Good morning, everyone. Thank you for joining us to discuss Tilray, Inc.'s Financial Results for the 2022 fiscal Second Quarter ended November 30, 2021.

Joining me on today's call are Irwin Simon, Chairman and Chief Executive Officer; Carl Merton, Chief Financial Officer; Blair MacNeil, President of Tilray Canada; Denise Faltischek, Chief Strategy Officer and Head of International; and Berrin Noorata, Chief Corporate Affairs Officer. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session for analysts and investment firms, conducted via audio and participating retail shareholders conducted through the Say technologies platform.

Questions submission and uploading through the Say technologies platform has already been concluded and the company will read aloud and answer the top questions. Ms. Noorata, you may now begin the conference..

Thank you. And good morning. By now, everyone should have access to the earnings release, which is available on the Investors section of Tilray's website at Tilray.com and has been filed with the SEC and SEDAR. On today's call, we will be referring to various non-GAAP financial measures which can provide useful information for investors.

However, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Today's earnings press release contains a reconciliation of each non-GAAP financial measure to the most comparable measures prepared in accordance with GAAP.

Also, please note that we will be making numerous forward-looking statements. These statements are based on our current expectations and beliefs, and involve known and unknown risks and uncertainties which may prove to be incorrect. Actual results could differ materially from those described in these forward-looking statements.

The text in our earnings press release issued today includes many of the risks and uncertainties associated with such forward-looking statements. And now, I'd like to turn the call over to Tilray's Chairman and CEO, Irwin Simon..

Thank you, Berrin, and hello, everyone. We thank you for joining us for our call this morning.

And as the operator just noted, I want to recognize the new additions to our call today, including Blair MacNeil, President of our Canadian business, who will speak on the evolution of our Canadian business and the Canadian market, and Denise Faltischek, President of our International Business and Chief Strategy Officer, who will speak on our global operations and its strength at the heel of international growth and legalization across Europe.

For all of the reasons we will discuss this morning, we're excited to be announcing a new parent name for our company, Tilray Brands, Inc.

Our new name reflects our evolution from a Canadian LP to a global consumer packaged goods company and branded powerhouse with a market leading portfolio of cannabis and lifestyle CPG brands that are empowering the worldwide community to live their very best life.

Through the completion of our business combination last year, we positioned Tilray as a disruptive cannabis industry leader with a portfolio highly sought after brands that bring people together in a memorable and positive way, contribute significant operation scale, benefit from a broad global distribution footprint, and last but not least, that are flourishing from hands-on CBG expertise and operational excellence across the board.

The economic engine driving shareholder value is our model that seeks to generate current cash flow, positive EBITDA while adding the infrastructure, production facilities, and distribution networks to capitalize on long-term growth opportunities that come with increasing acceptance of medical and recreational use of cannabis globally and ongoing cannabis legalization.

This is the heart of Tilray's value proposition and it's unique among our peer set. Most importantly, this model constitutes the road map to $4 billion in revenue by the end of fiscal 2024.

As our results today underscore, we are making tangible and notable progress towards executing against this opportunity despite challenging conditions in certain key markets and geographies.

Despite the continuing challenging backdrop driven by COVID and other competitive considerations, we delivered growth in the second quarter compared to a year ago.

We're also deeply gratified with second quarter results, including our eleventh consecutive quarter of positive adjusted EBITDA, a strong affirmation of our ability to achieve topline growth and have paired it with smart, disciplined operations acumen.

While there are multiple factors that contribute to this relatively strong outcome, none is more notable than the grit, hard work and resilience of Tilray's global team. They are performing admirably under some trying conditions, and I'm immensely proud of their ability to execute.

Second, we have been proficient and flexible in terms of simplifying our supply chain, particularly in light of today's headwinds facing our businesses.

This combined with our production and cultivation efficiencies we have gained through the integration have allowed us to partially offset the negative impacts of COVID and current cost pressures impacting every segment of the global economy.

Importantly, we believe there are temporary headwinds, which when they abate and conditions normalize put us in even stronger position for growth as we capitalize on our leading brands, our distribution network, our proven execution skills, and our strong financial profile and scale in Canada, Europe, US, and the opportunities around the rest of the world.

With that, I will now turn the call over to Blair MacNeil for discussions on our Canadian business.

Blair?.

Thank you, Erwin. And I'm very pleased to be here speaking with all of you today and providing an update on our Canadian business. I'm excited to have joined the Tilray team from Bacardi, where I successfully ran their Canadian business for the last five years.

I see tremendous growth for Tilray in the Canadian market, bringing new consumers into the market and taking consumers away from the illicit market. At the highest level, this market remains defined by an oversaturation of licensed producers and retail stores, leading to unsustainable price compression and lack of profitability.

I want to be clear, we do not believe this is a sustainable environment. The strong will survive, so we view this as a temporary pain point and an opportunity.

Namely, we are being more aggressive to win share, capitalizing on our iconic and leading brands, our innovation pipeline, industry-leading cultivation capabilities, boots on the ground provided to us through our expanded distribution partnership with Great North Distributors, and the strength of our balance sheet.

Importantly, even in this intensive price competitive market, we have maintained our number one leading market share position in Canada and leading positions across our portfolio of brands with top rankings across adult use product categories such as concentrates, edibles, flower, oils, pre-rolls, topical, vapes, and beverages based on recent HiFyre sales data in Canada for the months of September through November.

Still, in the second full quarter since completion of the business combination, our retail market share declined to 12.8% from 16% in the sequential period because of the heightened price deflation. As I alluded to, our pricing strategy is to defend share to a point, but we will not severely compromise margins.

And to protect our gross margin, we are implementing several initiatives to ensure we have the right cost index to compete profitably. To be clear, our Canadian market share strategy is to execute relentlessly and with the precision across two main fronts that complement and reinforce each other.

First, the strategic price reductions will drive near- and long-term growth in our fastest growing categories – vapes and prerolls – and position us for strong upside when the market consolidates further.

Second, we are ramping up initiatives to educate and bring in new consumers through many different fronts, including partnering with retail and budtenders and delivering a more aggressive marketing strategy and product innovation pipeline through business intelligence and insights.

On the medical front, we are also rolling out new Tilray medical website and patient platform that gives patients access to all four medical brands and enhances their experience. This includes Tilray Medical, Aphria Medical, Broken Coast Medical, and Symbios.

In short, we have the scale and resources in Canada to allow us to double down on brand and strategically win. With that, I'll now turn the call over to Denise Faltischek.

Denise?.

Thank you, Blair. And thank you all for joining us today. Internationally, our presence continues to grow. We now offer branded medical cannabis in 20 countries around the world, reflecting the trust that governments, healthcare professionals and patients place in us every day.

Importantly, over the past five years, while everyone else was focused on other markets, we were focused on Europe. We strategically invested, acquired and built a strong infrastructure team and business across the EU, which has twice the population of the US and 20 times the size of Canada.

Just within the last couple of months, policy discussions on the legalization of cannabis for adult use has intensified throughout Europe, with Germany and Portugal being the most prominent candidates. The dominoes are beginning to fall and Tilray is uniquely and optimally positioned when they do.

Our two state-of-the-art cultivation facilities in Portugal and Germany provide EU GMP certified pharmaceutical grade medical cannabis, and we have sales and distribution arrangements to supply cannabinoid-based medicine through major pharmaceutical distribution channels.

This includes, among others, our wholly owned subsidiary, CC Pharma in Germany, which has preferred access to approximately 13,000 pharmacies and Grow Pharma in the UK.

Notably, Tilray is the only company currently supplying the German government with medical cannabis cultivated in country and we are the market leader across Germany in medical cannabis extracts and dried flower combine, which helps to ensure that patient needs in Germany are met with products of the highest quality and safety, while at the same time ensuring consistent supply and reducing dependence on importation.

In Germany, our revenue related to medical cannabis extract products grew 16% versus last quarter, and we now have a market share of 64% in the extract market. Our revenue related to dried flower products grew 10% versus last quarter, and we now have a market share of approximately 16% in the dried flower market.

As of November, Tilray is now the market leader in Germany with an overall market share of approximately 20%. Our strong reputation and product quality and safety and science-based cannabis research also puts us in an excellent position to capture the enormous opportunity for both medical and adult use legalization in the EU.

And that time may be nearer on the horizon because Germany's incoming government coalition has reached an agreement to legalize adult use cannabis nationwide within the framework of a regulated market. In terms of population, Germany would then become the largest country in the world to permit the sale of adult use cannabis on a federal basis.

And when that milestone does occur, we believe we have a head start on the competition based on our EU GMP certified cultivation facility currently operating in Neumünster, Germany, which has additional capacity to immediately support the recreational market.

And we have a track record backed by science, technology and quality control standards to offer high quality adult use cannabis brands and products on a consistent basis that we are confident would be well received in the market. We are also a market leader within other countries in Europe, where we have achieved the following.

In Portugal, we are the only approved medical cannabis product in the market with our T18 dried flower, which is distributed through our distribution partners to medical stakeholders throughout Portugal.

In Luxembourg, we were selected by the Luxembourg Ministry of Health as the exclusive supplier for the country's medical cannabis program for dried flower and oils. In Switzerland, we distribute our cannabinoid-based medical extract products to Swiss patients through our local partner.

In France, we were selected as one of four suppliers in a two-year pilot experiment to supply approximately 3,000 patients with medical cannabis. This experiment was to inform a regulatory framework for medical cannabis going forward, and we expect the French medical market to be in the order of magnitude of Germany.

In Italy, we are one of five distributors licensed to import medical cannabis into the Italian medical market. In the UK, in the quarter, we completed our first shipment of broad range dried flower products with high, medium and balanced potencies into the UK market.

In addition, we are one of only three suppliers within the Irish market whose cannabinoid-based medical products are eligible for reimbursement. As we look ahead, with respect to legalization more broadly, we expect all of Europe to legalize medical use cannabis within the next 12 to 24 months, and certain countries legalizing adult use thereafter.

Right now, there are compelling signs that Portugal and Israel are also gearing up for adult use markets. Outside of the EU, our businesses in Australia and New Zealand are performing very well, with Tilray-branded extracts and flowers leading the market.

To give some highlights, Tilray was the first company to have both purified CBD and balanced THC extracts registered in New Zealand by meeting their high quality standards. This took effect October 1 and the rollout of our products is going very well.

Patients now have accessibility to all four Tilray products offered in the market, and we are well positioned to drive ongoing growth. In Australia, the reputation and trust in our brands continues to grow.

To give an example, through a contract with the Department of Health in Victoria, 90 children are now participating in a government-funded seizure program using our products which will continue until the end of 2024.

Consistent with this growing trust in our brands, more national pharmacies in Australia have requested Tilray product by name, driving a 29% increase in revenue quarter-over-quarter. In fact, our performance would have been stronger had our sales team not been prevented by COVID lockdowns from promoting our products face to face.

Turning to the rest of the world, we see additional opportunities in Argentina, where we benefit from our distributor relationship with ADP, in Brazil and even China and India. So, in short, our international opportunities are tremendous and I look forward to keeping you updated on our progress.

I'll now turn the call over to Irwin for a discussion of our US operations before Carl closes the prepared portion of our remarks with a detailed financial overview.

Irwin?.

Thank you, Denise and Blair. And in the US, I want to start with our CPG businesses SweetWater Brewing, Manitoba Harvest, and our new addition Breckenridge Distillery, which together generate approximately $150 million in annualized revenue and profitable EBITDA and have exciting potential for future growth.

To offer some insight, utilizing our current footprint in the US today, we're able to invest in these strong brands, meaningfully expand their presence, and leverage their distribution systems to parlay into CBD beverages, CBD personal cares, and related adjacencies.

The free option at play is that these attributes will later be translated into THC businesses, in addition to our beverage alcohol businesses. Upon federal legalization in the US, much like our MedMen investment, we'll continue to explore THC options in the US market once additional clarity is available.

SweetWater is known for its 420 beers, among others, but since our acquisition of the business a year ago, we've expanded the product line to include spirits, ready-to-drink vodka sodas in a can in collaboration with our Canadian cannabis brand, RIFF, as well as hard teas and lemonades, and new craft beers including a new imperial IPA and a BC lager in collaboration with our award winning Canadian craft cannabis brand, Broken Coast.

It is our intention to make US beer consumers more aware of our Canadian cannabis brands prior to federal legalization because we have data that shows that beer drinking consumers are often cannabis users too. We have even more opportunities with SweetWater down the road, such as developing CBD products or infusing non-alcoholic spirits with THC.

In addition to the new SweetWater tap room located at Denver International Airport, and please visit it on your trips, we also recently acquired a second SweetWater Brewery and taproom in Fort Collins, Colorado, both which enable SweetWater to pursue their expansion to the rest of the US and in the western states.

Just a few weeks ago, we announced the acquisition of Breckenridge Distillery, widely known for its award winning bourbon whiskey collection and innovative craft spirits portfolio, including bourbon whiskey, gin, and vodka. Breckenridge is an exceptional leading brand that has current distribution across 50 states.

Working with its founder, Brian Nolte, and his team, all of them who will remain in place, we plan to bring our CPG brand building expertise to bear and make targeted investments in marketing, brand awareness and increase distribution. Even now, Breckenridge will benefit from synergies on the distribution side when paired with SweetWater.

We are confident that these steps will drive growth both now and in the future. I should note that both SweetWater and Breckenridge distilleries are business that are cashflow positive, EBITDA positive, earnings are creative, and can be leveraged for cannabis when federally permissible.

SweetWater's distribution currently reaches over 47,000 on and off premise points of sale, and we are continuing to build the business.

Right before year-end, SweetWater announced the acquisition of Alpine Beer and Green Flash, iconic West Coast craft beer brands to be brewed in our new Fort Collins facility for West Coast distribution, all which complements SweetWater's existing product offerings and give us a strong foothold in California and the west part of the United States, the largest state economy in the US and the largest legal cannabis market in the world.

I spent my career building CPG brands with teams that I work with today. And we've brought this expertise to Tilray with an ability to identify and significantly expand leading CPG lifestyle brands that resonate powerfully with consumers even without legalization.

We can therefore grow these brands, while building all the sets and pieces for the immensely positive impact that legalization will bring one day. With this in mind, I'm excited about the very fast growth of the spirits category in the US.

And we're exploring additional opportunities to build out our beverage alcohol business through more categories and, of course, brands. The CPG deals in turn ensure access to even more potential and deal flow and accretive EBITDA for us.

Turning now to Manitoba Harvest, we have stabilized the business since assuming ownership by rebuilding its core hemp food portfolio. In the latest 12 weeks, our US consumption in measured channels is up 2%.

On Manitoba Harvest, a significant turnaround from the double-digit decline that brand was experiencing at the time our business of our business combination.

We intend to accelerate the business through 2022 as we're introducing a great deal of product innovation that will enable us to capitalize on consumers' interest in hemp products aligned with plant-based, low carb or keto diets.

As a certified B Corp, Manitoba Harvest is committed to educating consumers of both the nutritional benefits and the sustainability of hemp as we grow consumer trial and awareness of hemp foods.

Additionally, we are leveraging our ingredients division to collaborate with CBG partners who are incorporating hemp seed, hemp protein and hemp oil into their brands. Our Tilray Wellness business is also developing multiple CBD beverage products for launch in 2022.

We'll take full advantage of our beverage manufacturing capabilities to deliver these innovative products to market. Manitoba Harvest products are currently available in 17,000 stores in the US. As with SweetWater, there is room to run.

Beyond that, as we grow each of these brands, we will be able to use these distribution systems to parlay into CBD beverages, personal care products, and related adjacencies. These may later be translated into THC based products upon federal legalization.

In both cases, we do not need to expend significant capital, build production facilities or distribution networks. They already exist and can be leveraged. We are setting the standard. Manitoba Harvest has the opportunity to become a multiple 100 million dollar company.

This is a clear reflection of the fact that even now, before federal legalization, we're building out our US infrastructure through cannabis adjacent products, putting the pieces in place to drive revenue growth today and to allow us to hit the ground running once legalization occurs and these assets can be more fully leveraged.

That being said, we view our ability to go on day one as important in that process, which is why we invested in convertible notes of MedMen. We have multiple benefit options regarding MedMen. More broadly, we continue to build our strategic position through multiple alternatives, so that can be fully benefit from legalization when the time comes.

Of course, we could take additional options on multiple MSOs now, but this approach only provides options since we could not recognize revenue or EBITDA from the underlying businesses and are dependent upon regulation to realize the full benefits of these options.

Moving on, I will touch on our progress in delivering the $80 million in cost synergies we've identified as part of the Tilray Aphria business combination. In short, we are ahead of our original pace, having reached $70 million on a run rate basis to date, with actual cash savings close to $36 million.

Carl will speak in more detail on our progress against the synergy goals in a minute.

In conclusion, to sum up, before I turn the call over to Carl, Tilray's business model, which is based on current value we are generating from our business in Canada, international and US, plus the upside that comes with legalization, is the backbone of our strategic plan and we remain on track despite headwinds.

Our strategy and team are in place and executing, and we are leading and differentiating our market position. And we are looking at all ongoing opportunities to drive synergies, reduce production costs, and a strong pipeline of transaction and growth opportunities worldwide.

At the same time, we are cognizant of the near-term challenges facing our business and the current pressure on our shares and that of our industry and the global economy in general. Omicron is likely to exasperate these challenges.

While unfortunate, neither deter us from executing on our mission to further build our position in the global cannabis industry. In fact, they enable us to make investments and adjustments now that will pay even bigger dividends when the market and the global economy normalizes.

We have the brands, we have the team, we have the plan in place, all to drive consumer demand, and we will reward our shareholders and allow us to win. And with that, Carl will now discuss our financials in greater detail.

Carl?.

Thank you, Irwin. Let's now discuss our relative strength during Q2, the synergies we are successfully building into our business model, as well as our cash and liquidity position.

At the highest level, the quarter was unquestionably impacted by a variety of factors, including, as Blair mentioned, marketplace saturation in Canada and the impact of COVID on our operations.

Importantly, we are confident that the medium to long term implications of these challenges play to our favor, particularly in terms of our ability to implement strategies that will ensure we win market share.

We are, therefore, more confident than ever concerning our organizational objective to emerge from these short-term market challenges stronger, more diversified and more profitable through our execution of our key competitive differentiators.

As with prior quarters, I want to remind everyone that as a result of the arrangement between Aphria and Tilray, our results in the prior fiscal quarter are based on Aphria's financial statements, but have since been adjusted to follow US GAAP and are presented in US dollars.

Additionally, recall that, in July 2021, we published an appendix to our investor deck located on our website that contains an unaudited analyst primer, which breaks down Aphria's US GAAP financial statements for fiscal 2020 and 2021 by quarter.

Please also note that, throughout our call today, we will reference both our financial results in accordance with GAAP as well as our non-GAAP adjusted financial results. Our earnings press release contains a reconciliation of our reported financial results under GAAP to the non-GAAP financial measures identified during our remarks.

Starting with the top line, despite a challenging environment, our Q2 net revenue grew 20% compared to Q2 last year, although the comparison itself is not apples to apples because the year ago quarter does not include any contributions from legacy Tilray.

We achieved our 11th straight quarter of positive adjusted EBITDA, particularly in a market where revenue was a challenge, speaks volumes to our relentless focus on operational and cost efficiencies, our overall planning capabilities and the success in integration and executing on the synergies we identified in the Tilray Aphria combination.

Over the past year, we have continually challenged market expectations on profitability and delivered superior results each time. From a medical standpoint, there was similar downward pressure caused by COVID from patients unable or unwilling to see a doctor as well as increased competition from adult rec and related price compression.

Ultimately, we believe that consumer demand for higher quality brands will rise once the pandemic wanes and bud tenders are able to more positively influence purchasing decisions, and then we will be best positioned to capitalize on that opportunity, similar to how consumers behave with regards to other products, such as alcohol.

Turning to our beverage business, SweetWater on premise demand remains impacted by COVID. Off-premise channels look to be stronger in the future with our new innovation pipeline and increased distribution points.

New leadership, product innovation and operating improvements have stabilized Manitoba Harvest with its revenue contribution relatively flat from the sequential quarter and margins basically unchanged.

After managing through the changes associated with moving from branded product at a big box retailer to a white label product, we are pleased with its revenue contribution in Q2.

Finally, while CC Pharma experienced a decline in net revenue, a major part of the decline was tied to the strengthening of the US dollar and the inherent weakening of the euro versus the prior-year period.

More specifically, if the euro/US dollar exchange rate had been the same in the current quarter as it was a year ago, CC Pharma would have reported an additional $5.3 million of revenue. Before we turn to profitability, it is important to note we performed a detailed review of our inventory as part of the quarter.

As part of our review, we identified an adjustment of $8 million in the value we originally ascribed to inventory and $6 million in the value we originally ascribed to prepaids and other current assets as part of our reverse purchase of Tilray.

During the current quarter, and prior to having finalized the purchase price accounting for the transaction, we reduced the inventory and prepaids and other current assets on the transaction date by $14 million and correspondingly adjusted deferred taxes and goodwill. These adjustments did not flow through the income statement.

At the same time, and as part of the inventory review, we identified inventory acquired in the transaction, whose cost due to price compression in the market was now higher than our expected selling price for the inventory.

Accordingly, we recorded an inventory impairment of $12 million in the quarter, with the vast majority of the write-down reflecting this higher-priced inherited inventory from the transaction. In a challenging revenue environment, operating excellence can play an outsized role, and that's certainly true as we turn to bottom line performance.

Despite the headwinds we've all discussed here today, our team worked hard to optimize performance. And as a result, we increased net income by almost $96 million to $6 million from the prior-year quarter as well as improved our adjusted gross margin to 29% from 27% in the quarter on a year-over-year basis.

Further, we reported our 11th consecutive quarter of positive adjusted EBITDA, which increased to $13.8 million from $10.1 million a year ago.

Importantly, we are confident our profitability will increase as more of our operating synergies become embedded within the platform, particularly by converting the legacy Tilray brands to Aphria's cost structure.

On a pro forma basis, for example, if Aphria's cost structure had been applied to the legacy Tilray brands in Canada during Q2, we believe that our adjusted gross profit would have been $3.8 million higher. Recall that Aphria has been a low cost producer with strong cultivation, processing and manufacturing facilities.

And we are now pulling additional costs out of that structure to gain further efficiencies, while improving product potency and quality to meet market demand. Adjusted free cash flow improved to negative $16 million from negative $53 million last quarter.

As we said last quarter, we believe that our first few quarters as a combined entity would likely see negative cash flows. However, as we achieved our synergies, we would be working towards sustaining free cash flow generation, which we believe will generate sustainable shareholder value.

Turning now to the business integration, we are making meaningful progress optimizing operations and as we focus on reaching at least $80 million of synergies within the first 18 months post transaction. To date, synergies achieved have reached $70 million on a run rate basis and $36 million of actual cash savings.

Further, we are pleased to announce that we now anticipate reaching our $80 million synergy target within a little over 12 months of closing the transaction or by our current year end on May 31.

Additionally, we are pleased to announce that we anticipate generating an additional $20 million in synergies from the transaction that will be achieved during our fiscal 2023 year. Now let's discuss Q2 in greater detail.

Within cannabis, our medical business grew primarily due to contributions from legacy Tilray and innovative new products, including the June launch of our new brand Symbios, which addresses unmet medical needs and provides patients with more choices in managing their health conditions with medical products.

Still, we experienced a lower number of existing patient renewals and lower numbers of new patients in both independent and clinic patients because they were unable or unwilling to see a doctor.

Our adult use business on a net basis declined year-over-year despite contributions from the business combination because of the move to price-based brands, more competition, and more aggressive price discounting during COVID.

And while we took the proactive measures to adjust our pricing and rationalize some SKUs during Q2, as discussed earlier, our cannabis gross margin fell as a result of the price protection provided to our customers as part of our pricing adjustments.

As a result of our pricing changes, we anticipate a minor fall in our cannabis gross margins going forward, but we believe we will remain industry leading. Our adult use business experienced a revenue decline.

The strong performer of the quarter was our international cannabis business where we were reported a 227% increase in revenues from the prior year. Net cannabis revenue rose 7% to $58.7 million for the quarter. Net distribution revenue fell 7% to $68.9 million for the quarter.

Net revenues at SweetWater were $13.7 million, slightly down from the prior quarter. Net revenues from our wellness business, Manitoba Harvest, were $13.8 million, which was relatively flat sequentially and for which there is no comparable to the previous year.

We view this business as largely stabilized at this point under the leadership of Jared Simon.

All of this led to net revenue increasing 20% to $155.2 million in Q2 over the prior year period, with the increase primarily driven by the contributions from legacy Tilray for which there was no comparable in the prior year, and SweetWater for which the comparable was only five days in the same period.

Adjusted cannabis gross profit remained flat at $25.5 million in Q2, while adjusted cannabis gross margin remained strong, but fell to 43% from 46%.

This reflects, in part, our proactive and decisive steps to adjust our cost structure and reduce production costs through the integration process, leading to some temporary inefficiencies during this transitional phase. But ultimately, this hard work now will yield greater efficiencies going forward.

Distribution gross profit decreased to $7.6 million in Q2, while distribution gross margin declined to 11% as a result of the impacts of COVID on CC Pharma sales mix. Beverage alcohol gross profit was $7.8 million in Q2, and there was no meaningful comparable in the prior year as the acquisition was completed last November.

Beverage alcohol gross margin was 57%, which was on par with the sequential quarter despite the drop in revenue, but below the 60% we achieved in the prior year. Wellness gross profit was $3.8 million and gross margin was 28%, which was in line with our expectations and for which there were no comparables last year.

In aggregate, adjusted gross margin increased slightly to 29% compared to the prior year, while adjusted gross profit rose 27% to $44.8 million. As we continue to achieve our synergy plan over the coming quarters and as our non-distribution revenues increase their share of our total revenues, we expect to see continued improvement in this metric.

For the quarter, we reported net income of approximately $6 million compared to a net loss of $89 million in Q2 last year.

Turning to cash flow and liquidity, adjusted free cash flow was negative $16 million during Q2 and reflected $17 million of net cash used for operations, $7 million in investment in capital and intangible assets, offset by $8.1 million of cash expended related to our acquisitions.

Again, as I said earlier, we view achieving free cash flow on a consistent basis as a priority for this business. While we certainly fell short in Q2, the negative adjusted free cash flow was within expectations, given the integration of the Tilray assets and represents a substantial improvement of over $37 million from the prior quarter.

We also still maintain a strong cash position of $332 million as of November 30th to both support our existing working capital requirements and our business plan. As we look forward and get beyond the near-term challenges due to COVID and the Omicron variant, we see good reason for optimism.

First, there will likely be a right-sizing of the Canadian market that candidly will be accelerated as the dramatic impact of Omicron variants impacts consumer behavior across the board. Further, continued pricing levels below cost levels for the vast majority of our competitors are not sustainable.

Through the benefit of time, we believe those pressures will be removed. Second, the movement towards legalization is continuing. With the anticipated legalization of recreational cannabis in Germany, we believe other EU countries will follow suit.

Moreover, we are continuing to invest in our US assets, including SweetWater and Manitoba Harvest, which are already cashflow and EBITDA positive, earnings accretive and will be leveraged for cannabis, along with other recent acquisitions, such as Breckenridge, Alpine Beer, and Green Flash Brewing that will be accretive to our portfolio.

Across all markets and geographies, we are expending our energies and resources on executing on our highest return priorities, actualizing our business integration to better manage costs, and capturing and delivering value for our shareholders. This concludes our prepared remarks. Thank you for your interest in Tilray.

We'll now begin the question segment of our call starting with questions from our covering analysts, which will be followed by a few questions from our retail shareholders from the Say platform.

Operator, what's the first question?.

[Operator Instructions]. Our first question comes from the line of Vivien Azer with Cowen..

You guys have been active from an M&A standpoint in the alcoholic beverage market, makes good sense, Irwin, as you articulated in terms of the long-term leveragability of those assets. But in the near term, it is a bit of a different network.

So I'd be curious just to hear your thoughts on any kind of synergy opportunities you see across those assets, any incremental M&A to kind of build more [Technical Difficulty] alcohol assets in the US?.

Anyway, just in regards to that, listen, I think what we saw with SweetWater Brewery, number one, very quickly we rolled out our risk plan, we rolled out our Broken Coast brand. And I think beverages is a major, major part of the whole cannabis industry. The second thing is this here.

I think one day when this does happen that the opportunity to replace alcohol with THC, and I've said this before, the brands that are out there today, whether it's SweetWater, whether it's Breckenridge are brands that consumers know and we will have the opportunity to get into the markets with THC products.

I come back and I look at the whole bourbon category is such a fast-growing category, and one day to be able to come out with a bourbon that's infused with THC under the Breckenridge name, which we would have an alcohol business, we'd have a THC business.

The third part is, listen, as you come back today to look to build brands out there and you saw we changed the name of the company, the Tilray Brand company, and you look at valuations and multiples, the spirit industry is similar to the cannabis industry in many ways and there's many crossovers.

Our study shows that consumers who consume alcohol are also cannabis users. So, a lot of synergies. And listen, our partner in Canada, Southern Glazer, in regards to our distribution piece of the business, that's the opportunity here in the US. So I see a tremendous amount of synergies, and these deals, A, are accretive.

And there's good growth in these industries for us. And one of the big things, Vivien, you can't do, which is wait for the US to legalize, and I think what the important thing is us being in adjacency categories that got growth, that got accretion, and that give us opportunities in the marketplace. .

Our next question comes from line of Andrew Carter with Stifel. .

I guess I want to step back and think through the Canadian adult use business, I think first off, kind of pressure on your market share, actually post integration of Tilray, could you diagnose is it all a function of pricing? And now that you're putting some price investments in place, do you think you'll be able to grow revenue at a level to where your actual Canadian profitability will grow from there?.

I'm going to start it and then I'm going to turn it over to Blair MacNeil, who is newly appointed President of Canada. But, yeah, I think – I come back for a second at this here. Number one, the Canadian market is continuously going through its challenges. There's more stores opening up. There's more LPs out there. And also, there's pricing.

And I come back and I look at here, we have 12 brands, we're going through SKU rationalization, we're going through brand rationalization. And also, if you come back to the liquor control boards, they're also going through SKU and brand rationalization.

And I think what's important is what Tilray has, we're going to have brands, we're going to have innovation, we're going to have products that consumers want because we're going to build our brands and that's why we changed the name to the Tilray branded company.

The other thing is, Andrew, I think what's important is our products are grown in our Leamington facility, our Broken Coast facility that's going to be consistent with quality, going to be consistent with regulatory, and going to be able to deliver potency. So, with that, yeah, we have lost some share in the marketplace.

Some of it was self-inflicted on ourselves. But the easiest thing is just go drop price and get share, but we're here to build something for a long term.

Blair, do you want to add something to that?.

I would say, first of all, on the diagnosis side, it's very clear. The inventory levels at a lot of LPs are unsustainable. And to get rid of those inventories, they're doing two things. One is they are compressing prices. And if you look in the last year, we've come down in price 1.7%, while the market has come down 22.6%.

So, we have definitely protected our margins on the way down, and I think as an LP, we have more room than a lot of our competitors to be able to take some smart pricing. So that's number one. I'd say the other form of this over-supply of inventory has meant new brands. 157 new brands were launched in the last year.

So, the market is getting very diluted. And we are going to ramp up our innovation in a big way to fight that. So we will take some strategic price, but we will also do it with an industry-leading innovation portfolio behind our big brands, which Irwin just talked about.

And I think the most important thing, and final part of your question is, can we do it profitably? And yes, we think we can. We have big scale. We have some cost opportunities that we realized through the synergies, but we have further costs that we can take out of this business to make sure we can do this and grow our gross margins.

It's going to be a little bit of a bumpy ride over the next couple of quarters. But certainly, we're in, I would say, the best position to be able to weather it. .

Andrew, I think the big thing is, listen, one of the things we're dealing with is a world called COVID. We're also dealing with supply chain issues and products and stuff like that.

And at the end, as we brought these two companies together and took out $70 million of cost and look at more opportunities, I think that's what the important part here is, and there's a big opportunity in the Canadian market.

But right now, only 50% of the market is going through the legal market where there's additional illicit market, you heard Carl talk about the opportunities for us in the medical market. So, the industry is three years old in Canada. I think there's lots of opportunities.

And yes, there could be additional M&A opportunities for us in the Canadian market..

Our next question comes from line of Pablo Zuanic with Cantor Fitzgerald..

Irwin, can I ask about the JV with Anheuser-Busch. Just if you can give some background about the termination of that JV? And if I tried to put a positive twist on it, does that give you more flexibility in pursuing partnerships with other CPG companies or that was never an issue? And if I may add one for Denise.

And thank you for all that color, Denise. That was very helpful. So, big jump sequentially, about 40% sequential growth in exports.

Is that a normalized run rate that we should think about for the next few quarters? If you can give more color there would help in this?.

I think, listen, the opportunity with ABI – and I think, very early on, even before the transaction closed, we had discussions with ABI and it made sense to terminate this deal. It was not a great deal for Tilray, number one. Number two, in the Canadian market, ABI just did not want to do THC products.

And number three, it was a major money losing relationship there. And with that, with our own infrastructure and our own distributor base, with distributors in the beer business, us knowing that business and with no growth, but big losses, it just made sense – and it was mutually, for both of us – to terminate.

We still have a relationship with them in regards to a co-pack relationship in doing a CBD product for them. Ultimately, it was not any type of hostile issue. It just made sense economically, it made sense for us and it made sense for them. And listen, it can create. There's a lot of other beverage companies out there.

We have a lot of other relationships in the beer distribution business. And one of the big things we acquired was a facility and we're the ones that have the facility in regards to producing and manufacture of drinks today, whether it's CBD or THC. So that's the whole thing with ABI. And part of our synergies came from closing down this joint venture. .

Just in terms of your question in terms of run rate for Europe, so we are looking at a 37% run rate for the rest of the year. Now, just as a note of – like, sort of caution, in our numbers are oftentimes shipments into other countries.

And as you know, with regulatory framework, the timing of that doesn't always work out the way we want to with import and export permits. But there was a shipment into Luxembourg, there was our first shipment into the UK, but cautioning, just that with 37%, there could be some changes in the outer quarters..

And I think, Pablo, the thing is this year. We're excited about European market today, and I said, how do we get to a billion dollars in Europe. It's got to depend upon legalization in certain countries. But you've heard Germany talk about it. And we are working with the German government right now in ways that this is going to happen.

It's probably going to get announced soon. It will probably take maybe 12 to 18 months before it can happen. And you will see potentially Portugal and other countries go ahead because of the tax. You even see Macron talking about it in France in regards to his election in May. That is something that he will have on his election platform.

And with our facility in Portugal, with our facility in Germany, and with our CC Pharma, we're well positioned for that marketplace. And as Denise said, right now, there's 20 plus countries in Europe today that do sell medical cannabis, and we look to enhance those sales. .

Our next question comes from line of Rupesh Parikh with Oppenheimer. .

I guess I just wanted to touch on the COVID backdrop in Canada. If you guys can just help us understand what you're seeing right now in Canada. And then, as we look at the business in the current quarter, would you expect the cannabis part of it to take a step back versus what you just did in Q2. .

So, Canada and Ontario and a lot of the different provinces are shut down. Blair, I'll let you go ahead and take that since you're in Toronto right now and you're the one dealing with the offices closed and restaurants closed, but cannabis stores are still open, which is the good news.

The only thing, you have to show your vaccine card before you can enter. And that's the same with the control boards. The other good news is people are staying home. So, hopefully, they're consuming more alcohol and consuming more cannabis.

Blair?.

In terms of the COVID effects, I think over the last almost two years, we've seen the similar issues. So, the ability to get capacity limits in store, which making sure our distribution team can get out there and talk to bud tenders and be in stores. So that is a little slower than what we'd like.

Some of the supply chain things that Irwin mentioned earlier, similar. On the opportunity for consumption, we are seeing increases on that side. So, I'd say the COVID is nothing unexpected to what we've seen so far. In response to your question about the Q3 numbers, we are forecasting an increase in our Q3 business.

So, we definitely think that our pipeline of innovation, some of the strategic pricing moves we've made will result in increased revenue versus Q2 balance of year. .

Rupesh, I think the big thing is this here. COVID is something that's been around for two years. And the bad news is, it's still around for two years. The good news, we're getting used to dealing with it and how to deal with it.

And with that, we have made tremendous amount of improvements to our business, keeping our employees safe, keeping our offices open, dealing things online, and making sure we sell into the bud tenders and that's what our partnership with Southern Glazer that has the boots on the street to get into the stores and market to these bud tenders.

The other thing is working with the liquor control boards to make sure we have inventories in regards to being able to ship to them. In the last quarter, because of not having labor, we lost multiple sales on pre-rolls. Some of the control boards took down their inventories because concerns of COVID, and that's already gone through our numbers.

So, there's lots of things that have happened. And there's lots of things that reflected our numbers because of COVID. But I think, as Blair said, we're in a good place.

And having Blair on board today, who came through the spirits industry with five years with Bacardi, knowing how to work with the control boards, knowing how to work with an alcohol product, and he today is totally responsible for the P&L of Canada and runs all sales and marketing operations in Canada.

So, it's great to have someone of Blair's caliber running Canada for us today. .

Our next question comes from the line of John Zamparo with CIBC. .

I know we're past the hour, so just one question. What are your thoughts on cannabis M&A? You've mentioned the 30% domestic share in the past. It does look like that'll require acquisition.

So, what are some attractive characteristics of a target that you might look for in Canada? And what have you learned from either the Tilray Aphria merger or deals outside the cannabis space in informing your future M&A plans?.

It's like every one of them are something different. And there is a lot – and I've always said this in my prior days at Hain, every deal I've done, I've learned something different from and what would we have done differently.

I think the big thing, which, again, we learned from Tilray and the Aphria come together, do we need 12 brands? You can't support all 12 brands. And one of the things – and as you look at some of our revenue, we're down because we have 12 brands out there not being able to support 12 brands.

The second is bringing the cultures together and bringing the people together. And that's something why Blair's here today, is really to bring the cultures together and bring the businesses together. What brands are we going to spend on, the innovation part of the business.

And then, we closed two facilities, Enniskillen and Nanaimo, because of cost out in those facilities to produce.

And that's sort of, as Blair talked about before, is us being that low cost producer and that's us being the quality producer? Another big thing is how do you bring more and more consumers over from the illicit market? You've got to offer innovation, you've got to offer new products, you've got to offer potency out there.

So, there's a lot we'll learn in regards to future acquisitions. I come back and say there's some great LPs in Canada that would add additional uniqueness and brands, that would add additional capacity and bring them into our Aphria Tilray facility. And there has to be consolidation. There's close to 700 plus LPs in Canada today.

You're seeing in regards to – just in Ontario, it's gone from 600 to 1,200 stores, so the cannibalization happened in that marketplace. So, yes, we're looking at acquisitions in Canada.

As you can see today, listen, if you look at the top four or five companies, did we all lose share? But is it profitable share, is it sustainable share? And ultimately, what happens to it? You just can't look at a quarter to quarter. .

Our next question comes from line of Gaurav Jain with Barclays. .

It was just on the comments that have been made around the Canadian market that next quarter revenue will be more than this quarter. And clearly, most producers are losing money right now. And there is overcapacity.

So, what is your best estimate when the industry turns? Is it later this year, Q3 Q4, or is it more of a 2023 phenomena when we actually see an upturn in the industry? And if you could think or talk about what could be your potential margins at that time. I think that would help us really understand the opportunity here..

I think number one, we're not ready to give guidance here. But I think the thing is, is this here. What Blair is going to – I'll let Blair speak for himself or I'll let Carl.

What's important is, as we brought these two businesses together in May/June of last year and taking the costs of these businesses and setting the floor for the brands, the products with their SKU rationalization – and I hear from people, you're down quarter over quarter.

Well, there's seasonality, there's holidays, there are certain stores that were closed during COVID. There's a lot of factors out there. But I come back and say this here. The Canadian market is a $9 billion market today at retail. And that's only for 50%. That's only for 50% of the market. The other market is the illicit market.

There's ultimately sales and there's consumers to bring over from that. In regards to bringing new users into the marketplace, I think that's going to continue to bring in more and more users into the marketplace.

The other, and I've talked about it before, is the category in regards to the medical cannabis industry, which is tremendous size and opportunity for us. You saw our margins improved somewhat in the quarter. But I think the big thing Blair mentioned is this here. While the industry was down on price 22%, we're only down on 1.7%.

And yes, we lost two or three share points.

But I think as we build out the core brands within Tilray, as we build out the innovation within Tilray, we build out the potency within Tilray, and we have the boots on the street, which we have, to get in there, to educate the bud tenders, which are key, ultimately – and I think it's also important is to have that consistent low cost producer out there coming into facilities.

Blair, you want to add anything?.

No, you went exactly where I was going to go, which is there's so much runway on the illicit market. We're still only at 50% of that. So, certainly, we see the opportunity for growth in the next two quarters, notwithstanding some of the issues there.

But we're building up capacity on pre-rolls, we're building up capacity on flower, we're building out our innovation pipeline over the next 12 to 24 months to have more robust launches into the marketplace. So, there's a lot of runway for growth in Canada.

And as we said in our statement, I think the bottom line is we see some of this compression as short term. How short term? We don't know.

But as Irwin mentioned, there are a lot of LPs who are either buying products third party, which makes their margin compression much, much worse than ours, and there's a lot of LPs who are burning through cash trying to compete right now. And some of that consolidation will ease inventory.

And we see the opportunity to optimize revenue from that point forward. The timing isn't exactly clear, but we think it's not going to be long-lived..

Gaurav, you might see margins go down because of price compression, and we out there are dropping some price, whether it's vapes or some other things, but on the other side where we have the opportunity, and you heard me say today, we are increasing our cost savings and the costs that we're taking out of the combination of Tilray and Aphria going to $100 million.

And that's ultimately how we're going to support that. And that's what's important is here. We can afford to be able to go out there and do it, and we're not going to do it recklessly by no means.

At the same time, the products are going to be grown in our facilities, which are going to bring our overall costs down as we bring in the Enniskillen and we bring in the Nanaimo production into our facilities in Leamington. .

Our next question comes from line of Tamy Chen with BMO Capital Markets..

Just a quick question on the US strategy. So, Irwin, you talked quite a bit about the CBD beverages, personal care, related adjacencies that then can be translated to THC upon federal legalization. But I'm curious on this aspect, which is that what we see right now in the US cannabis market is that, like Canada, flower and pre-rolls really dominate.

So, I was wondering if you could talk about how you intend to build that aspect of your US strategy because my sense is that I think MedMen is primarily a retailer, not as much a flower producer per se. .

In the US, Tamy, we're seeing demand out there for other products and ancillary products, whether it's in drinks, whether it's in edibles, whether it's in moisturizers, whether it's in type a personal care products. But with that, we have formed Tilray wellness run by Jared and his team that is running Manitoba Harvest today.

So with that, you're going to see us coming out with CBD drinks soon, you're going to see us coming out with other CBD products. You're also going to see us focusing on hemp and taking a big position in the whole hemp market.

And what are the standards there? I think we've done a great job in regards to improving the hemp quality and the taste of hemp. What we've done with SweetWater is taken the risk brand and the Broken Coast brand and coming out with seltzer products and coming out with IPAs in that market to introduce our brand names.

So, the US market is – the focus is to grow brands, both in spirits, beer, CBD and wellness. Until legalization does happen here, at least that gives us good adjacency products. And as I was telling someone the other day, in regards to regulatory, ultimately, regulatory will change or regulations will change in the US.

And I think at that time, we'll have a good sized business that we will be able to participate in the THC market, whether it will be flower, whether it will be pre-rolls. And with that, having the knowledge and the business that we have in the Canadian market, we'll be able to translate a lot of that expertise into the US market..

Our next question comes from the line of Aaron Grey with Alliance Global Partners..

I just want to touch on Manitoba Harvest. So, you spoke to some stabilization that you had seen prior to the merger, but I want to touch more on the margin side. So, continue to see the mid to high 20s the past few quarters now, below the 40% levels we had seen in the past.

So, I just want to know if you could provide some color in terms of the gross margin profile, whether or not we should expect to see now in this range with more the white label versus branded prior? Or if you see some margin opportunity there?.

I'm really excited about Manitoba Harvest. And I know quarter over quarter, it was down a bit. But if you look at Manitoba Harvest, the brand itself, it was flat quarter-over-quarter. And this is a brand that until we acquired it, I think they had lots of plans for it. I'm not sure it got the plans and attention.

The other thing is everybody thought hemp, hemp, hemp and what do we do with this. The team that is working on this worked with me at Hain, has introduced numerous new products. I've seen the new product plan. I've seen what they're doing in regards to distribution. Also, I've seen what they've done in regards to taking costs out of this business.

We did have a lot of private label business that was not profitable. And we have now discontinued that or given it up. And some of that was Costco business that was Manitoba Harvest where they have converted it to their Kirkland brand.

And coming back and sort of saying, did the Manitoba harvest brand ultimately sell better? So, number one is I come back and say we are going to focus on the Manitoba Harvest brand, we are going to come out there and legitimize hemp foods in regards to the quality of the product, the taste of the product.

Some of the products just did not taste good. So we pulled them off the marketplace. In regards to the benefit of hemp and educating consumers why hemp is good, why it's good in regards to smoothies, why it's good in yogurt, why it's a keto diet food.

And I think there is a big opportunity to really grow this business to $100 million business or do add-on acquisitions. We are not in the snack business. We plan to enter the snack business. We plan to enter other product lines and ingredients in this business.

Ultimately, will the margins grow? Yeah, because we're going to take costs out of the facilities that are going to be much more efficient. And a lot of products that were co-packed in third parties, we're going to move back into our facilities. Today, Manitoba Harvest is sold in over 17,000 stores. So, looking to expand that.

And the key thing is there's a team in place that has done that before on the snack product, on other grocery products and know how to do that. .

Our next question comes from the line of Doug Miehm with RBC Capital Markets..

This question is for Denise.

I just wanted to review what specifically the German timeline would look like in terms of receiving approval on a broader basis, what the risks might be? And then, maybe you could just talk to us a little bit about your facility in Germany and how would you be able to supply that if we did see the approval in 12 to 18 months? And I'll leave it there..

In terms of the legalization timeline, as you know, the coalition has already talked about the approval of adult use cannabis into the German marketplace and are working on a framework, a regulatory framework in order to execute on that.

And as Irwin mentioned, we are offering up our support and help to the extent necessary to help frame and provide some information in order to allow for the development of that framework rather quickly.

We believe it'll be a 12 to 24-month framework for the basically the adoption of new regulations, as well as the execution implementation of those regulations. So in essence, because of the fact that a whole framework has to be developed, it has to go through various government channels and then it has to be ultimately approved and rolled out.

So, we believe that timeline is probably around 12 to 24 months for the full execution, implementation and commercialization of adult use cannabis. You asked about the Germany facility in Neumünster, so we believe that this uniquely positioned us and provides us with great advantage in the German market.

One of the things that the German government has talked about is trying to eliminate the overall requirement that they have to rely on – basically cannabis is imported into Germany. And as we all know that there's not enough cannabis that's actually being produced in Germany to actually support that.

However, we are the only facility today that is supplying the German government with medical cannabis. There is room for expansion within this facility. And we believe that we can very quickly expand and also provide to the adult use markets. So, we believe it's a great advantage for ourselves..

And just add on to that, we're really excited about Europe. And I wouldn't want to be starting from scratch in Europe today. And I think that's the big thing. We've made the financial commitment. We've dealt with the financial burdens. We've dealt with being limited to medical cannabis.

And I think it's important today of where we are and what ultimately that could be worth one day. The German Mark alone – and again, it's got to legalize, a lot got to be done, is a $2 billion to $3 billion market within itself. .

Yeah..

Canada is 33 million people. Germany is 80 million. And that's what's why the Canadian market is so important for us. Number one, both adult use and medical is legal. But there is so much perfection that we have learned from the Canadian market and knowledge that we're taking to Europe today.

And at the same time, we will take that to the US once the legalization happens here. .

Our next question comes from the line of Gordon Johnson with GLJ Research..

Just a quick question.

When I look at your sales on a like-for-like basis, is it fair to say if I look at the sales for Tilray Aphria combined, in the fiscal second quarter, they were down 13.9% year-over-year?.

So, sales quarter-over-quarter on a combined were down..

No, no, year-over-year. So, in one of the presentations you guys gave, you gave pro forma results for Aphria Tilray sales in the fiscal second quarter of last year, and that number was around $180 million.

So, using that number in the sales you reported today of $155 million, on a year-over-year basis, looking at pro forma numbers on an apples-to-apples basis, is it correct that sales actually fell 13.9% year-over-year?.

Gordon, if you go to the analyst primer, which is I think the document you're referring to and you look at the pro forma number, on a pure dollars for dollars basis, you're correct. But I think you also have to go back and look at what was in those numbers for legacy Tilray in the prior year.

So, in the prior year, they had their one big shipment for the entire year that was to Israel and the international market. Aphria had its one big shipment in the year in that period. And you also had Tilray working towards its achievement of EBITDA positive by the end of that calendar year.

And so, there's a few things that are in there that drove the that number up that may not be comparable in future periods. .

And I think, Gordon, the other thing is to look at – in this quarter, close to $7 million of inventories were taken out of OCS. And as we've gone through SKU rationalization and we've gone through product rationalization, but your number year-over-year as a combined is absolutely correct. But there's factors that add into that.

Also, you heard Carl talk about currency in regards to this quarter, $5 million in currency, we're down. So, absolutely right. But there's other conditions as we look at quarter-over-quarter and year-over-year when companies come together. .

That was really helpful. I was a little confused last quarter as well, because it was a similar dynamic where the like-for-like numbers were flat, but the number at the top of the press release was much higher. So separately, it's encouraging that you guys are entering new geographies, new markets, etc.

Can you tell us what you expect to be your biggest opportunity over the next three to six months from a geography perspective? And it seems like there's some opportunities clearly in the US.

Can you give us your outlook on – excuse me if you guys already said this, but can you give us your outlook on national legalization?.

So number one, I come back and with Blair in charge in Canada today, and he's got a real good strategic plan, you heard him come back and say about growth in the third quarter and all the things that we've been working on. So, I feel good about the opportunities in the Canadian market. You heard with Denise laid out regards to Europe.

And with that, it's not going to happen in the next three to six months. But there's going to be plans in place in regards to us really growing in the European market. There's 20 markets today that has cannabis medical in Europe. The big thing for us is the US right now, is I come back and I say this here, is growing Manitoba Harvest.

Breckenridge has tremendous, tremendous growth opportunities. It's in 50 states.

The majority of the product today is sold in Colorado, but we look to roll that out, we look to roll out Breckenridge in cans, expanding SweetWater into additional states, going into the West Coast with the Fort Collins facility with our Green Flash and our Alpine products.

So, there's lots of opportunities for us, both in the US, Canada and Europe, Gordon. And last, but not least, there's additional cost to come out of this business.

And I think that's what's important for us in the next two quarters that we're free cash flow positive here and we really manage those costs and that we are able to get share back from a profitable standpoint, just not get share back for the sake of getting share back..

Ladies and gentlemen, that concludes our questions via the telephone. I'll now turn the floor back to Ms. Noorata. .

Thank you, operator. And now we'll turn to questions from the Say technologies platform from our retail shareholders group. Our first question is regarding the stock price.

What are you doing to increase the share price and to perhaps reassure stockholders?.

So great question. And listen, it's something that I get asked all the time. And my first and foremost is our focus remains on executing on our global growth strategy. And I hope we discussed a lot of that with you today. We will not be distracted by short term market volatility. We'll not go out there and do short term pricing and strategies.

We will defend competition. Absolutely. But we're here to build a strong consumer packaged goods company. That's why we changed the name to Tilray Brands. Cannabis is still a nascent industry and shareholder value is our foremost priority.

When I went back to our shareholders and looked for additional shares, I said we would not go out there and use these shares for diluted deals. And so far, we have not. And that is a big part of our plans.

I think what's important too is our focus is executing and driving top and bottom line performance, but profitable one, and delivering sustainable value. And just like Gordon asked me the question before, it's very easy to go out there and do private label business, it's very easy to keep sales in place that are not profitable for top line growth.

But that's not something we're going to do. As we bring these two companies together, how do we build a base for the future growth? And listen, there's lots that changes out there. Yes, I've come out and said $4 billion is contingent upon legalization in the US. It's contingent upon legalization in Europe.

I've come out and said, I'd like to get to a billion dollars in Canada. There's lots of wood to chop to get there. And I think a year from today, there'll be lots of changes in the marketplace. This is a three-year old industry. And if you look at most companies today and most categories, they're a lot older than three years.

So we're out there redefining the category and trying to get it right. Do we get everything right? No. Do we make mistakes along the way? Yes, but we realize it and try to correct it. .

And the second and last question is, what are the plans to enter the US market in 2022? And how does performance look over the balance of 2022?.

The plan to enter the US market, as I've been clear about it is this here. With our Breckenridge brand, our SweetWater brand, our Green Flash, our Alpine, our Manitoba Harvest, we really have a good stable of consumer products. We'll look at other acquisitions in that marketplace.

But one of the things we're not going to do is do deals where there is no sales, no revenue, no EBITDA and it's going to be dilutive to our shareholders. And just to be clear, the shares that our shareholders approved us to use, they're not dilutive today if we don't use them.

I do not see legalization happening in the US for at least the next two years. You've got an election coming up in November of this year. I don't think it's going to happen after that. Depending upon how the House and the Senate goes, I'm not sure if it's going to happen within the first year of that.

The Biden administration can't get their bill through on infrastructure right now. So, I don't think cannabis is going to be one of the top things. So, how does the performance look over the balance of 2022? Listen, I hope everybody on this call today heard what the team is saying.

Bringing Blair's expertise to the Canadian market, bringing Denise's expertise to the European market, in regards to the finance group, in regards to our overall vision, what we're doing out there. At the same time, dealing with COVID, dealing with trying to keep our facilities open, dealing with a market that's controlled by regulation.

I'm proud of what the team has done. And I've got to thank the team tremendously. I want to thank our shareholders, for those that have stuck with us. I know it's been a bumpy ride and I feel it with you and feel the pain.

And on the other hand, what we're trying to do here is to build a consumer products company that ultimately has the results and ultimately rewards shareholders and rewards – most important thing I've always been told, build a strong company and the stock will take care of itself. And it's important to do those.

But at the end of the day, you've got to build the company, you've got to build brands around what consumers want. And that's what this team is trying to do. And I really come back and look at the expertise of this team. And I know we can do it. .

With that, that is the conclusion of our earnings call for Q2. I really want to thank everybody for listening today. I know there was a lot of you on the call. I know there's a lot of frustration in the industry, there's a lot of frustration out there. When you look at different aspects and I read the text and I read the emails when you send them to me.

And where I can answer, I try. There's a lot of times I just can't. But we listened and we want to improve. And I think that's what's important with Tilray. Tilray is about our brands. It's about the strong management.

and one of the things I've tried to do was to bring in a strong management team and I think I've got to A class – I know I have an A class management team that's working with me. I have a top board of directors that is working with me. Our strategy is right. And, listen, the strategy changes, and that's what's going on in this world today.

Whoever thought last year this time, we'd still be sitting here with COVID and the shutdowns, we are. Yes, I've come out and said, I want 30% market share. But some of the challenges met? Yeah. And when you have to change, accept it and make the change. Just don't stick to it because you said it.

And that's one thing we're going to be flexible, nimble and entrepreneurial. And if we come out there and say things that we have to change, we'll change it and adjust to it. In regards to our brands, we're going to build brands even though the limitations on what we can say and what we can advertise.

We are going to be and we are a diversified company into adult use, into medical, into spirits, into beer, into food. We will, and we are concerned, reward our shareholders. We're not out there to do dilutive deals and deals that just don't make sense. And with that, hopefully, in the end, it all equals what everybody wants to see.

Again, I thank everybody for their support. I thank everybody for their input and I look always forward to input. I look forward to those shareholders that have been with us a long time. And the most important thing is stay safe out there.

We live in a world today where when I wished half of my friends happy new year, I got back from them, I got COVID, I got COVID, I got COVID. And I told them drink a bourbon beer using cannabis [indiscernible]. So, with that, Happy Holidays and to a good 2022 and I look forward to speaking to you again soon. .

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..