PresentationI would now like to hand the conference over to your first speaker, Lee Evans, SVP of Capital Markets. Please go ahead.Good day, and thank you for standing by. Welcome to The Cannabis Company Q3 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.Lee Ann EvansSenior Vice President of Capital Markets Good afternoon, and thank you for joining The Cannabis Company's Third Quarter 2025 Earnings Conference Call. With me today are Chief Ex ...

Industry Overview - The global cannabis industry is gaining legitimacy, particularly in the United States, Europe, and Canada, comparable to tobacco and alcohol [1] - The public sector for legal cannabis has experienced long downtrends, but recent changes indicate a potential turnaround [2][3] - The fear of an industry-wide shutdown is diminishing, suggesting that legal cannabis is becoming a stable market [3] Company Highlights - **Trulieve Cannabis Corp.**: Operates as a cannabis retailer, involved in cultivation, processing, and distribution of cannabis products [4] - **Verano Holdings Corp.**: A vertically integrated multi-state cannabis operator in the U.S., recently launched HYPHEN to expand its vaporizer portfolio [7][8] - **Glass House Brands Inc.**: An integrated cannabis company operating in three segments: Retail, Wholesale Biomass, and Cannabis-Related Consumer Packaged Goods [9] Upcoming Financial Reports - Trulieve Cannabis Corp. is set to report its Q3 financial earnings on November 5, 2025, at 8:30 AM Eastern Time [6]

Core Insights - Tilray Brands experienced a significant stock rally, closing up over 60% at $1.85 per share on September 29, driven by a surge in trading volume exceeding 371 million shares, which is over eight times its daily average [1][2] - The rally was sparked by political news regarding the medical potential of CBD, perceived as a de-risking event for the U.S. regulatory landscape, benefiting Tilray as a primary player in the cannabis sector [3][4] - The stock's technical setup, including a short interest of 14.8% of its float, likely contributed to a short squeeze, amplifying the price surge as short sellers were forced to buy back shares [4][5] Company Fundamentals - Tilray is building a solid foundation beyond being a speculative cannabis play, supported by strong operational and financial progress [7] - The company holds $256 million in cash and marketable securities, with a reduced total debt of nearly $100 million over the past year, resulting in a debt-to-equity ratio of 0.20 [11] - The international cannabis business saw a revenue increase of 19%, and the U.S. beverage alcohol segment also reported a 19% revenue growth, with Project 420 delivering $24 million in annualized savings towards a $33 million goal [11] Upcoming Events - Tilray is set to report its first-quarter fiscal year 2026 financial results on October 9, 2025, which will be crucial for assessing the sustainability of the recent rally [8][9] - Key indicators to watch include top-line growth in the international cannabis sector, progress from Project 420, and reaffirmation of full-year adjusted EBITDA guidance of $62 million to $72 million [9][10]

Group 1: Cannabis Industry Impact - Cannabis stocks experienced a significant rally following President Trump's endorsement of cannabidiol (CBD) for senior healthcare, suggesting a potential shift in public perception and market dynamics [3][4] - Leading cannabis companies such as Tilray Brands, Canopy Growth, Cronos Group, and Aurora Cannabis saw substantial stock price increases, with Tilray Brands rising as much as 60% and Canopy Growth gaining approximately 17% [4][5] - The video posted by Trump emphasized CBD's benefits, including pain relief and improved sleep, and highlighted potential cost savings of $64 billion annually if cannabis is fully integrated into the healthcare system [6] Group 2: McDonald's Loyalty Program - McDonald's is reintroducing its popular Monopoly game to attract customers to its loyalty program, which currently accounts for about 25% of its U.S. business [10][12] - The new game format allows customers to scan game pieces from food packages into an app, offering prizes such as airline miles and cash, aiming to increase global active loyalty members to 250 million by the end of 2027 [11][12]

Core Viewpoint - Aurora Cannabis Inc (NASDAQ: ACB) experienced a significant rally of over 25% following President Trump's endorsement of cannabidiol (CBD) as a potential breakthrough in senior healthcare [1] Company Summary - The endorsement from President Trump has positively impacted Aurora Cannabis Inc, leading to a notable increase in its stock price [1] Industry Summary - The cannabis industry, particularly the CBD segment, is gaining attention due to its potential applications in healthcare for seniors, which may lead to increased investment and interest in cannabis-related companies [1]

Group 1 - Alan Brochstein is a pioneer in the cannabis investment sector, having focused exclusively on this industry since 2007 [1] - He founded AB Analytical Services to provide independent consulting to registered investment advisors [1] - Brochstein is the managing partner of New Cannabis Ventures, which has been a key provider of financial information in the cannabis industry since 2015 [1] Group 2 - Alan has led the investing group 420 Investor since 2013, which focuses on publicly-traded cannabis stocks [2] - The group moved to Seeking Alpha in 2023 and covers 20 stocks, providing investment news, earnings report previews, and post-report analyses [2] - Features of the 420 Investor group include a model portfolio, 10 weekly videos with chart analysis, 3 weekly summary pieces, a monthly newsletter, and a chat for questions [2]

Core Insights - A study in Europe supports arguments for global marijuana law reform, indicating potential benefits from legalization [1] - Curaleaf's share price increased by nearly 6% following the study's release, outperforming the S&P 500 index [2] Industry Trends - The German Federal Institute for Public Health's study revealed a decrease in marijuana use among young people (ages 12 to 17) from 6.7% to 6.1% after the legalization of recreational marijuana in April 2024 [3][5] - Conversely, marijuana use among young adults (ages 18 to 25) increased from 23.3% to 25.6% between 2023 and 2025 [6] Implications for Reform - The findings challenge the anti-legalization argument that legalization would lead to increased use among vulnerable youth, providing evidence that marijuana law reform is a sensible approach in Germany and globally [7]

Financial Data and Key Metrics Changes - Total revenue for fiscal year 2025 declined from $151.9 million to $127.5 million, a decrease of $24.4 million compared to fiscal year 2024 [12] - Gross profit decreased to $22.7 million from $29.8 million year-over-year [13] - Gross margins were 17.8% for fiscal year 2025, down from 19.6% in fiscal 2024 [14] - Net loss was $39.2 million compared to $40.8 million in fiscal 2024 [15] - Cash held at June 30, 2025, was $24.4 million, a reduction of $10.7 million versus the previous year [15] Business Line Data and Key Metrics Changes - The company shifted focus from the cannabis sector to the higher-value nicotine sector, resulting in a decline in cannabis revenue [4][11] - The company reduced net accounts receivable by over 21% year-over-year, marking the first decline in history [6] - General and administrative expenses decreased from $7.6 million in Q3 2025 to $6.7 million in Q4 2025 [7] Market Data and Key Metrics Changes - European revenue increased to approximately $74.1 million, up 13.6% from $65.3 million in the previous year [13] - North American revenue dropped to approximately $32.6 million from $63.1 million, primarily due to the strategic pivot away from cannabis [13] - Revenue from Asia Pacific totaled approximately $12.3 million, down from $17.6 million in the previous year [13] - Revenue from other countries increased to $8.5 million, up from $6 million in fiscal 2024 [13] Company Strategy and Development Direction - The company is investing in manufacturing capabilities in Malaysia, planning to scale production from six lines to up to 80 lines [5] - Focus on building sustainable long-term partnerships in the cannabis sector rather than pursuing short-term volume gains [6] - The company is advancing regulatory initiatives, including PMPA activities for its devices, which could transform the regulatory landscape for nicotine delivery systems [9][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges in the cannabis industry due to cash flow issues and the lack of federal legalization [30] - The company is optimistic about its pivot to the nicotine sector, expecting it to lead to stronger and more sustainable growth [11] - Management highlighted the potential of breakthrough technologies like ICE-TECH and GMASH to reshape industry standards [18] Other Important Information - The company undertook significant cost optimization measures, achieving estimated annual savings of $10.2 million [8] - The appointment of Jay Yu as the new Chief Financial Officer reflects the company's commitment to strong financial stewardship [10] Q&A Session Summary Question: Key milestones for age gating technology approval - Management indicated that the FDA accepted the component PMPA application within four weeks, which is unprecedented [22] - The next step is the issuance of a deficiency letter, which could take anywhere from three months to over a year [23] Question: Approval timelines in other markets - Management expressed optimism about potential approvals in two unnamed countries that are moving quickly with the technology [25] Question: Intellectual property protections for age verification technology - The company has filed patents in multiple regions, emphasizing the strength of its IP defensibility [27] Question: Details on the $22 million provision for receivables - The provision was a cumulative effect from all customers rather than being tied to a single client [33] Question: Future of cannabis revenue - Management stated that Q4 2025 cannabis revenue is expected to be the bottom, with new customer acquisition and product development underway [45]

Core Viewpoint - Tilray Brands presents a compelling investment opportunity following a 42% stock surge driven by regulatory optimism regarding marijuana reclassification [2][9] Regulatory Catalyst - The potential reclassification of cannabis from Schedule I to Schedule III could significantly benefit cannabis firms, including Tilray [3] - This change would alleviate tax burdens, enhance investment access, and facilitate market expansion [4] Financial Performance Assessment - Tilray has demonstrated strong revenue growth, with a 10.8% average growth over three years, surpassing the S&P 500's 5.7% [5] - Recent revenue growth of 11.2% from $743 million to $827 million is double the broader market's 5.0% growth [5] Profitability Challenges - The company faces significant operational inefficiencies, with an operating margin of -12.8% and a net income margin of -114.4% [6] - The operating cash flow margin stands at -6.2%, indicating fundamental operational issues [6] Balance Sheet Strength - Tilray maintains a debt-to-equity ratio of 36.1%, higher than the S&P 500's 21.8%, but still manageable [7] - Cash reserves of $248 million provide liquidity, though a 7.3% cash-to-assets ratio suggests limited financial flexibility [7] Valuation Attractive - Tilray's price-to-sales ratio of 1.2x is significantly lower than the S&P 500's 3.2x, indicating substantial undervaluation [7] - The current valuation is well below the stock's average price-to-sales ratio of 4.3x over the past five years [7] Investment Verdict - Tilray is characterized as a speculative investment with high reward potential due to prospective regulatory changes [9] - The anticipated reclassification could relieve tax burdens and attract institutional investments, enhancing Tilray's valuation [10] Bear Case - Ongoing operational challenges and market volatility present considerable downside risks if significant policy shifts do not occur [11]

Market Overview - The US stock market is experiencing fluctuations near historical highs, with the S&P 500 index dropping 0.25% to 6373.45 points, the Nasdaq down 0.3% to 21385.4 points, and the Dow Jones down 0.45% to 43975.09 points [1][3] Economic Indicators - The upcoming US July CPI report is seen as a catalyst for market sentiment, with predictions that if the core CPI month-on-month growth is below 0.25%, the S&P 500 could rise by 1.5%-2%, while exceeding 0.4% could lead to a drop of 2%-2.75% [3] Investor Sentiment - A monthly survey by Bank of America indicates that approximately 91% of respondents believe US stocks are overvalued, marking the highest level since the survey began in 2001 [3] Sector Performance - The lithium sector saw significant gains due to production halt news from a project under CATL, with companies like American Lithium up 9.32% and Sigma Lithium up 22.79% [3] - AI application stocks faced declines, with C3.ai dropping 25.58% due to disappointing sales performance attributed to organizational restructuring and health issues of the CEO [4] - Another AI stock, BigBear.ai, also reported weaker-than-expected earnings, leading to a nearly 30% drop in its stock price [5] - Cannabis stocks experienced notable movements, with Tilray Brands rising 41.82% and Canopy Growth up 26.40% due to policy rumors [6] - Chocolate producer Hershey's stock fell 4.8% amid rising cocoa futures [7] Notable Stock Movements - Major tech stocks showed mixed results, with Apple down 0.83%, Microsoft down 0.05%, and Tesla up 2.85% [8] - Chinese concept stocks had a varied performance, with Alibaba down 1.43% and NIO up 1.45% [8]