Tilray Brands, Inc., a global lifestyle and consumer packaged goods company that’s “leading the forefront of beverage, cannabis and wellness industries”, today reported financial results for its second quarter ended November 30, 2024.
Tilray has reported significant financial growth in the second quarter, with gross profit rising 29% year-over-year to $61 million and net revenue reaching a record $211 million, marking 9% growth overall and 10% in constant currency. The company saw a 36% increase in beverage revenue, a 25% boost in international cannabis sales, and a 13% gain in its wellness segment. Additionally, Tilray announced “Project 420,” a $25 million synergy plan aimed at enhancing its beverage business.
Irwin D. Simon, Chairman and Chief Executive Officer of Tilray Brands, stated, “In our fiscal second quarter, Tilray achieved strong results while making significant progress on our strategic plan. Our dedication to operational excellence has improved Gross Margins, Gross Profit, and overall profitability across our business segments, positioning us favorably for future success.”
Mr. Simon stated, “As we enter the second half of the year, we remain committed to delivering on our financial guidance and driving shareholder value. Tilray is a leading force at the forefront of the beverage industry, revitalizing the beer market, driving growth in spirits and non-alcoholic beverages, and advancing the legitimacy of cannabis for both recreational and medical use. Through our brew pubs, we focus on bringing people together, creating exceptional experiences through entertainment, and enhancing lives through moments of connection. As I’ve said in the past, new industries are not born, they are built. To that end, we are trailblazing the future of consumer products through the infrastructure we have built. I am enthusiastic about what lies ahead, including the potential future legalization of cannabis in the U.S.”
Financial Highlights – Second Quarter Fiscal Year 2025
- Net revenue increased 9% to $211 million in the second quarter compared to $194 million in the prior year quarter. On a constant currency basis, net revenue increased 10%.
- Gross profit increased by 29% to $61 million in the second quarter compared to $47 million in the prior year quarter, with growth across all four business segments. Gross margin increased to 29% in the second quarter compared to 24% in the prior year quarter.
- Adjusted gross profit increased by 20% to $63 million in the second quarter from $52 million in the prior year quarter.
- Net loss was $(85) million in the second quarter, of which $75 million was comprised of non-cash items (including foreign exchange loss, amortization, and stock-based compensation) and $8 million, of which were one-time non-recurring costs.
- Adjusted net loss was $(2) million in the second quarter compared to an adjusted net loss of $(3) million in the prior year quarter.
- Adjusted net loss per share was $(0.00) in both the second quarter and prior year quarter.
- Adjusted EBITDA in the second quarter was $9 million compared to $10 million in the prior year quarter due to the beverage segment’s SKU rationalization EBITDA impact of $1.8 million.
- Beverage alcohol net revenue increased 36% to $63 million in the second quarter compared to $47 million in the prior year quarter.
- Beverage alcohol gross margin increased to 40% in the second quarter compared to 34% in the prior year quarter. Adjusted gross margin increased to 42% in the second quarter compared to 38% in the prior year quarter.
- Cannabis net revenue was $66 million in the second quarter compared to $67 million in the prior year quarter.
- Cannabis gross margin increased to 35% in the second quarter compared to 31% in the prior year quarter. Adjusted gross margin was 35% in both the second quarter and prior year quarter.
- Distribution net revenue was $68 million in the second quarter compared to $67 million in the prior year quarter
- Distribution gross margin increased to 12% in the second quarter compared to 11% in the prior year quarter.
- Wellness net revenue increased 13% to $15 million in second the quarter compared to $13 million in the prior year quarter.
- Wellness gross margin increased to 31% in the second quarter compared to 29% in the prior year quarter.
Tilray Beverages, Project 420 Highlights
In December 2020, we entered the beverage category with the acquisition of SweetWater Brewing Company, one of the largest independent craft brewers in the U.S. by volume, with the vision of creating a larger and more diversified global lifestyle consumer products company.
This initial acquisition provided us with a foundation to pursue additional acquisitions in the beverage category and scale our business on a national basis. We acquired Alpine Beer Company, Green Flash and Breckenridge Distillery in December 2021, Montauk Brewing Company in November 2022, Craft Acquisition I in October 2023 and Craft Acquisition II in September 2024.
With Craft Acquisition I and Craft Acquisition II, we capitalized on opportunities to acquire additional beverage businesses that consisted of strong brands in decline and in need of investment in order to promote growth. To support the growth of these acquired brands and establish a clear path to profitability, we implemented Project 420, which is a comprehensive plan through which we expect to achieve our $25 million synergy plan based on the following initiatives:
- Operational optimization: As we increase our operational footprint, the optimization of those facilities has been our focus. Accordingly, we continuously evaluate our beverage operational footprint and have identified redundancies in our manufacturing and warehousing assets. By integrating our operations, we are obtaining better utilization of our facilities, decreasing the amount of excess capacity and gaining efficiencies through improved fixed cost absorption.
- Cost savings, cost avoidance and synergies: Our focus on cost savings, synergies and cost avoidance across our beverage segment has identified and, we are continuing to identify, the elimination of duplicative fixed costs, procurement, distribution and back-office costs.
- Portfolio optimization/SKU Rationalization: Today, our Beverage segment consists of an expansive portfolio comprised of over 20 beverage brands in different categories consisting of craft beer, spirits and non-alcoholic options. In response to the declining growth in the craft beer industry and consolidation of distributors, we worked with our distributors in various markets to streamline our portfolio to eliminate duplicative and slower growth products, which had the immediate effect of reducing revenue. However, by eliminating these slower growing SKUs, we are able to focus our attention and resources on our higher growth SKUs and the introduction of new innovation, which we expect will accelerate our revenue growth in future quarters. Going forward, we will continue to manage SKU performance within our portfolio on a “one in and one out basis” to maximize SKU productivity. In addition, in connection with our strategic review with the Boston Consulting Group, we are executing against our “regional jewel” strategy, which resulted in our decision to delist certain SKUs in certain geographies that were not considered key markets for those brands.For the six months ended November 30, 2024, our prioritization of certain products in key markets resulted in a reduction in net sales of approximately $6.0 million. Additionally, our decision to discontinue certain SKUs due to market conditions led to an additional reduction in net sales of $2.0 million. For the fiscal year ended May 31, 2025, it is anticipated that the cumulative impact of these initiatives will result in a reduction of approximately $20.0 million in net sales, which we believe will be offset by the growth of our new product innovation, including in new beverage categories, and brand extensions over the next 18 months. It is important to note, however, that there is a lag between the discontinuation of the SKUs and the associated reduction in revenue, which has an immediate effect, and the acceleration of the growth of our existing SKUs and the introduction of new innovation and the associated increase in revenue, which takes time due to retailer resets. We also expect these efforts will lead to improved sales and margins, with benefits realized through lower selling costs, as well as reduced requirements for working capital through inventory reductions and an improvement in our cash conversion cycle.
- Brand & Business investment: We have been and are continuing to increase our investment in the marketing, promotion and infrastructure of our recently acquired brands in order to reestablish their dominance in their core markets. Our intention is to fund this investment through the cost savings and synergies achieved through Project 420.
As of the end of the second quarter ended November 30, 2024, we achieved $17 million of the $25 million synergy plan. However, these savings are not completely offsetting our investment at this time. As a result, our Adjusted EBITDA for the three and six months ended November 30, 2024 was lower by $1.8 million and $3.2 million, respectively, as a result of our SKU rationalization. Our operating cash flow in the quarter was also lower due to these investments.
Company’s Fiscal Year 2025 Guidance
The Company reaffirms its fiscal year 2025 guidance of anticipated net revenues between $950 million and $1 billion.
