Tilray Brands, Inc. (TLRY) has evolved into a global consumer packaged goods (CPG) powerhouse, pioneering the convergence of beverages, cannabis, hemp, and wellness products. Over the past five years, the company has transformed from a Canadian cannabis producer into a diversified multi-national lifestyle brand with operations spanning 20 countries and five continents.
Company History and Evolution
Tilray's journey began in 2013 when it was founded as a licensed producer of medical cannabis in Canada. The company quickly established itself as a leader in the burgeoning Canadian cannabis market, building state-of-the-art cultivation and processing facilities across the country. In 2018, Tilray made history as the first cannabis company to conduct an initial public offering on the NASDAQ exchange. That same year, the company acquired Manitoba Harvest, a leading hemp food brand in North America, marking its entry into the wellness products segment.
In 2019, Tilray expanded its reach through the acquisition of Aphria, a major Canadian cannabis producer, solidifying its position as a dominant player in the Canadian cannabis market. This move significantly strengthened Tilray's presence in the industry and set the stage for further growth and diversification.
To accelerate its global expansion, Tilray made strategic acquisitions in adjacent industries. In 2020, the company purchased SweetWater Brewing Company, entering the craft beer market. This was followed by the acquisition of Breckenridge Distillery in 2021, expanding Tilray's portfolio into the spirits sector. In 2022, the company further bolstered its beverage alcohol segment with the purchase of Montauk Brewing Company.
Throughout its evolution, Tilray has faced challenges common to many cannabis companies, such as navigating complex and evolving regulatory environments, managing price compression in the Canadian cannabis market, and integrating newly acquired businesses. However, the company's strategic focus on diversification, operational efficiency, and building a strong portfolio of beloved brands has allowed it to weather these challenges and emerge as a leading global consumer products company.
Current Business Overview
Today, Tilray is a diversified global CPG leader, operating in four core business segments: Cannabis, Beverage Alcohol, Distribution, and Wellness. The company's cannabis division is the market share leader in Canada, while its medical cannabis business has a strong foothold in the emerging European markets. Tilray's beverage alcohol segment includes iconic craft beer and spirits brands like SweetWater, Montauk, and Breckenridge Distillery, making it the 5th largest craft brewer in the U.S. The Wellness division, anchored by the Manitoba Harvest hemp brand, is the #1 branded hemp business in North America.
Financials
Tilray's financial performance reflects the company's transformation and diversification efforts. In the latest fiscal year ended May 31, 2024, the company reported revenue of $788.94 million, a 26% increase over the prior year. Gross profit for the period was $223.35 million, representing a gross margin of 28.3%. While the company reported a net loss of $244.98 million, this was largely driven by one-time charges and impairments totaling $960.45 million. Excluding these unusual items, Tilray's normalized EBITDA was negative $312.97 million.
For the most recent quarter (Q1 2024), Tilray reported revenue of $200.04 million, representing a 13% growth year-over-year. The net loss for the quarter was $34.70 million, an improvement of 38% compared to the same period last year. The increase in revenue was primarily driven by strong performance in the Beverage Alcohol segment, which grew 132% year-over-year. This was partially offset by a 13% decline in Cannabis revenue, as the company focused on improving margins over volume.
Operating cash flow for the fiscal year 2024 was negative $30.91 million, while free cash flow stood at negative $60.15 million. For Q1 2024, operating cash flow was negative $35.31 million, and free cash flow was negative $42.04 million.
Liquidity
Looking at the company's balance sheet, Tilray ended the fiscal year with $448.53 million in cash, cash equivalents, and short-term investments, providing ample liquidity to fund future growth initiatives. As of the most recent quarter, cash and marketable securities increased to $464.85 million. The company's total debt stood at $590.13 million, resulting in a net debt position of $373.14 million. Tilray's current ratio of 2.47 and quick ratio of 1.57 indicate a healthy liquidity position.
Tilray has access to several credit facilities, including a $10 million operating line of credit bearing interest at prime rate plus 0.75%, €7 million and €500,000 operating lines of credit for CC Pharma GmbH bearing interest at ESTR +2.5% and EURIBOR +3.75% respectively, and a $30 million revolving credit facility for Four Twenty Corporation bearing interest at SOFR plus margin.
Geographic and Segment Breakdown
Tilray's geographic sales breakdown shows the company's global reach. In the most recent quarter, 40% of revenue came from North America, 45% from Europe, Middle East, and Africa (EMEA), and the remaining 15% from the Rest of World. The EMEA region saw strong growth of 21% year-over-year, driven by a 50% increase in medical flower sales and a 22% increase in medical cannabis extracts in Germany since the new regulations took effect.
On a segmental basis, Tilray operates in four main reportable segments:
1. Cannabis Operations: This segment encompasses the production, distribution, sale, co-manufacturing, and advisory services of both medical and adult-use cannabis products. For the three months ended August 31, 2023, net cannabis revenue was $70.33 million, up 20% from the prior year period. Cannabis gross profit was $19.82 million, with an adjusted gross margin (excluding purchase price accounting step-up) of 35%.
2. Distribution Operations: This segment encompasses the purchase and resale of pharmaceutical products to customers. Distribution revenue for the quarter was $69.16 million, up 14% year-over-year, with a gross profit of $7.69 million and a gross margin of 11%.
3. Beverage Alcohol Operations: This segment encompasses the production, marketing, and sale of beverage alcohol products. Net beverage alcohol revenue for the quarter was $24.16 million, up 17% year-over-year, with a gross profit of $12.90 million and an adjusted gross margin of 56%.
4. Wellness Operations: This segment encompasses the production and sale of hemp foods and CBD products. Wellness revenue for the quarter was $13.30 million, relatively flat compared to the prior year period, with a gross profit of $3.79 million and a gross margin of 29%.
Cannabis Operations
In Canada, Tilray's adult-use cannabis business has maintained its market share leadership, accounting for nearly 17% of the national market. The company's focus on higher-margin product categories like flower, pre-rolls, and beverages has led to improved profitability, with the Canadian cannabis business reporting a 40% gross margin in the latest fiscal year. Tilray's international medical cannabis operations, particularly in Germany, have also seen strong growth, with flower sales up 50% and extracts up 22% since the country's new cannabis regulations went into effect in April 2024.
Beverage Alcohol Segment
Tilray's Beverage Alcohol segment has been a key driver of the company's diversification strategy. Through a series of strategic acquisitions, including SweetWater Brewing, Montauk Brewing, and Breckenridge Distillery, Tilray has become the 5th largest craft brewer in the U.S. with a 5% market share. The company's portfolio of iconic local craft brands, coupled with its robust distribution network and manufacturing capabilities, position Tilray as a formidable player in the $100 billion U.S. beer market.
Wellness Division
In the Wellness division, Tilray's Manitoba Harvest brand maintains its dominance as the #1 branded hemp business in North America, with a 53% market share. The company has also leveraged its hemp expertise to launch innovative CBD-infused wellness products, including the recently introduced Happy Flower beverage line.
Future Outlook and Growth Strategies
Looking ahead, Tilray remains focused on driving profitable growth across its diversified business segments. The company has reiterated its revenue guidance range of $950 million to $1 billion for the upcoming fiscal year 2025, representing double-digit growth. This guidance includes some anticipated M&A, though the recent acquisition of brands from Molson Coors was not specifically included in the previously provided guidance range. Tilray also expects to achieve positive adjusted EBITDA, marking the sixth consecutive year of positive adjusted EBITDA generation.
Key drivers of Tilray's future growth include continued market share gains in the Canadian cannabis market, accelerated expansion in the European medical cannabis market, further integration and optimization of its craft beverage portfolio, and the launch of new hemp-derived product lines in the U.S. wellness market. The company's strong balance sheet and liquidity position provide the financial flexibility to pursue strategic acquisitions and invest in high-growth initiatives.
Tilray is also focusing on improving margins and operational efficiency across its business segments, particularly in the Canadian cannabis operations where the company has experienced price compression over the past three years, resulting in losses of over $200 million. The company is investing in growth initiatives such as its new Tilray Alternative Beverages division focused on hemp-derived Delta-9 THC products.
Tilray's transformation from a Canadian cannabis producer to a global CPG powerhouse has been nothing short of remarkable. With its diversified business model, market-leading brands, and strong financial position, Tilray is well-positioned to capitalize on the convergence of beverages, cannabis, and wellness, driving sustainable long-term growth and shareholder value.