Tilray Brands, Inc., a leading global cannabis-lifestyle and consumer packaged goods company inspiring and empowering the worldwide community to live their very best life, today reported financial results for the fourth quarter and fiscal year ended May 31, 2023. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.
Irwin D. Simon, Tilray Brands’ Chairman and Chief Executive Officer, stated, “Our financial performance is demonstrative of Tilray Brands’ being the leading, most diversified cannabis lifestyle and CPG company in the world. During the 2023 fiscal year, we delivered on our commitment to generate positive adjusted free cash flow across all business segments, and executed against our strategic plan to grow revenue, drive operating efficiencies, and improve margins and profitability, all while investing in our industry-leading brands.”
Mr. Simon continued, “The recent closing of the HEXO transaction has boosted our competitive positioning in Canada, the largest, federally legalized cannabis market in the world. We are working towards a seamless integration into our efficient, built-to-last platforms as we leverage our deep CPG expertise and track record to drive both revenue and cost synergies while expanding product distribution in Canada and across international markets.”
Financial Highlights – 2023 Fiscal Fourth Quarter
- Net revenue increased 20% to $184 million in the fourth quarter compared to $153 million in the prior year quarter. On a constant currency basis, net revenue was $190 million in the fourth quarter of 2023, up 24% from the prior year quarter.
- Tilray’s reporting segments for cannabis, beverage alcohol, and distribution each individually grew revenue by ~$10 million in the fourth quarter or ~20%, compared to the prior year quarter.
- Gross profit was $67 million, while adjusted gross profit was $68 million in the quarter. Gross margin was 36%, while adjusted gross margin rose to 37% from 33% in the prior year quarter.
- Cannabis net revenue increased 21% to $64 million in the fourth quarter compared to $53 million in the prior year quarter. On a constant currency basis, net cannabis revenue was $69 million in the quarter, up 29% from the prior year quarter.
- Cannabis gross margin increased to 61% in the quarter from -36% in the prior year quarter and cannabis adjusted gross margin rose to 61% in the quarter from 53% in the prior year quarter, reflecting contributions from the HEXO arrangement.
- Beverage alcohol net revenue increased 43% to $32.4 million in the fourth quarter from $22.7 million in the prior year quarter.
- Beverage alcohol gross margin increased to 51% in the quarter from 50% in the prior year quarter and adjusted gross beverage alcohol margin was 55% in the quarter compared to 60% in the prior quarter, reflecting lower contribution margins from recent acquisitions.
- Distribution net revenue increased 19% to $73 million in the fourth quarter compared to $61 million in the prior year quarter.
- Distribution gross margin rose to 9% in the quarter from -7% in the prior year quarter and adjusted distribution gross margin rose to 9% in the quarter from 6% in the prior year quarter, reflecting favorable product mix.
- Net loss of $120 million in the fourth quarter compared to net loss of $458 million in the prior year quarter. Adjusted net loss of $32 million in the fourth quarter compared to adjusted net loss of $46 million in the prior year quarter.
- Adjusted EBITDA rose 93% to $22 million in the fourth quarter from $12 million in the prior year quarter.
- Operating cash flow of $44 million in the fourth quarter compared to -$21 million in the prior year quarter. Adjusted free cash flow of $43 million compared to adjusted free cash flow of -$24 million in the prior year quarter.
Financial Highlights – 2023 Fiscal Year
- Net revenue was $627 million compared to $628 million in the prior fiscal year. On a constant currency basis, net revenue was $668 million, up 6% from the prior fiscal year.
- Gross profit was $147 million, while adjusted gross profit was $206 million. Gross margin rose to 23% from 19% in the prior fiscal year, representing more than $30 million in growth, while adjusted gross margin rose to 33% from 30% in the prior fiscal year.
- Cannabis net revenue was $220 million compared to $238 million in the prior fiscal year. On a constant currency basis, cannabis net revenue was $233 million, down 2% from the prior fiscal year.
- Cannabis gross margin was 26% compared to 18% in the prior fiscal year and Cannabis adjusted gross margin rose to 51% from 43% in the prior fiscal year, reflecting contributions from the HEXO arrangement.
- Beverage alcohol net revenue increased 33% from the prior fiscal year to $95 million.
- Beverage alcohol gross margin was 49% compared to 55% in the prior fiscal year and Beverage alcohol adjusted gross margin was 53% compared to 58% in the prior fiscal year, reflecting lower contribution margins from recent acquisitions.
- Distribution net revenue was $259 million compared to $260 million in the prior fiscal year. On a constant currency basis, distribution revenue was $285 million, up 10% from the prior fiscal year.
- Distribution gross margin rose to 11% from 6% from the prior fiscal year and distribution adjusted gross margin rose to 11% from 9% in the prior fiscal year, reflecting favorable product mix.
- Achieved $22 million in annualized run-rate savings (and $19 million in actual cost savings) as part of the $30 million cost optimization plan announced in Q4 2022; total annualized cash cost-savings since the closing of the Tilray-Aphria transaction reached $128 million.
- Net loss of $1,443 million compared to net loss of $434 million in the prior fiscal year. Adjusted net loss of $130 million compared to net loss of $183 million in the prior fiscal year.
- Adjusted EBITDA rose 28% to $61 million from $48 million in the prior fiscal year, marking the fourth consecutive year of positive adjusted EBITDA and in line with our adjusted EBITDA guidance of $60 million to $66 million.
- Strong financial liquidity position of ~$450 million, consisting of $207 million in cash and $242 million in marketable securities.
- Achieved positive adjusted free cash flow across all operating segments in the 2023 fiscal year.
Operating Highlights
Leadership in Global Cannabis Operations, Brands, and Market Share, Further Solidified through Recent HEXO Acquisition
- Despite ongoing challenges to cannabis market conditions in Canada, Tilray maintained its #1 cannabis market share position in FY 2023. Closing the HEXO transaction in June 2023 and adding it’s leading high-growth brands to the Tilray portfolio significantly bolsters the Company’s position supported by low-cost operations and complimentary distribution across all Canadian geographies. Tilray’s market share in Canada has reached ~13% and the Company holds the #1 market position across all major markets and a leading share across most product categories. Tilray is now #1 in Flower, Oils, and Concentrates, and #2 in Pre-Rolls, #4 in Vape, and Top 10 in all other categories.
- Tilray is focused on growing its leading market share in medical cannabis in the countries in which it distributes today and achieving early-mover advantage in new countries as cannabis legalization proliferates across Europe. This is being accomplished by capitalizing on the unrivaled platform provided by its cultivation and distribution operations across Portugal and Germany and the leadership team’s depth of commercial and regulatory expertise.
Maximizing the High-Growth Potential of U.S. CPG and Craft-Beverage Portfolio
- Tilray made substantial strides across its five craft-beverage brands including leaders SweetWater Brewing Company, Breckenridge Distillery, and Montauk Brewing Company, growing revenue in its beverage alcohol segment by 33% and adjusted gross profit by 24%. Tilray’s wellness brand, Manitoba Harvest, maintained its brand leadership position in branded hemp with 51% market share and stabilized its gross margin through price increases.
- Upon federal cannabis legalization in the U.S., Tilray is well-positioned to immediately leverage its strong U.S. leadership position and strategic strengths across distribution and brands to include THC-infused products to maximize all commercial opportunities and drive significant additional revenue in adult-use cannabis through expanded recognition and distribution.
Fiscal Year 2024 Guidance
For its fiscal year ended May 31, 2024, the Company expects to achieve adjusted EBITDA targets of $68 million to $78 million, representing growth of 11% to 27% as compared to fiscal year 2023. In addition, the Company expects to generate positive adjusted free cash flow.
Management’s guidance for adjusted EBITDA is provided on a non-GAAP basis and excludes transaction expenses, integration charges, restructuring charges, litigation costs, start-up and closure costs, lease expense, purchase price accounting step-up, changes in fair value of contingent consideration and other items carried at fair value and other non-operating income (expenses) and other non-recurring items that may be incurred during the Company’s fiscal year 2024, which the Company will continue to identify as it reports its future financial results. Management’s guidance for adjusted free cash flow is provided on a non-GAAP basis and excludes our projected integration costs related to HEXO and the cash income taxes related to Aphria Diamond.
The Company cannot reconcile its expected adjusted EBITDA to net income or adjusted free cash flow to operating cash flow under “Fiscal Year 2024 Guidance” without unreasonable effort because of certain items that impact net income and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time.
