Tilray(TLRY) - 2025 Q4 - Annual Report

Part I Business Tilray Brands, Inc. is a global consumer products company with four segments: Cannabis, Beverage, Distribution, and Wellness, focused on strategic acquisitions and global brand building - Tilray operates through four reportable segments: Beverage, Cannabis, Distribution, and Wellness, aiming to be a leading global lifestyle consumer products company[19][30][31] Net Revenue by Reportable Segment (Fiscal Years 2023-2025) | Segment | FY 2025 Net Revenue (in thousands USD) | FY 2024 Net Revenue (in thousands USD) | FY 2023 Net Revenue (in thousands USD) | | :--- | :--- | :--- | :--- | | Beverage business | $240,595 | $202,094 | $95,093 | | Cannabis business | $249,001 | $272,798 | $220,430 | | Distribution business | $271,228 | $258,740 | $258,770 | | Wellness business | $60,485 | $55,310 | $52,831 | | Total net revenue | $821,309 | $788,942 | $627,124 | - The company's core strategy involves building global brands, developing innovative products, growing its beverage and hemp-food businesses, expanding international medical cannabis availability, and optimizing global operations for cost reduction[26][27][28] - In fiscal year 2025, Tilray continued its expansion in the beverage sector by acquiring four craft beer brands and breweries from Molson Coors, designated as "Craft Acquisition II"[27][29] Our Company Tilray Brands, Inc. is a global consumer products company leading in Canadian cannabis and U.S. craft brewing, supplying medical cannabis internationally - Tilray is a leading global lifestyle consumer products company with operations in Canada, the U.S., Europe, Australia, and Latin America[19] - The company is the 4th largest craft brewer in the U.S. and leads the Canadian cannabis market in revenue[20] Our Strategy and Outlook Tilray's strategy focuses on driving revenue and profitability through global brand building, product innovation, U.S. beverage expansion, and cost management - The company's strategy is to leverage its brands, infrastructure, and expertise to drive revenue, achieve profitability, and build long-term shareholder value[26] - A key strategic pillar is the growth and leverage of its U.S. beverage and hemp-based food businesses, which serve as a platform for potential entry into the U.S. cannabis market upon federal legalization[27] Reportable Segments Tilray's four segments—Beverage, Cannabis, Distribution, and Wellness—contributed to $821.3 million in FY2025 net revenue, with Distribution being the largest at 33% Net Revenue by Segment (FY 2025) | Segment | Net Revenue (in thousands USD) | % of Total Revenue | | :--- | :--- | :--- | | Beverage business | $240,595 | 29% | | Cannabis business | $249,001 | 30% | | Distribution business | $271,228 | 33% | | Wellness business | $60,485 | 8% | | Total | $821,309 | 100% | Cannabis Revenue by Channel (FY 2025) | Channel | Revenue (in thousands USD) | % of Total Cannabis Revenue | | :--- | :--- | :--- | | Canadian medical | $24,998 | 10% | | Canadian adult-use | $224,048 | 91% | | Wholesale | $18,207 | 7% | | International | $63,356 | 25% | | Less excise taxes | ($81,608) | (33)% | | Total | $249,001 | 100% | Beverage Segment Tilray's Beverage segment, the 4th largest craft brewery in the U.S., operates 7 facilities and 16 brewpubs, distributing diverse brands across all 50 states - Tilray is the 4th largest craft brewery in the United States, with a portfolio including brands like SweetWater, Montauk, Shock Top, and Breckenridge Distillery[20][33] - The segment operates 7 production facilities and 16 brewpubs across the U.S., producing a variety of craft brews, ciders, seltzers, and spirits[37] - Beverage brands are distributed in all 50 states to nearly 50,000 off-premises retail locations and over 30,000 on-premises restaurants and bars[38] Cannabis Segment Tilray's Cannabis segment supplies medical cannabis to over 20 countries and manages a diverse adult-use portfolio in Canada, facing intense competition and evolving regulations - Tilray supplies medical cannabis products to patients in over 20 countries across five continents, utilizing EU-GMP certified production facilities in Portugal and Germany[47][59] - The company maintains a diverse portfolio of adult-use cannabis brands in Canada, segmented by consumer preference and price point, including Good Supply, Redecan, and Broken Coast[51][54] - Distribution in Canada is managed through provincial/territorial agencies for adult-use products and a direct-to-patient online platform for medical cannabis[61][63] - The company faces intense competition from approximately 1,000 licensed producers in Canada and the persistent illicit market[74][75][77] Distribution Segment The Distribution segment, primarily CC Pharma, is a leading German pharmaceutical importer and distributor, also supporting Tilray's medical cannabis distribution - The segment is centered around CC Pharma, a leading drug importer in Germany that specializes in re-importing and distributing European pharmaceuticals[81] - CC Pharma distributes approximately 1,200 product lines to public pharmacies, hospital pharmacies, and pharmaceutical wholesalers, and also supports Tilray's medical cannabis business in Germany[81][84] Wellness Segment The Wellness segment, led by Manitoba Harvest, distributes hemp-based food products to over 21,000 retail locations in North America, subject to evolving U.S. regulations - The Wellness segment primarily consists of the Manitoba Harvest brand, which produces and distributes hemp-based food products sold in over 21,000 retail locations in the U.S. and Canada[87][89] - The segment operates under U.S. regulations defined by the 2018 Farm Bill, which legalized hemp but preserved FDA authority over products containing hemp derivatives like CBD and THC[90][91] Environmental and Social Tilray is committed to environmental sustainability through GHG emission monitoring and waste management, alongside social initiatives like community donations and health awareness campaigns - The company is committed to monitoring its greenhouse gas (GHG) emissions, promoting supply chain sustainability, and implementing waste management programs[94][102] - Social initiatives include community hospital donations, support for veterans, and partnerships with organizations like the Waterkeeper Alliance, Soil Health Institute, and One Tree Planted[98][99] Employees and Human Capital Resources As of May 31, 2025, Tilray employed approximately 2,842 people globally, with a human capital strategy focused on talent, health, safety, compensation, and engagement - As of May 31, 2025, Tilray employed approximately 2,842 people worldwide[105] - The company's human capital management focuses on talent acquisition, health and safety, compensation and benefits, and employee engagement[106][108] AI and Cryptocurrency Business Strategy Tilray is implementing AI in greenhouse operations to enhance efficiency and plans to accept cryptocurrency for online payments, exploring further strategic initiatives - The company is implementing AI in its global greenhouse operations to manage conditions in real-time, aiming to increase output and reduce costs[106] - Tilray plans to accept cryptocurrency as a payment method for its online operations and is exploring other strategic initiatives related to cryptocurrency[106] Risk Factors Tilray faces significant risks including evolving cannabis regulations, intense market competition, acquisition integration challenges, potential asset impairments, financial losses, and cryptocurrency market volatility - The cannabis business is highly dependent on regulatory approvals, licenses, and ongoing compliance, with risks related to evolving government regulations in the U.S. and other international markets[110][115] - The company faces intense competition from the illicit cannabis market and other licensed producers, which could negatively impact business success[122][125] - Significant financial risks include a history of net losses, potential for additional goodwill and intangible asset impairments, and the challenge of achieving or maintaining profitability[149][151] - Ownership of the company's securities is subject to risks such as failure to meet Nasdaq's continued listing requirements, severe stock price volatility, and potential dilution from convertible securities and warrants[204][207][213] - The new cryptocurrency strategy introduces high risks due to market volatility and an evolving, uncertain regulatory landscape[220][221] Unresolved Staff Comments The company reports no unresolved staff comments - None[238] Cybersecurity Tilray manages cybersecurity through an enterprise-wide program overseen by the Board and CIO, with no material incidents reported to date - Cybersecurity risk is managed through an enterprise-wide framework that includes regular risk assessments, advanced access controls, employee training, and incident response protocols[239][240] - Oversight is provided by the Board of Directors, with the Chief Information Officer (CIO) responsible for managing the cybersecurity program[242] - As of the report date, the company believes no cybersecurity threats have materially affected or are reasonably likely to materially affect its business, strategy, or financial condition[241] Properties Tilray operates diverse owned and leased properties globally, including cannabis cultivation, craft breweries, hemp processing, and distribution facilities across its segments Principal Facilities by Location and Segment | Location | Segment | Primary Use | Ownership | | :--- | :--- | :--- | :--- | | Leamington, ON, Canada | Cannabis | Cultivation and Processing | Owned | | Gatineau, QC, Canada | Cannabis | Cultivation and Processing | Owned | | Atlanta, GA, USA | Beverage | Craft Brewery | Owned | | Littleton, CO, USA | Beverage | Brewery/Pub facility | Owned | | Portland, OR, USA | Beverage | Craft Brewery | Owned | | Cantanhede, Portugal | Cannabis | Cultivation and Processing | Owned | | Densborn, Germany | Distribution | Distribution Operations | Owned | Legal Proceedings The company is involved in various legal proceedings, including ongoing U.S. securities class actions, settled Canadian class actions, and contractual disputes - The information for this item is incorporated by reference from Note 28 of the Consolidated Financial Statements[248] Mine Safety Disclosures This item is not applicable to the company - Not applicable[249] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Tilray's common stock trades on Nasdaq and TSX under "TLRY", with no cash dividends paid, and recent issuances for convertible senior notes - The company's common stock is traded on the Nasdaq Global Select Market and the TSX under the symbol "TLRY"[251] - Tilray has not paid cash dividends and does not plan to in the foreseeable future, intending to use funds for operations and growth[252] - During fiscal 2025, the company issued an aggregate of 80,517,859 shares of common stock in exchange for approximately $55.6 million in aggregate principal of its 5.20% Convertible Senior Notes due 2027[255][256] Stock Performance Comparison (May 31, 2020 - May 31, 2025) | Period Ending | Tilray Brands, Inc. | Nasdaq Composite | Horizons Marijuana Life Sciences Index | | :--- | :--- | :--- | :--- | | May 31, 2020 | $100.00 | $100.00 | $100.00 | | May 31, 2021 | $172.39 | $144.88 | $154.83 | | May 31, 2022 | $45.58 | $127.31 | $60.29 | | May 31, 2023 | $16.95 | $136.31 | $30.33 | | May 31, 2024 | $18.27 | $176.35 | $31.88 | | May 31, 2025 | $4.37 | $201.41 | $21.95 | Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations In FY2025, Tilray's net revenue grew 4% to $821.3 million, but a $2.1 billion impairment charge led to a $2.28 billion operating loss, while the company focuses on strategic acquisitions and cost-saving initiatives Consolidated Results of Operations (Fiscal Years 2023-2025) | Metric (in thousands USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net revenue | $821,309 | $788,942 | $627,124 | | Gross profit | $240,570 | $223,351 | $146,960 | | Operating loss | ($2,282,705) | ($174,745) | ($1,369,685) | | Net loss | ($2,181,356) | ($222,404) | ($1,443,000) | | Adjusted EBITDA | $55,035 | $60,465 | $58,679 | - The significant increase in operating loss in FY2025 was primarily driven by a $2.1 billion non-cash impairment charge on intangible assets and goodwill[292][320][335] - The company is implementing "Project 420," a comprehensive plan for its beverage segment focused on SKU rationalization, geographic focus, distributor consolidation, and synergy optimization to improve profitability[287][291] - The company is managing liquidity through an at-the-market (ATM) equity program, which generated net proceeds of $161.2 million in FY2025, to fund strategic acquisitions and capital expenditures[376] Quantitative and Qualitative Disclosures About Market Risk Tilray is exposed to credit, liquidity, currency, and interest rate risks, with management considering liquidity risk low and not hedging currency exposure - The company's primary market risks are credit, liquidity, currency rate, and interest rate risk[388] - Credit risk stems from unsecured accounts receivable, with all cash held at major financial institutions[389] - Currency rate risk arises from significant operations in Canada and Europe, with financial assets and liabilities denominated in Canadian dollars and Euros[393] Financial Statements and Supplementary Data This section presents Tilray's audited consolidated financial statements for FY2023-2025, including balance sheets, income statements, equity changes, and cash flows, with an independent auditor's report Key Balance Sheet Data (as of May 31) | Account (in thousands USD) | 2025 | 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $221,666 | $228,340 | | Total current assets | $688,626 | $677,710 | | Goodwill | $752,350 | $2,008,884 | | Intangible assets | $21,423 | $915,469 | | Total assets | $2,074,327 | $4,221,665 | | Liabilities & Equity | | | | Total current liabilities | $280,303 | $299,170 | | Total liabilities | $584,752 | $778,487 | | Total stockholders' equity | $1,489,575 | $3,443,178 | Key Income Statement Data (for the year ended May 31) | Account (in thousands USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net revenue | $821,309 | $788,942 | $627,124 | | Gross profit | $240,570 | $223,351 | $146,960 | | Impairment of intangible assets and goodwill | $2,096,139 | $0 | $934,000 | | Operating loss | ($2,282,705) | ($174,745) | ($1,369,685) | | Net loss | ($2,181,356) | ($222,404) | ($1,443,000) | | Net loss per share - basic & diluted | ($2.46) | ($0.33) | ($2.35) | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[655] Controls and Procedures Management concluded that Tilray's disclosure controls and internal control over financial reporting were effective as of May 31, 2025, excluding recent acquisitions from the initial assessment - Management concluded that disclosure controls and procedures were effective as of May 31, 2025[657] - Management concluded that internal control over financial reporting was effective as of May 31, 2025[661] - The evaluation of internal controls excluded the recently acquired "Craft Acquisition II" from Molson Coors, which represented 0.9% of total assets and 3% of net revenue for the fiscal year[663] Other Information Key events include a credit facility refinancing, a Nasdaq non-compliance notice regarding bid price, and Board-approved retention payments for key executives - On March 25, 2025, the company received a notice from Nasdaq for failing to meet the minimum $1.00 bid price requirement and has 180 days to regain compliance[666] - On July 24, 2025, the Board approved retention payments for key executives, including $950,000 for CEO Irwin Simon, contingent on continued employment through August 31, 2026[667][668] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company reports no issues under this item - None[669] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2025 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2025 Annual Meeting of Stockholders[671][672][675] Executive Compensation Information on executive compensation and equity compensation plans is incorporated by reference from the company's 2025 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2025 Annual Meeting of Stockholders[671][673] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership by beneficial owners and management, and equity compensation plans, is incorporated by reference from the company's 2025 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2025 Annual Meeting of Stockholders[671][674][675] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the company's 2025 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2025 Annual Meeting of Stockholders[671][674][675] Principal Accounting Fees and Services Information on principal accounting fees and services is incorporated by reference from the company's 2025 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2025 Annual Meeting of Stockholders[671][674] Part IV Exhibits, Financial Statement Schedules This section lists documents filed as part of the Form 10-K, including an Exhibit Index of corporate governance documents, material contracts, and certifications - Financial Statement Schedules have been omitted because the required information is not applicable or is included in the financial statements or notes[676] - The Exhibit Index lists all documents filed as part of the report, including the Certificate of Incorporation, Bylaws, Indentures for convertible notes, employment agreements, and various certifications[677][679][681] Form 10-K Summary The company provides no summary under this item - None[686]