TILRAY-BRANDS Earningcall Transcript Of Q2 of 2024
provide opening remarks and commentary; followed by Carl Merton, chief financial officer, who will review our financial results for fiscal year 2024 and fourth quarter. Also, joining us for the question-and-answer segment are Denise Faltischek, chief strategy officer and head of international; Blair MacNeil, president of Tilray Canada; and Ty Gilmore, president of Tilray Beverages North America. And now, I'd like to turn the call over to Tilray Brands' chairman and CEO, Irwin D. Simon. Irwin Simon -- Chairman and Chief Executive Officer Thank you, Berrin, and good afternoon, everyone, and thank you for joining us today. Before diving into our fiscal 2024 results, I'd like to take a moment to reflect on the evolution of Tilray Brands. Back in 2019, Aphria was a cannabis-focused Canadian LP with only $50 million in revenue and minimal cash reserves. Since then, we've taken a strategic approach to diversifying our operations and growing our global businesses. Through a combination of organic growth, strategic acquisitions, we have disrupted the CPG industry by expanding our footprint into new markets and adjacent business categories. Today, Tilray Brands is a leading global lifestyle company, spearheading the conversion of cannabis, beverages, and wellness products and is elevating lives through moments of connection. We are operating in more than 20 countries across North America, Europe, Australia and Latin America, with five businesses in medical adult-use cannabis, beverages, spirits, wellness products and 44 consumer-connected lifestyle brands. As a vertically integrated company, we have 20 facilities that service our collective businesses allowing us to produce approximately 90% of our products internally, ensuring the high quality of our products. This is a testament to our success in building a diversified global business that is dedicated to providing the best possible products for our consumers. We're incredibly proud of the progress we've made in the short time and are excited to continue driving innovation and growth in the years ahead. Fiscal 2024 marked a year of significant accomplishments for Tilray Brands, achieving our best financial results to date. We achieved 26% net revenue growth with annual record net revenue of $789 million, record adjusted gross profit of $236 million, record adjusted EBITDA of $60.5 million, adjusted net income of $6.2 million and positive adjusted free cash flow. We also strengthened our balance sheet by significantly reducing our net convertible debt by approximately $300 million, reducing our net debt-to-EBITDA ratio to 1.73x. We also see exceeded our cost saving synergy target by 31%, delivering $35 million of savings. Additionally, not only we met our revised annual guidance for adjusted EBITDA, but also generated adjusted free cash flow of approximately $7 million for the year. Our record financial results were achieved despite the challenges we faced in the fiscal year, absorbing approximately $10 million in cannabis price compression, paying approximately $100 million in excise tax and regulatory fees in Canada, and paying higher operating insurance rates of nearly $7 million because of our cannabis businesses, which, together, equate to approximately $120 million that directly hit our bottom line. Our ability to deliver record financial results while navigating these challenges is a testament to the resilience and dedication of our team who have worked tirelessly to ensure the success of our businesses. Over the past fiscal year, our strategic acquisitions have significantly benefited our financial results, which we expect will continue to benefit us well into the future. In June 2023, we acquired HEXO and Redecan expand our cannabis business, our productions and capability and brand growth and opportunities in Canada and internationally. Since then, we have broadened Tilray's cannabis product portfolio across multiple form factors, including an 85% year-over-year increase in mainstream flower sales in adult-use cannabis. The addition of Redecan brand has further strengthened our categories such as pre-rolls, oils, capsules. Today, Tilray is the No. 1 player in the straight-edge pre-rolled category with a 46% market share and a top player in the oils and capsules category combined with a 21.5% market share in the adult-use business in Canada. In August 2023, we acquired Truss Beverages, fortified Tilray's leadership in the Canadian cannabis beverage market. This acquisition increased our market share in the beverage category by 400%, growing our market share in the THC beverage category to 41% at the end of fiscal year 2024. In September 2023, we acquired eight iconic beer and beverage brands from ABI, along with related breweries and group hubs. As a result, we're now the fifth-largest craft brewer in the U.S., with a 4.5% share of the craft beer market. Our growing beverage portfolio now includes craft beers, spirits, ready-to-drink cocktail, ciders, and nonalcoholic beverages. The combination of our legacy businesses and these acquisitions resulted in our best fiscal year results. Let's now dive deeper into each of our business segments. Tilray Cannabis, global cannabis net revenue increased by 24% during fiscal 2024. In Canada, our quarter four marked the culmination of transformative year in Canadian cannabis. It was the highest revenue quarter of the year at $58.8 million, and it marked the completion of our HEXO and Truss Beverages integration, a significant operation overhaul, resulting in extensive improvements in our facility utilization. We continue to lead Canadian cannabis market share by almost 200 bps over the next competitor and have consistently been at the top of the industry for the past three years. From a regional perspective, Tilray was No. 1 across British Columbia, Alberta and Ontario, and Quebec provinces combined, which include over 80% of the Canadian population. And we've also led in all secondary markets. In Canadian cannabis volume, Tilray shipped approximately 60% more in kgs, reaching 140 metric tons. Our unit sales grew approximately 130% to almost 35 million units. In fiscal 2024, approximately 27% of our Canadian adult-use cannabis net sales revenue came from new innovation, which is a testament to our successful ability to innovate and launch new products. Cannabis consumers have a unique attribute of being open to trying new products. And in fiscal 2024, we capitalized on this by launching over 150 new SKUs. Looking ahead to next year, we anticipate that innovation will continue to play a significant role in driving our net sales, brands such as Broken Coast, Redecan, XMG, Mollo, and Good Supply will be launching exciting new products based on feedback from our consumers and our bartenders. Our strategic acquisition of HEXO and Redecan aim to integrate their sales plan into our infrastructure and expand our brand portfolio and product mix. In fiscal '24, we almost doubled the Redecan flower share with the launch of three popular genetics: Animal RNTZ; Space Age Cake; and Purple Churro. In Ontario, Animal RNTZ became the No. 1 and No. 3 selling genetic for 14g and 3.5g pack types, respectively. Space Age Cake was No. 8 in the 14g flower segment, despite limited availability. In fiscal '25, we expect these genetics will continue to be within the top 10 performing genetics in the mainstream flower. In 2024, we made significant steps to rightsize our operational footprint in Canada to balance supply and demand. We sold the Truss facility and transitioned all our cannabis beverage production to our London, Ontario drinks facility, pushing the London facilities utilization above 70% and improving our cannabis gross margins. These cannabis beverages are phenomenal. I wish we could sell them in the U.S. today. We centralized all our HEXO brand packaging and logistics into Leamington, Ontario, lowering our labor cost per unit by 35% and delivering $35.4 million in synergies and exceeding our initial target of $27 million by 37 -- by 31%. We successfully transitioned our Broken Coast cultivation to our Nanaimo, B.C. facility, increasing yields by 30% and lowering our cost per gram by 15%. We also paused the growing during the year at our Cayuga facility that will drive additional savings of $4.5 million on an annual basis. Finally, we transitioned a large portion of our Quebec cultivation facilities as vegetables, which we expect to contribute over $5 million annually to offset the cost of the facility, improving the marketability and the value of the facility and continue to grow cannabis in smaller portions of the facility to meet the needs we want for our Quebec consumers. All of these initiatives were designed to significantly lower the cost of growth to manufacture and package and ship our leading cannabis brands to market. These consumer and operational initiatives are entirely leverageable in markets around the world for years to come. In fact, early in fiscal '25, we shared significant learnings in cultivation and genetics with our teams in Europe. Turning to our international cannabis, we grew net revenue by 22% year over year to approximately $53 million and remained the No. 1 market leader in medical cannabis across Europe. Our annual growth during the fiscal 2024 was driven by increased sales in Germany, Poland, the U.K., Australia, and New Zealand. In Germany, we believe we're best positioned to capture a majority of the expected incremental growth in the cannabis medical market, which is projected to be approximately $3 billion in the medium term. On April 1st, the Cannabis Act became effective in Germany, which declassified cannabis to a nonnarcotic, expanding Tilray's market opportunity in Germany. Since the Cannabis Act went into effect, we have already seen a 65% increase in sales, and we believe that our current positioning in Germany provides us with several unique competitive advantages. Our cultivation facilities in Germany and Portugal, combined with our Tilray Pharma medical distribution network, provides Tilray with a critical vertical integration, allowing us to consistently supply the market with high-quality and a reliable source of medical cannabis. Aphria RX was a first facility in Germany to receive both its cannabis cultivation license and commercial distribution license for medical cannabis under the new regulations, allowing Tilray to cultivate, produce, distribute premium quality medical cannabis, increasing its production by five times. Aphria RX can now fully utilize and maximize its growing capacity while also expanding its genetics to a total of 31 approved strain from the previously approved three strains. We believe that this, coupled with the steps being taken by Germany to liberalize the reimbursement of medical cannabis, significantly increases the opportunity in the German market. We believe that Germany is declassifying cannabis as a nonnarcotic will also have a far-reaching impact on the drug policy throughout Europe. The European opportunity could represent a potential $45 billion medical market alone over the long term, and our presence in Europe allows Tilray to grow our global brand portfolio to a base of 700 million people, which is twice the population in the U.S. Turning to another promising international market. This fiscal year, we launched Broken Coast medical cannabis products in Australia. Medical cannabis patients in Australia now have access to Broken Coast through now cannabis strains cultivation from our facility in Canada. This launch came in response to the feedback we received in Australia and leveraged our insights from our operations in Canada and Europe. Now, briefly on our CC Pharma, Tilray Pharma distribution business in Germany, which represents our medical cannabis business through its network of 13,000 pharmacies. CC Pharma revenue was nearly flat at $259 million, both in fiscal 2024 and fiscal 2023, but our gross margin held at 11% during both periods, but may fluctuate with change in product mixes as we focus on higher-margin sales in future periods. Moving on to Tilray Beverages. In the U.S., we operate the fifth-largest craft brewery by sales with six manufacturing facilities over 500 distributors, 11 brew hubs, and one distillery restaurant, and a sales and marketing team across the country. Our Tilray beverage strategy focused on growing our portfolio of iconic craft brands, ensuring the product's excellence and innovation, driving scale, expanding distribution to increase market reach and consumer access. In our beverage segment, we generated $200 million in fiscal 2024. On an annualized basis, we'll quickly approach $300 million as we ramp up. Across our growing brands, SweetWater remains the No. 1 brand family in Georgia, multi-outlet. Montauk remains the No. 1 brand family in Metro New York, having increased its distribution by 570 basis points over last year. Tilray is now the No. 1 craft supplier year-to-date in the Pacific Northwest. 10 Barrel's volume growth increased by 640 basis points since Tilray took over the brand, and we're capitalizing on the success of 10 Barrel's Pub Beer brand extension with Pub Ice, Pub Cerveza line extension. Both innovations have done extremely well in the market with 4,200 new distribution points, growing 18%. Pub Beer is now the 11th largest brand on the West Coast with only half the distribution of top competitors due to its focus on the Pacific Northwest states. Since Tilray acquired Shock Top in 2023, we have made significant progress in turning the brand around. In just eight months, we have cut total Shock Top declines in half, and our top 10 distributors have shown a remarkable 35% basis-point improvement. As a result, Shock Top finished quarter four with 13.5% growth year over year since we acquired the brand, a testament to our team's hard work and a commitment to delivering outstanding results. We're excited to continue building on this momentum and driving growth for Shock Top in the years ahead. As we have mentioned before, our vision is far beyond our current reach as we continue our focus to become a dominant leading beverage business by leveraging our portfolio of beloved local craft brand to win more hearts and occasions and bring these brands back to growth with innovation into new categories, including our nonalc beers, flavored malt beverages, ready-to-drink cocktails, spirits, and beyond alcohol, as we expand further into water, energy drinks and other categories. We have the manufacturing facilities, the distribution, and the sales and marketing infrastructure to drive growth in Tilray's beverage businesses. In the nonalcoholic segment, we launched a new brand, Runner's High Brewing Company. For those who love a great beer flavor without the buzz, this brand seeks to be the beer choice of runner's and their community of social and casual runner's, not just elite athletes. There are currently three brews, Runner's High Golden, wheat, raspberry wheat, and dark Chocolate, with several expansion markets to follow. In April, we celebrated high honors and awards at the 2024 Craft Brewer Conference and the World Beer Cup. 10 Barrel Brewing won four craft beer awards, and 10 Barrel Brewmaster was recognized for innovation in craft brewing. Green Flash Brewing also took home honors for their world-class Hazy West Coast IPA. I'm incredibly proud of Tilray Beverages' team for these outstanding achievements. With over 500 beer and beverage distributors, Tilray is now a leading supplier in key regions across the U.S. with regional jewels in Northeast, Pacific Northwest, Colorado, and Southeast. Per BI shipments for retail, Tilray has increased its market share of total craft beer in seven states, including key markets such as Oregon, Washington, Florida, Colorado, and Arizona, when comparing share and after the acquisition of our eight craft brands. With each beverage acquisition, we have made over the past few years, we have optimized our cost structure, operational efficiencies, and we brought these back to our beloved brand of growth. As we complete our integration process, we expect to get the margin of these eight craft brands to a gross margin shared by SweetWater and our other legacy businesses. We also relaunched HiBall Energy Drinks on Amazon and plan to launch new hemp-derived delta-9 beverages strategically in selected markets, including Texas and New Jersey, where we can leverage our existing beverage distribution network. Our hemp-derived delta-9 formulations are complete, and we're actively developing a target launch strategy to ensure maximum impact. We look forward to sharing more updates on this exciting development soon. With their operational strength, Tilray is on a path to become a lightning rod for the beverage industry, rejuvenating growth into these brands. In Tilray's spirits, Breckenridge Distillery continues to win accolades as the best American whiskey two years in a row, and now is one of the most awarded craft distilleries in the U.S. In addition to its awards-winning Bourbon, Breckenridge Distillery also produces highly coveted gin and vodka. Finally, let's discuss our Tilray Wellness businesses' focus on improving people's lives through the power of hemp. Tilray Wellness is represented mainly by Manitoba Harvest, our leading hemp brand, with over a 53% market share in branded hemp products, Happy Flower, CBD-infused beverages, and HiBall Energy Drinks. In Quarter 4, our Tilray Wellness business saw impressive growth, with a 6% increase in revenue to 15.7 million. For fiscal 2024, the business generated 5% growth, bringing in 55.3 million, with stable improvements to gross margins of 30% from 29% last year. Tilray wellness strengthened its leading market share positions in both the U.S. and Canada over the past year, with consumption increasing both in the natural and conventional channels. As Tilray Brands has transformed, expanded, and completed numerous acquisitions to get to where we are today, our mission has evolved to be a leading premium lifestyle company with a house of brand, innovative products that inspire joy, wellness, and create memorable experience. With that, I'll now turn the call over to Carl, to discuss our financial results in greater detail. Carl? Carl Merton -- Chief Financial Officer Thank you, Irwin. I'll begin with a brief overview of our annual results for fiscal 2024 before moving on to a more in-depth review of Q4. Note that we present our financials in accordance with U.S. GAAP and in U.S. dollars. Throughout our discussion, we will be referring to both GAAP and non-GAAP adjusted results, and we encourage you to review the reconciliation contained within our press release of our reported results under GAAP with the corresponding non-GAAP measures. Net revenue for fiscal 2024 grew 26% to $788.9 million compared to the prior year at $627.1 million, which, as Irwin stated, was a record outcome. By segment, beverage alcohol revenue increased 113%, largely attributed to the acquired brands. Cannabis net revenue rose 24% year over year, inclusive of $9.8 million due to price compression in Canada, of which nearly all represented a reduction in EBITDA. Distribution net revenue was flat, and wellness net revenue rose 5% for the year. From a segment perspective, 25% of our net revenue was generated by our beverage alcohol business, 35% was generated by our cannabis business, 33% by our distribution business, and 7% by our wellness business. This compares to 15% beverage alcohol, 35% cannabis, 41% distribution, and 9% wellness last fiscal year. The year-over-year variance is due to our acquisition of HEXO, the new craft brands, and the remainder of the Truss Beverage brands. Further, as we progress through a full year with the new beverage alcohol brands, we anticipate these ratios to converge around 30% beverage alcohol, 30% cannabis, 30% distribution, and 10% wellness. Gross profit for fiscal 2024 increased 52%, to $223.4 million, another record, compared to the prior year at $147 million. Gross margin increased 28% from 23% in the prior year. Adjusted gross profit increased 14% to $235.6 million from $206.4 million in the prior year, while adjusted gross margin, declined by 300 basis points to 30%, primarily reflecting the removal of the HEXO advisory service revenue in the prior year with their initially lowered margins, and the impact from the recently acquired craft brands. By segment, beverage alcohol gross margin was 44% compared to 49% in the prior year due to lower cost margin contributions from the craft acquisitions, which is the result of temporary excess capacity that we are in the process of optimizing and enhancing. Beverage alcohol adjusted gross margin was 46% compared to 53%. This was offset by a $2.5 million volume commitment reimbursement in our spirits business, with no associated costs. For greater context, adjusted gross margin for our legacy beverage business was 58%, compared to the prior year of 53%, primarily as a result of an agreement with the distributor related to our spirits business and more volume flowing through the facilities as we ramped up production in March and April to meet seasonally strong April and May sales. Adjusted gross margin for the newly acquired craft brands was 33%. The improvement of gross margins in beverage alcohol, primarily in the beer portion of our business, as Irwin said earlier, is a major focus of ours. And we should begin to demonstrate improvements in Q1 of fiscal 2025. As of the end of our fiscal year, we successfully integrated production of all the acquired brands into our production facilities and exited their related co-manufacturing agreements with the exception of Shock Top. As a result of this production integration, we will no longer separate the gross margins between legacy products and the new craft products starting next quarter. Cannabis gross margin was 33% compared to 26% in the prior year. And adjusted gross margin was 36%, compared to 51%, primarily due to the termination of the HEXO advisory services agreement, which contributed only $1.5 million of gross profit in the current year compared to $40.4 million in the prior year. We also experienced a change in sales mix, with a higher percentage of sales coming from wholesale, compounded by the price compression in the Canadian adult-use market, as I will explain in further detail shortly. Distribution gross margin held steady at 11%, although it was expected to improve with changes in product mix as we focus on higher-margin sales in future periods. And wellness adjusted gross margin was up slightly at 30% compared to 29%, driven by lower material costs and overhead optimization. Net loss for fiscal 2024 improved to $222.4 million or $0.33 per share, compared to $1.4 billion in the prior year, or $2.35 per share, with the latter tied to noncash goodwill impairment in the prior year. From an adjusted perspective, we are reporting adjusted net income of $6.1 million, or $0.01 per share, compared to $0.4 million, or $0.0 per share, in the prior year. Under the current year's adjusted EBITDA definition, fiscal 2024 improved to a record $60.5 million, up 3% from $58.7 million in the prior year. Under the prior year's definition, we would have reported adjusted EBITDA of $65.1 million in the current year while reporting $61.5 million in the prior year. We have now generated positive adjusted EBITDA for five consecutive years. Cash flow used in operations was $30.9 million, compared to $7.9 million of cash generated by operations in the prior year. Adjusted free cash flow was $6.6 million for the year, which we view as a very positive outcome, considering that just last quarter we had communicated that, we did not believe we would achieve our goal of reaching positive free cash flow in fiscal 2024. But we had still expected a very strong Q4 that proved to be stronger than we had anticipated. Over this past year, we reduced our convertible debt by almost $300 million, decreasing our net debt to approximately $61.3 million, and leaving us with a net debt to EBITDA ratio of 1.73. Our intention is to continue lowering our indebtedness, optimize our capital structure, and enhance our financial flexibility. The net reduction in our convertible debt will decrease our annual interest expense by $14.4 million, which flows directly to net income and free cash flow. Let's now review our quarterly performance. Q4 total net revenue rose by $45.7 million to $229.9 million compared to the prior year quarter of $184.2 million, representing almost 25% growth. The diversification of our business through our adjacency model really came into play during Q2. For the first time, our beverage alcohol segment exceeded the size of our cannabis segment in Q4, representing 33% of our total revenue mix compared to only 18% in Q4 during the previous fiscal year. In Q4, compared to the prior-year period, net beverage alcohol revenues rose 137% to $76.7 million. Net cannabis revenue rose 12% to $71.9 million. Distribution revenue decreased 10% to $65.6 million. And finally, wellness revenue rose 6% to $15.7 million. We are disappointed that the Canadian government did not resolve the issue of cannabis excise taxes during their last budget and maintain our view that reform is essential to long-term viability of the Canadian cannabis industry. The current fixed price tax structure is inherently unfair, as it has allowed taxes as a percentage of revenue, to spike even as the price of cannabis has declined by more than 50% since legalization. Still, as Irwin mentioned, as a result of this, we paid over $100 million in excise taxes last year and will continue to do so every year in the future, until it is changed. We are encouraged that CRA is beginning to crack down on delinquent LPs, asserting cash flow pressures on our less financially strong competitors, potentially forcing an industry-needed LP rationalization. We incurred $22.1 million in Canadian cannabis excise taxes during Q4, which are a reduction to revenue, compared to $16.4 million last year. But due to a change in our revenue mix to higher excise tax products, and without the advisory fee, which is not taxed, excise tax amounted to 33% of gross Canadian cannabis revenue, excluding wholesale in Q4, compared to 25% in the same quarter last year. Gross profit was $82.4 million compared to $67.2 million in the prior-year quarter. Gross margin remained consistent at 36%, while adjusted gross margin decreased 100 basis points to 36% compared to the prior-year quarter. Most of the variance was related to cannabis, which included significantly higher HEXO advisory fees in the prior year, along with higher sales from wholesale and price compression in the Canadian adult-use market in the current year. Net loss improved to $15.4 million compared to a net loss of $119.8 million in the prior year quarter. On a per share basis, this amounted to a net loss of $0.04 per share versus $0.15 per share in the prior year quarter. Adjusted net income in the quarter was $35.1 million, which when calculated on a per share basis, resulted in an adjusted EPS of $0.04 for the quarter, a $0.06 improvement from the prior-year quarter. Adjusted EBITDA was $29.5 million, up 37% from $21.5 million in the prior-year quarter, representing a new record level of quarterly adjusted EBITDA. On synergies and cost reductions, recall that our revised HEXO synergy plan targeted between $30 million and $35 million in savings. We exceeded that by achieving $35.4 million of savings on an annualized run rate basis, of which $26.2 million represented actual cost savings during the year. Operating cash flow was $30.7 million compared to $43.6 million in the prior year quarter. This decrease in operating cash flow is primarily a function of restructuring in HEXO exit costs, as we complete the integration of HEXO's operations into our operations. Adjusted free cash flow was $30.6 million compared to $48.3 million in the prior year quarter, consistent with the changes in operating cash flow. Turning now to our four business segments, beverage alcohol revenue was $76.7 million, up 137% from $32.4 million in the prior-year quarter. The positive delta was due to contributions from the craft brands, which were purchased last fall. A strong beer business leading up to the summer, which is a historically busy season. And new innovations across the portfolio launched as part of the spring reset. Beverage alcohol gross profit increased to $40.8 million compared to $16.6 million. And adjusted gross profit increased to $41 million compared to $17.8 million. While beverage alcohol gross margin increased to 53%, compared to 51%. And adjusted gross margin decreased to 53%, from 55% in the prior year quarter. Gross cannabis revenue of $94 million was comprised of $61.5 million in Canadian adult use revenue, $13.1 million in international cannabis revenue, $6.4 million in Canadian medical cannabis revenue, and $13 million in wholesale revenue. Net cannabis revenue, which excludes $22.1 million in excise taxes, was $71.9 million, representing a 12% increase from the year-ago period. The positive variances related to increased organic growth, excluding the HEXO advisory fee, combined with contributions from the acquisition of HEXO and Truss. Offsetting the increase in net cannabis revenue, was the elimination of advisory services revenue, totaling $16.1 million from the prior-year quarter, due to the HEXO acquisition, which terminated the previous strategic arrangement that was in place. Revenue from Canadian medical cannabis grew 6%, despite the category being impacted by competition from the adult use market, and its related price compression. Wholesale revenue increased to $13 million, from $0.8 million last year. The Canadian cannabis industry is currently experiencing an interesting, previously unexperienced phenomenon that we took advantage of in the current quarter. As many in the industry moved to asset-light business models, a significant portion of previous production capacity in the industry has disappeared. This, in turn, has resulted in previous excess inventory levels in the industry dissipating. With lower inventory levels, securing supply appears to have become more difficult, and pricing in the wholesale market is increasing, as much as 5x in some product categories. Against this new backdrop, we took advantage of advantageous pricing in the quarter, resulting in a significant increase in our wholesale revenue. While opportunities related to wholesale product demand from asset-light Canadian LPs is expected to remain in the short-term, we do not anticipate this level of quarterly wholesale revenues to be the new norm. International cannabis net revenue was $13.1 million in the quarter compared to $15.7 million in the prior year due to timing differences of shipments in the international markets to various countries. Cannabis gross profit was $28.8 million and cannabis gross margin was 40% compared to $39.5 million and 61% in the prior year quarter. Distribution revenue, derived predominantly through Tilray Pharma, decreased to $65.6 million from $72.6 million in the prior-year quarter. Distribution gross profit increased to $7.8 million, compared to $6.7 million in the prior year quarter, while distribution gross margin increased to 12%, from 9% in the prior year quarter, driven by our increased focus on margin. Wellness revenue grew 6% to $15.7 million from $14.8 million in the prior-year quarter. Wellness gross profit was $4.9 million, up from $4.4 million in the prior-year quarter, and gross margin rose to 31%, compared to 30%. Our cash and marketable securities balance as of May 31, was $260.5 million, down from $448.5 million in the year-ago period. The majority of the variance was related to the repayment of the Tilray '23s, the cash purchase price of our acquisition of the craft brands, and settling assumed liabilities and exit costs from HEXO, including the unpaid excise tax we inherited as part of the transaction, as well as legacy litigation settlements. Fiscal 2024 was a year marked by major acquisitions in both the beverage alcohol and cannabis segments. In addition to the revenue increases we enjoyed from these acquisitions, we also made significant progress in integrating those acquisitions into our existing infrastructure. For the cannabis segment, this integration is largely complete, with redundant assets available for sale, the largest pieces remaining in our integration plan. For the beverage alcohol segment, there is still work to be done on the integration. As I said previously, all brands, except for Shock Top, have exited their co-manufacturing agreements and are now being produced in our facilities. Our integration work will continue to ensure we are maximizing low-cost production footprints and their related utilizations, fully integrating purchasing decisions across all brands to take advantage of pricing commensurate with our status, as the fifth-largest craft producer in the U.S., and fine-tweaking all our production activities, all to bring our consolidated beverage alcohol margins back up above 40%. Finally, we are pleased to provide the following guidance for fiscal 2025. We anticipate net revenues to be between $950 million and $1 billion, with mid single digits of organic growth. Let me now conclude our prepared remarks and open the lines for questions from our covering analysts. Operator, what's the first question? Operator Questions & Answers: |
Tilray-brands