idaho, Minnesota, and Arizona, when comparing share before and after the craft acquisition. In the southeast alone, we've improved trends by 4.6% post-acquisition. For Q3, Ken Barrow has seen a 12.3% increase in distribution amongst our top 10 distributors when compared to the same time last year. And when comparing six months pre-acquisition with the five months post-acquisition, overall trends have improved 3.5%. Overall trends for Blue Point have improved 1.3%, while its number one distributor has improved trends by 3.8%, and those are just a few examples. We are also executing a national brand strategy, beginning with revitalizing Shock Top to win as a national craft beer over time by targeting share and connect occasions to reach mainstream male and female drinkers. We think there is tremendous upside with Shock Top, as according to our qualitative research, Shock Top has the highest purchase intent among 12 of the largest beer brands. This is why we're focused on increasing distribution and getting this brand back into the hands of consumers. We are already on our way in Q3, Shock Top's number one distributor. has increased distribution 24% versus last year, while on-premise distribution has increased 0.5% over last year among ShopTalk's top 10 distributors. We are aggressively launching new and often disruptive innovation across our beer and non-alcoholic craft to increase portfolio brand appeal to new consumers and new occasions. Many of our newly acquired brands have not had innovation in the last couple of years. Among many others, recent examples include Liquid Love for heartfelt hydration, Runner's High, a non-alcoholic craft brew for athletes. Eyeball and Hardball, a non-carbonated 10% ABV product sold in 16.9-ounce plastic resealable containers, and non-carbonated shock top LitRT. Let me say that we're working to get the cost structure right. transforming the productivity and profitability of the breweries we acquire. We expect that our beer gross margins will increase once we fully realize the cost savings achieved in connection with the fully integrated beverage alcohol platform as we move away from the existing co-packing manufacturing agreements with ABI and increase our productivity in our newly acquired breweries and 13 brew pubs. Finally, let's discuss our wellness segment, represented mostly by Manitoba Harvest, which is fostering a positive impact on people and the planet through hemp by making ongoing commitments to sustainability with breakthrough initiatives such as investment in regenerative agriculture. Revenue grew 12% in Q3 to $13.4 million compared to last year. We partnered with Bioactive's company, Bright Sea, to revolutionize the functional fiber market and breakthrough product, Manitoba Harvest Bioactive Fiber, which is now exclusively available at Whole Foods markets nationwide. Incredibly, 95% of Americans do not consume the recommended daily intake of fiber. This product provides six grams of both soluble and insoluble fiber per serving and is the only fiber solution containing two powerful hemp-based bioactives for gut health. Moving forward, the team continues to assess the opportunity to bring hemp-derivative Delta-9 beverages to market under Happy Flower and Tilray Brands. With that, I now turn the call over to Carl to discuss our financials in greater detail. Carl?