Delivered $145.6 Million in Net Revenue and 16th Consecutive Quarter of Positive Adjusted EBITDA
Maintained #1 Cannabis Market Share Position in Canada, the Largest Federally Legal Cannabis Market in the World; With HEXO Transaction, Poised to Substantially Increase Canadian Revenue
Medical Cannabis Leader in Europe
Achieved Key Efficiency Milestones on Accelerated Path to Positive Cash Flow, Company Reiterates Cash Flow Guidance
LEAMINGTON, Ontario and NEW YORK, April 10, 2023 (GLOBE NEWSWIRE) — Tilray Brands, Inc. (“Tilray” or the “Company”) (Nasdaq: TLRY; TSX: TLRY), a leading global cannabis-lifestyle and consumer packaged goods company inspiring and empowering the worldwide community to live their very best life, today reported financial results for the third fiscal quarter ended February 28, 2023. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.
Tilray also announces today that it entered into a definitive agreement to acquire HEXO Corp. (NASDAQ: HEXO; TSX: HEXO) for an aggregate purchase price of approximately US$56 million, to be satisfied through the issuance of 0.4352 of Tilray Common Stock for each outstanding HEXO share. The acquisition, which is structured as an arrangement under applicable Canadian laws (the “Arrangement”), builds on the successful strategic alliance between the two companies and positions Tilray for continued strong growth and market leadership in Canada, the largest federally legal cannabis market in the world.
The completion of the Arrangement is subject to customary and negotiated closing conditions, including HEXO shareholder approval and court approval, and is expected to close in June 2023. Further information about the HEXO transaction is included in an investor presentation available on the investor section of Tilray.com and in our Current Report on Form 8-K filed today.
Financial Highlights
- Net revenue increased to $145.6 million compared to $144.1 million in the prior quarter. On a constant currency basis, net revenue was $154.2 million in the third quarter of 2023, up 2% from the prior year quarter.
- Distribution revenue increased 5% to $65.4 million, from the prior year quarter. On a constant currency basis, distribution revenue increased 12% to $70.1 million.
- Gross Profit (Loss) was ($11.7) million, while adjusted gross profit was $44.3 million. Gross margin was negative 8%, while adjusted gross margin rose to 30% from 26% in the year-ago quarter.
- Adjusted cannabis gross profit increased to $22.2 million from $18.0 million in the prior year quarter, while adjusted gross margin percentage increased to 47% from 33%.
- Achieved $22 million in annualized run-rate savings (and $12 million in actual cost savings) as part of $30 million cost optimization plan announced in Q4 of 2022; total annualized cash cost-savings since the closing of the Tilray-Aphria transaction reached $122 million.
- Adjusted EBITDA of $14.0 million, marking 16th consecutive quarter of positive adjusted EBITDA. Currently expecting Adjusted EBITDA in the range of $60 to $66 million, a greater than 30% increase from the prior year.
- Strong financial position with $408.3 million in cash and marketable securities.
- Reiterated expectation to deliver positive free cash flow from operating segments in fiscal 2023.
- Recorded non-cash $1.1 billion net asset reduction resulting from higher interest rates and a decline in market capitalization. This non-cash net asset reduction has no impact on the Company’s compliance with debt covenants, its cash flows or available liquidity.
Irwin D. Simon, Tilray Brands’ Chairman and Chief Executive Officer, stated, “During the quarter, we continued to focus on our highest priorities: sustaining and growing the top-line across core markets and geographies while optimizing the platform to achieve positive free cash flow on an accelerated timeline. We are executing on both fronts and delivered revenue growth despite challenging market dynamics across Canada, Europe, and the U.S, as well as our 16th consecutive quarter of positive adjusted EBITDA.”
Mr. Simon continued, “Looking ahead, we are focused on being the leading, most diversified cannabis lifestyle and CPG company in the world. Our strategy to deliver on this vision is centered on pursuing targeted growth opportunities, as reflected in our opportunistic acquisitions of both Montauk Brewing Company and HEXO, which has made significant strides in driving operating efficiency and improving profitability while continuing to invest in industry-leading brands. We are incredibly excited about our combined prospects moving forward with HEXO and expect a seamless integration of HEXO’s business into our efficient, built-to-last platform. At the same time, we will continue our relentless focus on cost and operational efficiencies and strengthening our industry-leading balance sheet to deliver sustained, profitable growth and shareholder value.”
Mark Attanasio, Chairman of HEXO, said, “Over the past year, HEXO established and has been executing on a rigorous cost-cutting and balance sheet optimization plan. As we began working with Tilray last year, the value that could be achieved through the combination of our businesses in order to compete and drive profitable growth in the highly fragmented Canadian market was immediately clear. With the recent headwinds in the cannabis industry, our Board determined that HEXO shareholders would benefit from being part of Tilray’s diversified business and from the strong plan in place they have to reinforce their industry leadership, continue to strengthen the top and bottom lines, and to drive value creation. With Irwin and his leadership team, we are confident that our brands will continue to grow and thrive as part of Tilray Brands.”
Operating Highlights
Leadership in Global Cannabis Operations, Brands, and Market Share:
- In Canada, despite ongoing challenging cannabis market conditions, quarter over quarter, Tilray maintained its #1 cannabis market share position. With the addition of HEXO’s leading high-growth brands, the Company expects to significantly bolster its position supported by low-cost operations and complimentary distribution across all Canadian geographies. The combined company is expected to strengthen Tilray’s existing Canadian position with 12.9% pro-forma market share and #1 market position across all major markets and a leading share across most product categories. This includes anticipated pro-forma net sales of approximately US$215M and the leading low-cost operations with distribution across all Canadian geographies.
- Capitalizing on the unrivaled platform provided by its cultivation and distribution operations across Portugal and Germany and the leadership team’s depth of commercial and regulatory expertise, Tilray is focused on growing its leading market share in medical cannabis in the countries in which it distributes today and achieving early-mover advantage in new countries as cannabis legalization continues to proliferate across Europe.
Maximizing the High-Growth Potential of U.S. CPG and Craft-Beverage Portfolio:
- In the third quarter, Tilray made substantial strides across its five craft-beverage brands including leaders SweetWater Brewing Company, Breckenridge Distillery, and Montauk Brewing Company, and its wellness brand Manitoba Harvest. By expanding recognition and distribution, Tilray will be well positioned to immediately leverage these brands to drive significant additional revenue in adult-use cannabis, pending federal legalization.
Strategic Growth Actions
- April 2023 – Tilray Medical Expands Footprint in Europe and Broadens Distribution Across the Czech Republic
- April 2023 – SweetWater Brewing Company Expands Across 44 States with Nevada Launch
- April 2023 – Manitoba Harvest Expands Whole Foods Market Distribution
- April 2023 – Breckenridge Distillery Wins Big at Whisky Magazine’s 2023 World Whiskies Awards
- March 2023 – Alpine Beer Opens Taproom at Petco Park Stadium in San Diego
- March 2023 – Breckenridge Distillery Establishes March 31st as National Après Day
- March 2023 – Montauk Brewing Expands Distribution Across the Northeast
- March 2023 – Tilray Brands Stockholders Approve Charter Amendment to Enhance Corporate Governance and Support Strategic Growth Plan
- March 2023 – SweetWater Brewing Company Brings Back Popular Triple Tail Tropical India Pale Ale
- March 2023 – SweetWater Brewing Company Introduces New West Coast Style India Pale Ale
- March 2023 – Potently Canadian Cannabis Brand, CANACA, Introduces New Collection of Terpene Rich Products Across Canada
- February 2023 – Good Supply Cannabis Brand Launches Canada’s Strongest Infused Pre-Rolls
- February 2023 – Breckenridge Distillery Strikes Gold at 2023 World Whiskies Awards
- February 2023 – Good Supply Cannabis Brand Launches New Product Lineup
- February 2023 – SweetWater Announces 420 Fest 2023 Lineup and Venue
- February 2023 – Breckenridge Distillery Launches Limited-Edition Sexy Motor Oil Whiskey for Valentine’s Day
- February 2023 – SweetWater Brewing Company Introduces New Crisp Lager to Year-Round Lineup
- January 2023 – Alpine Beer Launches INFINITE HAZE Hazy IPA
- January 2023 – Solei Cannabis Brand Introduces New Approach to Wellness with New Product Lineup and Brand Refresh
- January 2023 – SweetWater Brewing Company Celebrates 26 Years of Brewing with Throwback Beers, Jam Bands
Live Conference Call and Audio Webcast
Tilray Brands will host a webcast to discuss these results today at 5:00 p.m. ET. Investors may join the live webcast available on the Investors section of the Company’s website at www.tilray.com. The webcast will also be archived after the call concludes.
