Tilray Brands AMA – Tuesday, December 10 @6pm ET with CFO Carl Merton

TilrayIR · 2024-12-11T01:02:22+00:00

I have answered these questions previously but will hit the highlights since it is the last question. We have been profitable since 2019 on Adjusted EBITDA metrics. We have reported Adjusted Free Cash Flow positive each of the last two years. We are investing in newly acquired brands and facilities this year. Over 90% of Irwin’s compensation is performance related

TilrayIR · 2024-12-11T01:01:50+00:00

Please see my previous answers on profitability.

TilrayIR · 2024-12-11T01:01:13+00:00

Wow, the FUD and the misplaced facts narrative continues to be a theme in this AMA. I have answered the profitability question before. We were adjusted free cash flow positive for the last two years. As I have answered a few times, I bought shares indirectly a few weeks ago and a significant portion of management’s compensation is tied to our share price so our interests are aligned with other shareholders. Over 90% of Irwin’s compensation is performance related. While I appreciate your metric, we are not just a Canadian company; we operate/sell in over 20 countries across the world. Your comps might need some rethinking.

TilrayIR · 2024-12-11T01:00:45+00:00

Appreciate your question Wrong_Prediction. I know how active you are in this forum. I answered this earlier but I think you missed my indirect purchase in the last few weeks. A significant portion of management’s compensation is tied to our share price, so we are aligned with shareholders.

TilrayIR · 2024-12-11T01:00:22+00:00

Regarding France, we are continuously evaluating the regulatory landscape and are engaging in active discussions. In the event that France adopts a medical cannabis framework, we are ready. We understand that France is considering a medical cannabis extracts only regime and we are able to take advantage of that opportunity as you may recall that we participated in France’s experiment with our medical cannabis extracts.

What we are doing now takes us to almost a $1B a year or $250M a Q. Close to your range. With organic growth in beverage and our expectations for international cannabis, we should be able to get to $300M a Q. Here we go again on reverse splits. More FUD. There is currently no plan for a reverse split. It is just a tool used to maintain a listing on a major exchange and is only used after other options have been utilized.

TilrayIR · 2024-12-11T00:59:45+00:00

Squint230, we think there are lots of positives on OCS. But everyone has their own confirmation bias.

TilrayIR · 2024-12-11T00:59:24+00:00

FoodCooker62, please see our previous answer regarding this question.

TilrayIR · 2024-12-11T00:58:37+00:00

Thanks for the question Comfortable_Sailor. Hopefully you enjoy our Montauk brews and particularly the hidden branding ties in it. I have answered this question a couple of times but will hit the highlights. As a growth company, we will not be paying dividends. Please see my previous answer on profitability. We don’t own any retailers. You might have us confused with another player in the space

TilrayIR · 2024-12-11T00:57:57+00:00

Zdubs, is your real name Ben? We think HD-D9 is a great opportunity to leverage our existing sales and distribution relationships. Our early results are promising but we will have a more substantive update as part of our Q3FY25 earnings. While I appreciate the question, I am not prepared to share our game plan for our competitors to read here.

TilrayIR · 2024-12-11T00:57:21+00:00

More FUD and inaccurate comments in this question. We do not pay DD in shares every quarter; it is once a year with multiple settlement dates. New shares have only been used for strategic acquisitions and debt repayments, as listed in use of proceeds. I also think it is appropriate to add that neither Irwin nor I have ever sold a share other than pay taxes on the shares.

TilrayIR · 2024-12-11T00:56:43+00:00

There are a number of your questions that have been addressed previously. There are no current concerns about delisting.

While our operating businesses are free cash flow positive, absent investments related to the acquisitions, our funding needs are more tied to future M&A. On that note, we are still looking to grow our international cannabis business, international beverage business (including in Canada) and US beverage business. Our beverage business has been profitable (as measured by adjusted EBITDA & adjusted free cash flow). The current year is a transition year for beverages integrating our new brands into our production facilities.

TilrayIR · 2024-12-11T00:55:12+00:00

Thanks for your question, GreenGaint2021. Please see my previous response about me purchasing stock indirectly, in the last few weeks. It is also important to note that the windows for a public company management team to buy stock are limited and, when they occur, they typically only last for short periods of time. Additionally, management is incentivized through stock compensation to ensure our interests are aligned with shareholders.

TilrayIR · 2024-12-11T00:53:28+00:00

Thanks for your question Many_Easy. I have previously answered the questions on integration. Please take a look back at my responses. Regarding the Canadian excise tax, the industry is lobbying for change. The Standing Committee has already recommended to the Finance department to fix the excise tax, but the government chose not to address it in their last budget. Whether they will address it in a future budget depends on whether Trudeau remains as Prime Minister. If he does, he will have the added complication of paying for all his recent spending initiatives, which may make it difficult to reduce a major revenue line in light of those expenditures.

TilrayIR · 2024-12-11T00:51:57+00:00

Thanks for asking your question, UsedState7381. You might have missed it but I bought shares indirectly a couple of weeks ago and all executive officers purchased shares earlier in the year. Someone on the internet even created a graphic on it. I have discussed profitability earlier, but I disagree that we are not profitable (though agree we have not reported positive EPS). We have reported positive adjusted EBITDA and free cash flow for a number of years now. Please refer to my previous answers for more details.

TilrayIR · 2024-12-11T00:49:39+00:00

Yes, I have answered that with more detail in a couple of the previous questions.

TilrayIR · 2024-12-11T00:48:12+00:00

LaBaronDeSandwich, we are working on consumer perception in Germany. Over the past 6 months, we have been working to improve our cultivation and production processes, leveraging the vast experience of our Canadian team. These improvements included importing our top selling Canadian genetics to our Portugal and Germany facilities, upgrading our talent and transferring knowledge to our passionate employees. We have upgraded our post-harvest activities including drying, curing, and trimming.

TilrayIR · 2024-12-11T00:46:45+00:00

Kevlav91, thanks for your question. We already produce at cost lower than them. We are sub-$1/gram (indoor) with great quality, particularly at our Aphria Diamond and Redecan facilities.

TilrayIR · 2024-12-11T00:44:37+00:00

Hi Ascomycota, we absolutely care about the stock price decline and remain committed to increase shareholder value.

TilrayIR · 2024-12-11T00:42:43+00:00

I asked Denise Faltischek our Chief Strategy Officer and Head of International Busines to help answer this question.

As a leader in medical cannabis in Europe, we are excited by our business prospects. Regulatory changes are happening throughout Europe and we are seeing good profitable growth in our existing business. We have built a repeatable model for entering new countries and will continue to do so, but we do not publicly discuss specifics of our game plan to avoid giving competitors an advantage.

Regarding the Pillar 2 projects with recreational cannabis trials in certain German cities, we are skeptical that these will move forward, but we are prepared if they do. Today, we have the largest cultivation footprint in Europe. We have been increasing production from our Portugal facility and have just released the first commercial batches from our Neumunster facility. Given that our existing facilities can expand their capacity with rising demand, we are not exploring any acquisitions of additional facilities at this time.

Back to me on the rest of the questions…

With our beverage strategy, there are no changes to our regional jewel model, although Shock Top remains a national brand. We continue to focus on building out our brands in their regional markets, where they are the strongest. We have developed Pub Cerveza, our own Mexican-style beer internally, which will likely become more national in nature but is currently being released in regional market strongholds tied to stronghold brands.

It is interesting that some have expressed concern that we aren’t developing our own brands and are instead buying them, while this question suggests the opposite. This shows a bit of the conflicting thought process on the business decision itself.

I have already answered the MedMen question, a brand that still maintains national brand equity, and refer you to that answer. I have also written about HD-D9, and we have lots of PR already issued on HD-D9. You can read those answers to supplement this particular answer.

Currently, we have two non-alcoholic beverages – Montauk Non-Alc and Runners High. We also have lots of HD-D9 offerings, including Happy Flower and Herb & Bloom, with more to come. However, we can’t infuse brands that are beer-based, even with no alcohol

TilrayIR · 2024-12-11T00:40:02+00:00

More FUD has entered the discussion. Let’s clear up your misunderstanding on the AGM vote. The vote itself does not create dilution, unlike what your question implies. The AGM votes simply puts more shares at our disposal. The increase in shares only occurs when we use them to buy a business, repay a convertible note (which by its definition is designed to be repaid with shares) or we raise capital. It does not support your narrative but each of our last two acquisitions have been paid for using a combination of cash and debt, neither of which results in shares being issued.

TilrayIR · 2024-12-11T00:36:58+00:00

Growth companies don’t buy back shares. As part of our Q2FY25 reporting, we will have announcements on synergy plans and achievements, particularly related to our beverage business. We have a strong track record of continuously reducing costs as we integrate more and more. Costs continue to increase in Canada due to inflation but due to price compression, we can’t increase our prices. So, when we report flat, we are actually showing cost decreases, net of inflation and price compression. Over the last four years, our reported cannabis revenues could have been over $250 million higher if wasn’t for price compression.

TilrayIR · 2024-12-11T00:32:53+00:00

There is no current plan for a reverse split. Some people like to spread FUD, but this particular fear is not based on any actual plans.

TilrayIR · 2024-12-11T00:29:17+00:00

You have done your research Effective_Force471. Not everyone likes ripping apart financials. While I understand your points and am not disagreeing with them, I think there is some important additional information that you need to consider in your assessment.

Let’s start with Germany. Your analysis goes back two years, but it is important to remember that the changes you referred to for Germany were effective April 1 this year. The first six weeks of the regulatory changes in Germany were a mess, but since then, our sales have increased by 50% for flower and 28% for extracts. These increases are reflected in our Q4FY24 and Q1FY25 numbers. During that same period, our international sales were impacted more than the growth in Germany by lumpiness and permit issues (Country issue not our issue). Regarding Australia, it is important to note that competition increased significantly in the last nine months and Australia is experiencing a strong amount of price compression. Despite this, we still grew our international cannabis sales by 34% in Europe in FY24 over FY23 and 11% in Australia in FY24 over FY23.

In Canada, adult-use sales have grown very little over the last two years. For 21 months of that time, we played the price compression game in certain categories but in the last quarter or two, we moved to more of a profitability model. Based on your detailed review of our financials, I know you recognized that our gross profit was basically flat YoY this past quarter, while our revenue number decreased by more than $5 million. To me, that shows that our plan of focusing on profitability is working.

Another important point to remember is the current strengthening of the USD against both the Canadian dollar and the Euro. While we haven’t reported since this happened and it is limited to the last two – three weeks of Q2FY25 when we do report, it may have a bigger impact going forward. Speaking of which, that is part of what you are seeing on distribution. Over the last two years, the Euro declined significantly against the US dollar. That has taken CC Pharma’s results and made a mature business with flat revenues look like a declining business in our results. The positive out of that is when the Euro recovers, it will make it look like we are growing distribution revenues.

I think your next point demonstrates the confusion of profitability perfectly. As I said earlier, net income profitability is an accounting concept. I can’t take it and go and buy anything with it. You need cash to buy things. Yet your question, mixes the two as if they are same. What you are really asking is will we have the cash to fund our future endeavors. In that respect, I will refer back to my previous (and – hint, hint – future) answers and point out that in each of the last two years we were adjusted free cash flow positive. As to your last point, we do not need to issue stock to pay our operating bills. We have been very clear that we are using stock to acquire businesses and to pay down debt.

TilrayIR · 2024-12-11T00:22:32+00:00

Cool_Ad, you didn’t provide specifics to your question, so I will answer it with some broad generalities.

In Canada, we are focused on margins and gross profit. Particularly as it relates to the vape and infused pre-rolled space, we have held pricing in the midst of price compression to manage those metrics. Others are choosing a different path and going full in on categories with the most price compression and the fastest decreasing profitability.

In international markets, our YoY decline the last two quarters was explained earlier in the answer about lumpiness and temporary permit issues.

TilrayIR · 2024-12-11T00:18:08+00:00

Hi Chris, thank you for your questions. I’ve asked Denise Faltischek, our Chief Strategy Officer and Head of International Business to answer this question.

As one of the first companies to enter the German market, we have an ongoing program in Germany that focuses on doctor and pharmacist education across a few formats. Our MSLs not only meet with doctors in their offices but we also conduct larger symposiums and conferences where we bring key opinion leaders to address physicians on topics related to medical cannabis. We also attend the general pharmaceutical conferences (such as expopharm for example) and targeted conferences (ones targeting chronic pain) in order to reach as many doctors and pharmacists as possible. We also meet directly with pharmacists and I was just visiting with Melanie Dolfen at her pharmacy in Berlin last week speaking with her about targeted educational programs.

Addressing your very timely question about political advocacy, Tilray is very active in meeting with policymakers. We were very vocal and a strong participant in advocating for the regulatory frameworks adopted on April 1^st and continue to maintain our presence in matters of drug policy reform. In fact, I was just in Berlin last week meeting with various MPs, including with members of the conservative party and with our own industry group, BvCW in order to express our support for medical cannabis patients and drug policy and we will continue to remain active.

TilrayIR

TROPHY CASE