PART I. FINANCIAL INFORMATION This section provides unaudited condensed interim consolidated financial statements and management's discussion and analysis Item 1. Financial Statements (Unaudited) This section presents Tilray Brands, Inc.'s unaudited condensed interim consolidated financial statements and notes for Q1 2025 Consolidated Statements of Financial Position (Unaudited) This section presents the company's unaudited consolidated financial position for Q1 2025 Consolidated Statements of Financial Position (in thousands of USD) | Metric | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Total current assets | $701,140 | $688,626 | | Total assets | $2,082,646 | $2,074,327 | | Total current liabilities | $267,632 | $280,303 | | Total liabilities | $561,988 | $584,752 | | Total stockholders' equity | $1,520,658 | $1,489,575 | - Total assets increased by $8.3 million from May 31, 2025, to August 31, 2025, reaching $2.08 billion11 - Total liabilities decreased by $22.8 million, from $584.8 million to $562.0 million, over the three-month period11 - Total stockholders' equity increased by $31.1 million, from $1.49 billion to $1.52 billion11 Consolidated Statements of Loss and Comprehensive Loss (Unaudited) This section details the company's unaudited consolidated loss and comprehensive loss for Q1 2025 Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (in thousands of USD) | Metric | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Net revenue | $209,501 | $200,044 | | Cost of goods sold | $152,032 | $140,338 | | Gross profit | $57,469 | $59,706 | | Operating income (loss) | $2,092 | $(36,570) | | Net income (loss) | $1,513 | $(34,652) | | Net loss per share - basic | $(0.00) | $(0.04) | | Net loss per share - diluted | $(0.00) | $(0.04) | - Net revenue increased by 4.7% to $209.5 million for the three months ended August 31, 2025, compared to $200.0 million in the prior year period13 - The company reported a net income of $1.5 million for the three months ended August 31, 2025, a significant improvement from a net loss of $34.7 million in the prior year period13 - Operating income improved substantially, moving from a loss of $36.6 million in Q1 2024 to an income of $2.1 million in Q1 202513 Consolidated Statements of Stockholders' Equity (Unaudited) This section outlines changes in the company's unaudited consolidated stockholders' equity for Q1 2025 - Total stockholders' equity increased from $1.49 billion at May 31, 2025, to $1.52 billion at August 31, 202516 - Share issuance through the At-the-Market (ATM) program generated $22.5 million in additional paid-in capital during the three months ended August 31, 202516 - The company repurchased $5.0 million of TLRY 27 convertible notes by issuing 12,591,816 shares of Common Stock, resulting in a $4.8 million increase in additional paid-in capital and a $1.2 million reduction in additional paid-in capital for the equity component settlement165465 - Stock-based compensation contributed $5.1 million to additional paid-in capital for the three months ended August 31, 20251664 Consolidated Statements of Cash Flows (Unaudited) This section presents the company's unaudited consolidated cash flow activities for Q1 2025 Consolidated Statements of Cash Flows (in thousands of USD) | Cash Flow Activity | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Net cash provided by (used in) operating activities | $(1,341) | $(35,307) | | Net cash provided by (used in) investing activities | $24,467 | $(49,395) | | Net cash provided by (used in) financing activities | $19,848 | $60,590 | | Net increase (decrease) in cash and cash equivalents | $43,162 | $(23,154) | | Cash and cash equivalents, end of period | $264,828 | $205,186 | - Net cash used in operating activities significantly decreased from $(35.3) million in Q1 2024 to $(1.3) million in Q1 2025, indicating improved operational cash management18187 - Investing activities shifted from using $49.4 million in Q1 2024 to providing $24.5 million in Q1 2025, primarily due to the sale of marketable securities in the current period18188 - Cash provided by financing activities decreased from $60.6 million in Q1 2024 to $19.8 million in Q1 2025, mainly due to variability in funds from the ATM Program18189 Notes to Condensed Interim Consolidated Financial Statements (Unaudited) This section provides detailed notes supporting the unaudited condensed interim consolidated financial statements Note 1. Basis of presentation and summary of significant accounting policies This note outlines the basis of financial statement presentation and significant accounting policies - The interim financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules, and should be read with the Annual Report on Form 10-K20 - The financial statements are prepared on a going concern basis, assuming continued operations and realization of assets/discharge of liabilities in the normal course21 - The company adopted ASU 2023-08 (Accounting for and Disclosure of Crypto Assets) in conjunction with digital asset acquisition during Q1 2025, requiring fair value measurement with gains/losses reported as unrealized32 - New accounting pronouncements not yet adopted include ASU 2023-05 (Joint Venture Formations), ASU 2023-06 (Disclosure Improvements), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03 (Expense Disaggregation Disclosures), with effective dates ranging from June 2026 to May 202627282930 Note 2. Inventory This note details the composition and changes in the company's inventory balances Inventory Breakdown (in thousands of USD) | Inventory Type | August 31, 2025 | May 31, 2025 | | :--------------------- | :-------------- | :----------- | | Beverage inventory | $70,622 | $63,965 | | Cannabis plants | $27,033 | $24,045 | | Dried cannabis | $106,653 | $103,507 | | Cannabis derivatives | $4,481 | $7,877 | | Cannabis vapes | $1,892 | $1,860 | | Packaging and other | $14,508 | $15,366 | | Distribution inventory | $44,450 | $38,735 | | Wellness inventory | $13,148 | $15,527 | | Total | $282,787 | $270,882 | - Total inventory increased by $11.9 million, from $270.9 million to $282.8 million, between May 31, 2025, and August 31, 202534 - Beverage inventory saw the largest increase, rising by $6.6 million, while cannabis derivatives inventory decreased by $3.4 million34 Note 3. Capital assets This note provides a breakdown of the company's capital assets and related changes Capital Assets Breakdown (in thousands of USD) | Capital Asset Type | August 31, 2025 | May 31, 2025 | | :------------------------- | :-------------- | :----------- | | Land | $45,122 | $44,529 | | Production facilities | $416,605 | $407,650 | | Equipment | $278,584 | $280,585 | | Leasehold improvements | $20,415 | $20,415 | | Finance lease, ROU assets | $40,019 | $40,308 | | Construction in progress | $11,190 | $11,241 | | Less: accumulated amortization | $(251,778) | $(236,295) | | Total | $560,157 | $568,433 | - Total capital assets decreased by $8.3 million to $560.2 million as of August 31, 2025, primarily due to increased accumulated amortization35 - The company classified a Fort Collins, CO warehouse facility from its Cannabis segment as held for sale, valued at $5.8 million, with the sale expected to complete by May 31, 202635 Note 4. Leases This note describes the company's lease arrangements, including right-of-use assets and liabilities Lease-Related Assets and Liabilities (in thousands of USD) | Metric | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Total right-of-use assets | $61,022 | $62,587 | | Total lease liabilities | $70,822 | $71,866 | Future Undiscounted Lease Payments (in thousands of USD) | Fiscal Year | Operating Leases | Finance Leases | | :-------------------- | :--------------- | :------------- | | 2026 (remaining 9 mos) | $5,902 | $3,388 | | 2027 | $6,931 | $4,518 | | 2028 | $5,916 | $4,518 | | 2029 | $2,941 | $4,370 | | Thereafter | $10,647 | $66,694 | | Total minimum lease payments | $32,337 | $83,488 | Note 5. Intangible Assets This note details the company's intangible assets and their expected future amortization expense Intangible Assets Breakdown (in thousands of USD) | Intangible Asset Type | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Customer relationships & distribution channel | $2,368 | $0 | | Licenses, permits & applications | $9,503 | $10,523 | | Intellectual property, trademarks, knowhow & brands | $13,302 | $10,900 | | Total | $25,173 | $21,423 | - Total intangible assets increased by $3.75 million to $25.2 million as of August 31, 2025, primarily driven by an increase in customer relationships & distribution channel assets39 Expected Future Amortization Expense for Intangible Assets (in thousands of USD) | Fiscal Year | Amortization | | :-------------------- | :------------- | | 2026 (remaining 9 mos) | $5,737 | | 2027 | $7,649 | | 2028 | $4,085 | | 2029 | $2,897 | | 2030 | $2,897 | | Thereafter | $1,908 | | Total | $25,173 | Note 6. Goodwill This note presents the company's goodwill by reporting unit, primarily within the Cannabis segment Goodwill by Reporting Unit (in thousands of USD) | Reporting Unit | August 31, 2025 | May 31, 2025 | | :--------------------- | :-------------- | :----------- | | Cannabis Goodwill | $752,350 | $752,350 | | Beverage Goodwill | $0 | $0 | | Wellness Goodwill | $0 | $0 | | Distribution Goodwill | $0 | $0 | | Total | $752,350 | $752,350 | - Goodwill remained constant at $752.4 million for the Cannabis segment, with no goodwill reported for Beverage, Wellness, or Distribution segments as of August 31, 202542 Note 7. Business acquisitions This note provides details on recent business acquisitions, including the Craft Acquisition II - Effective September 1, 2024, Tilray acquired four craft beer brands and breweries (Atwater Brewery, Hop Valley Brewing Company, Terrapin Beer Co., and Revolver Brewing) from Molson Coors Beverage Company for $23.0 million in cash (Craft Acquisition II)43 - The Craft Acquisition II would have generated approximately $13.7 million in additional net revenue and $4.0 million in net income for the three months ended August 31, 2024, on a proforma basis44 Note 8. Long term investments This note outlines the company's long-term investments, including equity investments Long-Term Investments (in thousands of USD) | Investment Type | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Equity investments measured at fair value | $2,012 | $1,972 | | Equity investments under measurement alternative | $8,160 | $8,160 | | Total | $10,172 | $10,132 | - Long-term investments remained stable at $10.2 million, with an option to acquire a 68% membership interest in SH Acquisition for $1.00 upon U.S. federal cannabis legalization valued at $8.2 million45 Note 9. Bank indebtedness This note details the company's bank indebtedness, including operating lines of credit - Aphria Inc. has an operating line of credit of C$1.0 million, undrawn as of August 31, 202547 - CC Pharma GmbH has two operating lines of credit totaling €7.5 million, with €7.46 million ($8.2 million) drawn as of August 31, 202548 - American Beverage Crafts Group Inc. (ABC Group) has a $25.0 million revolving credit facility, undrawn as of August 31, 2025, with new financial covenants for minimum consolidated EBITDA and liquidity49 Note 10. Accounts payable and accrued liabilities This note provides a breakdown of the company's accounts payable and accrued liabilities Accounts Payable and Accrued Liabilities (in thousands of USD) | Category | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Trade payables | $110,802 | $107,348 | | Accrued liabilities | $91,993 | $103,260 | | Litigation accruals | $12,021 | $12,431 | | Accrued payroll and employment related taxes | $2,796 | $1,436 | | Income taxes payable | $1,038 | $58 | | Accrued interest | $2,677 | $4,193 | | Sales taxes payable | $9,586 | $6,596 | | Total | $230,913 | $235,322 | - Total accounts payable and accrued liabilities decreased by $4.4 million to $230.9 million as of August 31, 202550 - Accrued liabilities decreased by $11.3 million, while trade payables increased by $3.4 million50 Note 11. Long-term debt This note details the company's long-term debt instruments and their carrying amounts Long-Term Debt Instruments (in thousands of USD) | Debt Instrument | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Term loan - C$53,000 | $38,690 | $38,690 | | Term loan - C$25,000 (1) | $11,222 | $11,501 | | Term loan - C$25,000 (2) | $9,127 | $9,354 | | Term loan - C$1,250 | $125 | $157 | | Mortgage payable - C$3,750 | $1,988 | $2,020 | | Term loan - €3,500 | $2,437 | $2,546 | | Mortgage payable - $22,635 | $19,233 | $19,418 | | Term loan - $90,000 | $78,750 | $80,438 | | Carrying amount of long-term debt | $161,572 | $164,124 | | Net carrying amount | $160,470 | $163,260 | | Total non-current portion | $144,175 | $148,493 | - The total non-current portion of long-term debt decreased by $4.3 million to $144.2 million as of August 31, 202551 Note 12. Convertible debentures payable This note describes the company's convertible debentures, including the TLRY 27 Notes Convertible Debentures Payable (in thousands of USD) | Metric | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | 5.20% Convertible Notes ("TLRY 27") | $84,267 | $86,428 | | Total convertible debentures payable, non current portion | $84,267 | $86,428 | - The net carrying amount of TLRY 27 Notes decreased by $2.16 million to $84.3 million as of August 31, 202552 - During Q1 2025, the company exchanged $5.0 million of TLRY 27 Notes for cancellation by issuing 12,591,816 shares of Common Stock and paying $6 thousand in cash, resulting in a $495 thousand gain54 - Interest expense recognized for TLRY 27 Notes was $1.4 million, and accretion of amortized discount interest was $2.0 million for the three months ended August 31, 202555 Note 13. Warrant liability This note details the company's warrant liability, including outstanding warrants and fair value - As of August 31, 2025, there were 6,209,000 warrants outstanding, expiring September 17, 202557 - The exercise price of each warrant was adjusted to $0.38 due to anti-dilution price protection features triggered by recent Common Stock issuances58 - The fair value of outstanding warrants was estimated at $1.00 per warrant as of August 31, 2025, using the Black Scholes pricing model59 Note 14. Stockholders' equity This note provides information on the company's stockholders' equity, including common stock and compensation - As of August 31, 2025, the company had 1,118,291,159 shares of Common Stock issued and outstanding61 - During Q1 2025, 34,443,799 shares of Common Stock were issued under the ATM program, generating $22.5 million in net proceeds65 - Stock-based compensation expense for Q1 2025 was $5.1 million, a decrease from $6.9 million in the prior year period64 Note 15. Accumulated other comprehensive income (loss) This note details the components of accumulated other comprehensive income (loss) Accumulated Other Comprehensive Income (Loss) (in thousands of USD) | Metric | August 31, 2025 | August 31, 2024 | | :-------------------------------- | :-------------- | :-------------- | | Balance May 31 | $(43,063) | $(43,499) | | Other comprehensive income (loss) | $(167) | $3,622 | | Balance August 31 | $(43,230) | $(39,877) | - Accumulated other comprehensive loss increased to $(43.2) million as of August 31, 2025, primarily due to a foreign currency translation loss of $(167) thousand in the current period66 Note 16. Non-controlling interests This note describes non-controlling interests in majority-owned subsidiaries and their attributable income - Majority-owned subsidiaries with non-controlling interests include Aphria Diamond (51% owned) and Colcanna S.A.S. (90% owned)67 Net Comprehensive Income (Loss) Attributable to NCI (in thousands of USD) | Subsidiary | August 31, 2025 | August 31, 2024 | | :-------------------------------- | :-------------- | :-------------- | | Aphria Diamond | $1,810 | $5,088 | | ColCanna S.A.S. | $4 | $(35) | | Total | $1,814 | $5,051 | - Net comprehensive income attributable to non-controlling interests decreased from $5.1 million in Q1 2024 to $1.8 million in Q1 202568 Note 17. Income taxes This note explains the company's income tax recovery or expense and related factors - The company reported an income tax recovery of $2.3 million for the three months ended August 31, 2025, compared to an income tax expense of $886 thousand in the prior year period70 - The change in income tax is primarily due to the geographical mix of earnings and losses, with no tax benefit from valuation allowances in certain jurisdictions70 Note 18. Commitments and contingencies This note outlines the company's financial commitments and potential litigation contingencies Financial Commitments (in thousands of USD) | Commitment Type | Total | 2026 | 2027 | 2028 | 2029 | Thereafter | | :---------------------- | :---------- | :---------- | :---------- | :---------- | :-------- | :--------- | | Long-term debt repayment | $161,572 | $16,295 | $16,241 | $96,436 | $3,531 | $29,069 | | Convertible debentures payable | $100,000 | $0 | $0 | $100,000 | $0 | $0 | | Material purchase obligations | $73,691 | $41,073 | $26,580 | $6,038 | $0 | $0 | | Construction commitments | $888 | $888 | $0 | $0 | $0 | $0 | | Total | $336,151 | $58,256 | $42,821 | $202,474 | $3,531 | $29,069 | - Total financial commitments amount to $336.2 million, with the largest portion ($202.5 million) due in 2028, primarily from convertible debentures71 - Litigation accruals totaled $12.0 million as of August 31, 2025, a slight decrease from $12.4 million at May 31, 202574 Note 19. Net revenue This note provides a breakdown of the company's net revenue by operating segment Net Revenue by Segment (in thousands of USD) | Segment | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :---------------- | :--------------------------------- | :--------------------------------- | | Net beverage revenue | $55,739 | $55,972 | | Net cannabis revenue | $64,511 | $61,249 | | Distribution revenue | $74,007 | $68,071 | | Wellness revenue | $15,244 | $14,752 | | Total | $209,501 | $200,044 | - Total net revenue increased by 4.7% to $209.5 million for the three months ended August 31, 2025, compared to the prior year76 - Distribution revenue showed the strongest growth, increasing by $5.9 million (9%), followed by net cannabis revenue, which grew by $3.3 million (5%)76 Note 20. Cost of goods sold This note details the company's cost of goods sold by operating segment Cost of Goods Sold by Segment (in thousands of USD) | Segment | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :---------------- | :--------------------------------- | :--------------------------------- | | Beverage costs | $34,413 | $33,050 | | Cannabis costs | $41,241 | $37,054 | | Distribution costs | $66,008 | $60,138 | | Wellness costs | $10,370 | $10,096 | | Total | $152,032 | $140,338 | - Total cost of goods sold increased by $11.7 million (8%) to $152.0 million for the three months ended August 31, 202577 - Distribution costs and Cannabis costs experienced the largest absolute increases, rising by $5.9 million and $4.2 million, respectively77 Note 21. General and administrative expenses This note presents a breakdown of the company's general and administrative expenses General and Administrative Expenses (in thousands of USD) | Category | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Salaries and wages | $21,736 | $21,567 | | Office and general | $8,697 | $9,260 | | Stock-based compensation | $5,052 | $6,917 | | Insurance | $2,393 | $2,455 | | Professional fees | $1,218 | $1,178 | | Gain on sale of capital assets | $(241) | $(26) | | Travel and accommodation | $1,312 | $1,493 | | Rent | $886 | $1,269 | | Total | $41,053 | $44,113 | - Total general and administrative expenses decreased by $3.1 million (7%) to $41.1 million for the three months ended August 31, 202578 - The decrease was primarily driven by a $1.9 million reduction in stock-based compensation and a $0.6 million decrease in office and general expenses78 Note 22. Restructuring charges This note details the company's restructuring and exit costs by segment - Restructuring and exit costs decreased significantly to $869 thousand for the three months ended August 31, 2025, from $4.2 million in the prior year period79 - Within the Cannabis segment, $692 thousand was recognized for employee termination severance and benefits due to reorganization of the Canadian cannabis commercial function80 - An additional $177 thousand in restructuring charges related to exiting the New Zealand medical cannabis market80 Note 23. Non-operating income (expense), net This note outlines the company's non-operating income and expenses, including fair value changes Non-Operating Income (Expense), Net (in thousands of USD) | Category | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Change in fair value of warrant liability | $(3,670) | $696 | | Foreign exchange gain (loss) | $6,928 | $11,881 | | (Loss) gain on long-term investments | $39 | $(39) | | Unrealized loss on digital assets | $(8) | $0 | | Other non-operating (losses) gains, net | $543 | $108 | | Total | $3,832 | $12,646 | - Total non-operating income (expense), net decreased by $8.8 million to $3.8 million for the three months ended August 31, 202582 - This decrease was primarily driven by a $4.4 million negative change in the fair value of warrant liability and a $4.9 million decrease in foreign exchange gain82 Note 24. Financial risk management and financial instruments This note discusses the company's financial risk management and fair value measurements of instruments Fair Value Measurements (in thousands of USD) | Category | Level 1 | Level 2 | Level 3 | Total (August 31, 2025) | | :-------------------------------- | :------ | :------ | :------ | :---------------------- | | Cash and cash equivalents | $264,828 | $0 | $0 | $264,828 | | Equity investments measured at fair value | $995 | $1,017 | $8,160 | $10,172 | | Digital assets | $992 | $0 | $0 | $992 | | Warrant liability | $0 | $0 | $(4,762) | $(4,762) | | Contingent consideration | $0 | $0 | $0 | $0 | | Total recurring fair value measurements | $266,815 | $1,017 | $3,398 | $271,230 | - The company's digital assets, consisting of 9.16 units of Bitcoin, are measured at fair value (Level 1) with a cumulative unrealized loss of $8 thousand as of August 31, 202586 - The warrant liability is classified as a Level 3 derivative, with its fair value determined using the Black-Scholes pricing model, and a change in fair value of $(3.7) million recognized in Q1 20258791 - Contingent consideration related to the Montauk Brewing acquisition was reduced to $0 thousand as of August 31, 2025, due to a 0% probability of achievement of financial measures, resulting in a $15.0 million change in fair value8891 Note 25. Segment reporting This note provides financial information by operating segment, including gross profit and revenue by channel - The company operates in four segments: Cannabis, Beverage, Distribution, and Wellness, with the Chief Operating Decision Maker (CODM) using segment gross profit for resource allocation and performance assessment94 Segment Gross Profit (in thousands of USD) | Segment | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :---------------- | :--------------------------------- | :--------------------------------- | | Beverage gross profit | $21,326 | $22,922 | | Cannabis gross profit | $23,270 | $24,195 | | Distribution gross profit | $7,999 | $7,933 | | Wellness gross profit | $4,874 | $4,656 | | Total gross profit | $57,469 | $59,706 | Cannabis Revenue by Channel (in thousands of USD) | Channel | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Canadian medical cannabis | $6,146 | $6,261 | | Canadian adult-use cannabis | $64,067 | $57,235 | | Wholesale cannabis | $4,155 | $5,507 | | International cannabis | $13,367 | $12,191 | | Total cannabis revenue | $87,735 | $81,194 | | Excise taxes | $(23,224) | $(19,945) | | Total cannabis net revenue | $64,511 | $61,249 | Geographic Net Revenue (in thousands of USD) | Region | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :---------------- | :--------------------------------- | :--------------------------------- | | USA | $63,961 | $63,880 | | Canada | $58,167 | $55,905 | | EMEA | $85,253 | $77,672 | | Rest of World | $2,120 | $2,587 | | Total | $209,501 | $200,044 | Note 26. Subsequent Events This note discloses significant events occurring after the reporting period, such as warrant exercises - Between September 5 and 15, 2025, 6,209,000 warrants were exercised, generating $2.1 million in cash and issuing 6,209,000 shares of common stock101 - On October 9, 2025, Tilray acquired a $14.8 million promissory note from Double Diamond Holdings Ltd. (DDH) payable by Aphria Diamond Inc., in exchange for 8,617,068 shares of Tilray's Common Stock102 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses Tilray's business, strategy, market trends, and financial performance for Q1 2025 Company Overview This section provides an overview of Tilray Brands, Inc.'s global lifestyle consumer products business and strategy - Tilray Brands, Inc. is a global lifestyle consumer products company focused on cannabis, beverage, wellness, and entertainment, aiming to be a leading premium lifestyle company105 - The company's strategy involves leveraging brands, infrastructure, and expertise to drive revenue growth, achieve industry-leading profitability, and build long-term shareholder value106 - Key strategic focuses include data analytics, consumer insights, category management leadership, new product/geography expansion, and cost structure management106 Trends and Other Factors Affecting Our Business This section discusses market trends and external factors impacting Tilray's Beverage, Cannabis, and Wellness segments - Beverage market trends: Focus on expanding Breckenridge Distillery's market share in spirits, optimizing craft beer portfolio and distribution (Project 420), and diversifying with HD-D9, non-alcoholic, and clean label energy drinks108110 - Canadian cannabis market trends: Tilray leads the Canadian market in cannabis revenue, with a marginal market share increase to 9.4%, driven by strength in flower and non-infused pre-roll categories. Price compression is expected to persist111 - International cannabis trends: Europe's medical cannabis market is developing, with Germany being the largest. Tilray is well-positioned with EU-GMP facilities and a broad product portfolio, pioneering research into therapeutic value112113114115 - Wellness market trends: Continued growth in brick-and-mortar and e-commerce, with a focus on value-added innovation in natural and organic food and beverages, including super-seeds, breakfast, snacking, and natural energy drinks122 Acquisitions, Strategic Transactions and Synergies This section details Tilray's strategic acquisitions and Project 420 initiatives for synergy optimization - Tilray continues to expand through organic growth and strategic acquisitions, evaluating businesses that complement its portfolio or offer new market/product opportunities123 - The company has made multiple beverage acquisitions (SweetWater, Alpine, Green Flash, Breckenridge Distillery, Montauk, Craft Acquisition I & II) to scale its beverage business124125 - Project 420 initiatives (SKU, Geographic, Distributor rationalization, and synergy optimization) aim to improve profitability and accelerate revenue growth in the beverage segment. $25.1 million in savings achieved to date out of a $33 million synergy plan126127 Political and Economic Environment This section addresses how economic, political, and regulatory factors may affect Tilray's operations - Operations may be affected by economic, political, legislative, and regulatory factors, including geopolitical tensions (Russia-Ukraine, Middle East), recessionary trends, inflation, and supply chain disruptions129 - U.S. tariffs and foreign retaliatory tariffs could impact input materials like aluminum, hops, barley, malt, and vape componentry, though the company intends to mitigate these impacts129 Results of Operations This section analyzes Tilray's consolidated and segment-specific financial results for Q1 2025 Consolidated Results of Operations (in thousands of U.S. dollars) | Metric | August 31, 2025 | August 31, 2024 | Change (2025 vs. 2024) | % Change | | :-------------------------------- | :-------------- | :-------------- | :--------------------- | :------- | | Net revenue | $209,501 | $200,044 | $9,457 | 5% | | Cost of goods sold | $152,032 | $140,338 | $11,694 | 8% | | Gross profit | $57,469 | $59,706 | $(2,237) | (4)% | | Operating income (loss) | $2,092 | $(36,570) | $38,662 | (106)% | | Net income (loss) | $1,513 | $(34,652) | $36,165 | (104)% | - Total operating expenses decreased by $40.9 million (42%) to $55.4 million, primarily due to lower amortization expense, a gain from contingent consideration fair value change, and reduced non-recurring costs155 Segment Net Revenue (in thousands of U.S. dollars) | Segment | August 31, 2025 | August 31, 2024 | Change (2025 vs. 2024) | % Change | | :---------------- | :-------------- | :-------------- | :--------------------- | :------- | | Beverage business | $55,739 | $55,972 | $(233) | (0)% | | Cannabis business | $64,511 | $61,249 | $3,262 | 5% | | Distribution business | $74,007 | $68,071 | $5,936 | 9% | | Wellness business | $15,244 | $14,752 | $492 | 3% | | Total net revenue | $209,501 | $200,044 | $9,457 | 5% | Adjusted EBITDA Reconciliation (in thousands of U.S. dollars) | Metric | August 31, 2025 | August 31, 2024 | Change (2025 vs. 2024) | % Change | | :-------------------------------- | :-------------- | :-------------- | :--------------------- | :------- | | Net income (loss) | $1,513 | $(34,652) | $36,165 | (104)% | | Income tax expense (recovery), net | $(2,285) | $886 | $(3,171) | (358)% | | Interest expense, net | $6,696 | $9,842 | $(3,146) | (32)% | | Non-operating income (expense), net | $(3,832) | $(12,646) | $8,814 | (70)% | | Amortization | $15,561 | $31,814 | $(16,253) | (51)% | | Stock-based compensation | $5,052 | $6,917 | $(1,865) | (27)% | | Change in fair value of contingent consideration | $(15,000) | $0 | $(15,000) | NM | | Project 420 business optimization | $200 | $0 | $200 | NM | | Purchase price accounting step-up | $0 | $175 | $(175) | (100)% | | Litigation costs, net of recoveries | $1,007 | $1,595 | $(588) | (37)% | | Restructuring costs | $869 | $4,247 | $(3,378) | (80)% | | Transaction costs (income), net | $400 | $1,156 | $(756) | (65)% | | Adjusted EBITDA | $10,181 | $9,334 | $847 | 9% | Liquidity and Capital Resources This section discusses Tilray's management of cash, investments, and capital to fund operations and growth - The company actively manages cash and investments to fund operations, debt payments, and acquisitions, believing existing cash, marketable securities, and operational cash flow, along with external funds, will meet short and long-term capital needs181 - For short-term liquidity, the focus is on generating positive cash flow from operations and optimizing working capital, including investing excess cash in short-term marketable securities and digital assets182 - For long-term liquidity, the company aims to fund operations through profitable organic growth and accretive acquisitions, potentially seeking additional debt or equity financing183 - During Q1 2025, the ATM Program issued 34,443,799 shares, generating $22.5 million in net proceeds, intended for strategic acquisitions and capital expenditures184 Critical Accounting Estimates This section identifies key accounting estimates that require significant judgment and assumptions - Critical accounting estimates include revenue recognition, valuation of inventory, long-lived assets, goodwill and intangible assets, stock-based compensation, and valuation allowances for deferred tax assets192 Recently Issued Accounting Pronouncements This section refers to disclosures regarding recently issued accounting pronouncements in Note 1 - A description of recently issued accounting pronouncements is disclosed in Note 1 – Basis of presentation and summary of significant accounting policies193 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes in market risk for Q1 2025 compared to the prior fiscal year - No material changes in market risk were identified for the three months ended August 31, 2025, compared to the prior fiscal year's Annual Report on Form 10-K194 Item 4. Controls and Procedures This section details the effectiveness of disclosure controls and changes in internal control over financial reporting Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of August 31, 2025 - As of August 31, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective196 - The assessment of disclosure controls did not include the internal controls over financial reporting of the recently acquired Craft Acquisition II businesses, which represented 1.3% of consolidated assets and 4.2% of consolidated net revenues197 Changes in Internal Control over Financial Reporting This section reports no material changes in internal control over financial reporting during the period - There have been no material changes in internal control over financial reporting during the period covered by this report198 - The company is reviewing and integrating the internal control structure of the Craft Acquisition II brands and businesses into its overall internal control over financial reporting process198 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other significant corporate information Item 1. Legal Proceedings This section confirms no material changes in legal proceedings and assesses related liabilities - No material changes in legal proceedings have occurred since the Annual Report on Form 10-K for the fiscal year ended May 31, 2025201 - Management believes established legal reserves are appropriate and that incremental liabilities from pending legal proceedings are not expected to have a material adverse effect on the company's financial position, results of operations, or cash flows200 Item 1A. Risk Factors This section outlines key risk factors, including acquisition integration, regulatory, and competitive challenges - No material changes from the risk factors described in the Form 10-K, except for specific updates203 - Key risks include potential failure to achieve expected benefits from craft beer acquisitions, difficulties integrating recent acquisitions, and dependence on regulatory approvals and compliance for the cannabis business203 - Evolving government regulations for cannabis (e.g., rescheduling in the U.S., international legalization delays) and intense competition, including from the illicit market, pose significant risks203 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports the issuance of common stock in exchange for convertible notes, relying on a Section 3(a)(9) exemption - On June 16, 2025, Tilray issued 12,591,816 shares of Common Stock in exchange for $5.0 million principal amount of its 5.20% Convertible Senior Notes due June 1, 2027205 - The shares were issued without registration under the Securities Act of 1933, relying on the exemption provided by Section 3(a)(9)206 Item 3. Defaults Upon Senior Securities This section states that there are no applicable defaults upon senior securities - Not applicable207 Item 4. Mine Safety Disclosures This section states that there are no applicable mine safety disclosures - Not applicable208 Item 5. Other Information This section details an amendment to the CEO's employment agreement and a promissory note acquisition - On October 7, 2025, an amendment to CEO Irwin D. Simon's employment agreement was made, modifying compensation benefits to include a $5,000 monthly after-tax amount for retirement/welfare plans and a $500 monthly car allowance, effective Fiscal Year 2026209 - On October 9, 2025, Tilray acquired a $14.8 million promissory note from Double Diamond Holdings Ltd. (DDH), payable by Aphria Diamond Inc., in exchange for 8,617,068 shares of Tilray's Common Stock210 - DDH's management team will provide additional services, including expert advice on maximizing vegetable cultivation, cannabis yields for Quebec and Cayuga facilities, and cannabis cultivation insights for the Portugal facility, at no incremental cost210 Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including amendments to credit agreements and employment agreements, promissory notes, certifications from executive officers, and financial statements formatted in Inline XBRL - Exhibits include the Fifth Amendment to Credit Agreement, Amendment No. 1 to Employment Agreement for Irwin D. Simon, and a Promissory Note from Aphria Diamond Inc. to Double Diamond Holdings Ltd212 - Certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Sarbanes-Oxley Act Sections 302 and 906) are filed212214 - Financial statements (Consolidated Statements of Financial Position, Loss and Comprehensive Loss, Stockholders' Equity, Cash Flows, and Notes) are provided in Inline XBRL format214 Signatures This section contains the duly authorized signatures of the company's executive officers for the report - The report is signed by Irwin D. Simon, Chairman and Chief Executive Officer, and Carl Merton, Chief Financial Officer, on October 9, 2025217
Tilray(TLRY) - 2026 Q1 - Quarterly Report