Financial Data and Key Metrics - Beverage alcohol gross profit increased to 18.9millionfrom10 million, but gross margin decreased to 34% from 48% due to lower margins from craft brands [1] - Adjusted gross margin fell to 38% from 53%, primarily due to co-manufacturing agreements for brewing [1] - Net cannabis revenue increased by 14% organically, with contributions from HEXO and Truss acquisitions, offset by the elimination of 8.7millioninadvisoryservicesrevenue[2]−Wellnessgrossprofitroseto4.1 million from 3.7million,withgrossmarginholdingsteadyat30188.3 million, representing almost 30% growth year-over-year [130] - Adjusted EBITDA was 10.2million,downfrom13.3 million in the prior year quarter [137] Business Line Data and Key Metrics - Beverage alcohol revenue increased 165% to 54.7million,drivenbycontributionsfromnewlyacquiredcraftbrands[223]−Cannabisgrossprofitwas20.9 million, with a gross margin of 33%, compared to negative 32.8millionintheprioryearquarter[140]−Wellnessrevenuegrew1213.4 million, driven by targeted advertising campaigns and innovation efforts [141] - Distribution revenue decreased 13% to 56.8million,impactedbyinfrastructureoutagesandweather[108]MarketDataandKeyMetrics−InGermany,Tilrayholdstheleadingcannabismarketsharebyrevenueandiswell−positionedtocapturegrowthinthemedicalmarket[65]−TheEuropeanmedicalcannabismarketisprojectedtobea45 billion opportunity in the long term [88] - Tilray is the fifth-largest craft brewer in the U.S., with a 4.5% market share, and aims to become a top 12 beverage company [114][123] - In Canada, Tilray maintains the number one market share in cannabis, with leading positions in key provinces and product categories [118] Company Strategy and Industry Competition - Tilray's strategy focuses on organic growth, strategic acquisitions, and cost management to drive profitability [83] - The company is leveraging its global expertise in cannabis to capitalize on regulatory changes, such as potential rescheduling in the U.S. [80] - Tilray is expanding its beverage portfolio beyond alcohol into categories like sparkling water and energy drinks [125] - The company is working to improve margins in its beverage business by moving away from co-manufacturing agreements and increasing production efficiency [96] Management Commentary on Operating Environment and Future Outlook - Management highlighted the impact of dry January on the beverage alcohol business and the challenges of integrating lower-margin craft brands [14] - The company is optimistic about the German market, where regulatory changes are expected to significantly expand the medical cannabis market [121] - Tilray is prepared to capitalize on potential U.S. regulatory changes, including rescheduling and federal legalization of medical cannabis [122] - Management expects strong growth in Q4, driven by seasonality and new product launches [5] Other Important Information - Tilray achieved 27.5millioninannualizedcostsavingsfromtheHEXOintegration,with15.6 million realized in Q3 [105] - The company is working to reduce its debt, having decreased net debt to 175millionandreducingannualinterestexpenseby9.8 million [70] - Tilray is exploring opportunities to introduce hemp-based delta-9 beverages in the U.S. [82] Q&A Session Summary Question: Impact of excise tax changes in Canada - Management expects potential savings of 80millionannuallyifexcisetaxreformsareimplemented,whichwouldbenefitTilrayandthebroaderindustry[79][195]−Thecompanybelievesthattaxsavingsshouldbereinvestedintotheindustrytodrivegrowthandinnovation[207]Question:OutlookfortheGermancannabismarket−Tilrayiswell−positionedinGermanywithacultivationfacility,distributionnetwork,andstrongmarketshare[65][144]−ThecompanyexpectssignificantgrowthintheGermanmedicalcannabismarketduetoregulatorychanges[121]Question:Guidanceandmarginexpectations−ManagementrevisedadjustedEBITDAguidanceto60-63 million, citing challenges in Q3 and expectations for a strong Q4 [170] - Margins are expected to improve in Q4 due to increased production and sales volume, particularly in the beverage alcohol business [193] Question: U.S. regulatory changes and opportunities - Tilray is prepared to enter the U.S. market if cannabis is rescheduled, leveraging its global expertise and distribution network [80][122] - The company sees significant opportunities in hemp-based delta-9 beverages and other THC-infused products [200]
Tilray(TLRY)2024-04-09 19:14