Good morning, everyone. Thank you for joining us to discuss Tilray Brands, Inc.’s Financial Results for the 2022 Fiscal Third Quarter Ended February 28, 2022.

Joining me on today’s call are Irwin Simon, Chairman and Chief Executive Officer; Carl Merton, Chief Financial Officer; Denise Faltischek, Chief Strategy Officer and Head of International; Blair MacNeil, President of Tilray Canada; 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, please note that 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 measure prepared in accordance with GAAP. In addition, we will be making numerous forward-looking statements during our remarks and in answering your questions.

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 Brands’ Chairman and CEO, Irwin Simon..

Thank you very much, Berrin, and hello, everyone. We thank you for joining us this morning.

We’re pleased to again have several members of our senior leadership team on the call, including Denise Faltischek, Chief Strategy Officer and Head of our International business, who will update us on the strength of our global operations at the heel of international growth and legalization across Europe.

Blair MacNeil, President of our Canadian business, who will update us on our Canadian business and the Canadian market and our plan. I will then walk you through our U.S. CPG business and the progress we are making against our cost optimization plans. And finally, last but not least, Carl Merton, will provide us with an update on our financials.

Turning now to Tilray Brands’ recent performance and the quarter highlights. We’re pleased to have delivered a profitable quarter with year-over-year revenue growth and achieved our 12th consecutive quarter of positive adjusted EBITDA.

And while Denise and Blair and Carl will discuss these results in detail, I want to spend some time outlining how we get to our ambitious goal of $4 billion in revenue by the end of fiscal 2024. The first is the potential we articulated in December of 2020 when we first announced the Tilray-Aphria merger.

We are a global CPG cannabis growth story backed by organic growth and acquisition opportunities in adult-use, medical and other cannabis and CBG adjacencies as well as synergistic opportunities that we continue to realize from merger and operational excellence delivered by our world-class team.

We have the infrastructure, people, brands and strategy in place across three main markets. In Canada, the adult-use industry is only now entering its fourth year. And this means that the first mover has the infrastructure and resources, coupled with a consumer-first approach to brand building, innovation that will win.

We have the leading brands in Canada. We are investing in new strategies and brands to build upon the leadership position and aggressively gain back market share, as Blair will expand in a minute. Recently in Canada, we announced a proposed acquisition of convertible notes in a partnership with HEXO that advances multiple objectives.

The proposed transaction will be immediately accretive, creates a pathway to a meaningful equity position in HEXO, generate substantial shared operational efficiencies of approximately $80 million, allows us to partner for product innovation that we would benefit from in Canada across the globe as legalization continues to gain traction.

With Europe, we continue to believe the European market is on the cusp of broad scale adult-use legalization. And you can be certain of one thing, companies with EU GMP certified operations like Tilray Brands possess a significant advantage as legalization spreads.

We have a great foundation and an unmatched infrastructure in those markets, as Denise will explain soon. On the medical front, we recently unified the global medical divisions of Tilray and Aphria under our cohesive strategy and mission.

And now, Tilray Medical is the premier global supplier of portfolio of high-quality, effective medical cannabis brands and products for patients in needs around the world and across 20 countries and 5 continents. As I said before, we believe the EU alone presents a potential $1 billion opportunity in our $4 billion strategy.

Denise will also address international developments beyond Europe that are compelling and moving very quickly. And in the U.S., legalization would be a milestone for Tilray Brands and the industry. Given uncertainty as to actual legislative reform, we are pursuing the next best thing, optionality.

Our investment in MedMen is the best example of this approach. And with our strong balance sheet, leadership experience, operating profitable CPG businesses and growing brands that consumers love, we see a clear path to additional acquisition opportunities across the U.S.

and remain optimistic that recent House passes of the MORE Act will provide additional momentum for legalization. Another key factor on our path to $4 billion is at the best-in-class, high-quality cannabis CPG brands platform.

In turn, it means that we are ideally positioned to disrupt the global medical health and wellness consumer products market, an opportunity that McKinsey has estimated to be more than $1.5 trillion today on a global basis with annual growth, 5% to 10%.

And while I will discuss our CPG segment performance in more detail later on in this call, I do want to reiterate highlights of this business, which include a key U.S. and global assets of SweetWater, Breckenridge Distillery and Manitoba Harvest. Together, our current U.S.

CPG platform represents a portfolio of highly sought-after brands that bring people together in a memorable and positive way, a strong and robust infrastructure, a broad global distribution footprint and hands-on CPG expertise with operational expertise. Utilizing our current footprint in the U.S.

today, we’re able to leverage these strong brands and their distribution system to parlay into CBD beverages, CBD personal care products and related adjacencies, and they may later be translated into THC products upon federal legalization in the U.S. as well.

I am confident that the unique experience of our executives will help Tilray Brands build on the lessons of better-for-you CPG and beverage alcohol to accelerate our market growth. Now, to hear about that in detail, I will turn the call over to Denise Faltischek, our Chief Strategy Officer and Head of International Business.

Denise?.

Thank you, Irwin, and good morning, everyone. As noted earlier, we recently launched Tilray Medical, a global medical platform that unifies four medical cannabis brands under one strategy mission and vision.

By unifying the global medical divisions of Tilray and Aphria under a cohesive strategy and mission, Tilray Medical emerges as the premier and leading global supplier of a portfolio of high-quality, consistent and effective medical cannabis brands and products for patients in need around the world.

Internationally, our strategic presence and position continues to accelerate powerful growth. In the third quarter, we saw strong performance from our EMEA business with sequential quarter-over-quarter growth of 37%. This growth was primarily driven by increased medical whole flower sales in Germany and Israel.

The potential of the EMEA business was a factor of the Tilray and Aphria transaction, and we’ve seen over 4,000% growth in the quarter compared to the prior year quarter. We have invested in our infrastructure in Europe.

And as a result, Tilray is uniquely positioned as the only company on the continent with two EU GMP facilities located in Portugal and Germany. Our German facility also remains the only facility producing medical cannabis in Germany today.

In addition to our well-received whole flower offerings, we have a comprehensive portfolio of medical cannabinoid extracts to meet our patients’ needs and are excited about the launch of our high-THC balanced extract product, which we expect will launch in May and which we developed based upon our insights.

Today, Germany remains the largest medical cannabis market in Europe and is expected to be one of the largest adult-use markets as well, upon legalization. We are already the leader in medical cannabis within Germany with a market share of approximately 20% with our whole flower extracts and Dronabinol products.

And this, together with our investments in infrastructure, brands and people, positions us exceptionally well for the eventuality of adult-use legalization. We also see growing potential in our German distribution business, CC Pharma.

With access to over 13,000 pharmacy distribution points across Germany, we expect this business to grow as medical cannabis continues to gain traction across the country, and CC Pharma adds additional Tilray Medical products to its distribution points.

Please note that any revenue generated by CC Pharma for cannabis is accounted for within our international medical sales. Outside of Germany, we believe that there are great opportunities across other European countries as well.

Other countries have expressed a clear political ambition to broadly legalize adult-use cannabis, such as Portugal, Luxembourg and Malta. Some are engaging in an experiment for adult-use, including the Netherlands and Switzerland, and some are debating regulations for cannabinoid-based medicine such as France, Spain, Italy and the United Kingdom.

In fact, we think all of Europe could legalize medical cannabis within the next few years, or sooner with certain countries legalizing adult-use thereafter. Let’s now discuss our international business across various countries.

In Portugal, we are the only approved medical cannabis product in the market with our high-quality medical whole flower, which is distributed through our distribution partners to medical stakeholders.

In Luxembourg, we were selected by the Luxembourg Ministry of Health as the exclusive supplier for the country’s medical cannabis program from medical whole 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 will inform a regulatory framework for medical cannabis, and we estimate that the French medical market is roughly the magnitude of Germany’s medical market.

In Italy, we are one of five distributors licensed to import medical cannabis into the Italian medical market. In the UK, we completed our first shipment of broad range medical whole flower products last quarter with high, medium and balanced potencies, and our shipments this quarter have increased and are growing nicely.

We also launched Pollen, [ph] a CBD wellness brand with three broad spectrum CBD products, including gummies, drink drops and in oil across the UK within Amazon. In Ireland, we are one out of only two suppliers within the Irish market whose cannabinoid-based medical products are eligible for reimbursement.

Continuing with this theme of opportunities in Europe, in February, we completed our first sale of medical cannabis whole flower in Malta. And then in March, we expanded the offering and the launched the first EU GMP medical cannabis oil products in Malta. Turning now to the Oceania region.

In January, we announced the expansion of our medical cannabis product offerings in Australia and a new medical cannabis e-learning platform for healthcare providers.

After listening to patient feedback and leveraging learnings from our operations in Germany, we were very excited to launch new products in Australia to meet consumer needs and now have a broad and complete range of EU GMP certified medical cannabis whole flower offering.

Finally, we also see additional opportunities in other parts of the world, and therefore, look forward to further updates on our progress. These include Colombia, where we are seeking product registrations, Argentina, where we benefit from our distribution business, ABP, Brazil and even China and India.

With that, I’ll now turn the call over to Blair MacNeil, President of our Canadian business.

Blair?.

Thank you, Denise, and hello, everyone. As Irwin noted, we are now entering the fourth year of cannabis legalization in the Canadian market. The total cannabis opportunity in Canada is approximately a $10 billion market, of which only 54% is being serviced by the legal market. This presents a significant revenue opportunity ahead.

However, the Canadian cannabis market remains crowded and oversaturated with 800 LPs and 3,200 retail stores. This has led to an oversupply of product and price compression. In the last 12 months, the market has seen reductions in retail pricing of 24.5%. In the last three months, the market has seen a reduction of 6.5% in pricing.

Despite these price reductions, we’ve been able to maintain our margins in the 40% range. In Q3, our retail market share declined to 10.2% from 12.8% in the sequential period because of this heightened price compression.

Still, we maintained our number one market share in Canada and leading positions across numerous adult-use categories, including pre-rolls and vapes based on recent Hifyre sales data from December through February.

The market share decline was due to a shift in our flower strategy and availability as well, as well as vaccine passports in Quebec and the dissolution of our partnership with the Marley Natural brand.

Notably, the rate of decline in the month of February is the lowest we have experienced in over a year, an encouraging first step, which leads us to believe that our pricing and marketing adjustments are paying dividends.

We remain focused on brand and product education, and we have boots on the ground working with retail partners and budtenders across Canada. In Q3, we executed 1,076 budtender product knowledge sessions alone. According to Brightfield Research report published in December, budtenders influenced 33% of in-store purchases.

Executing these sessions will maximize the opportunity for our brands at retail. These investments are paying off as a national budtenders survey released in Q3 has also identified our Broken Coast brand as the leading favorite consumer brand amongst Canadian budtenders, the most recommended and the brand perceived as most premium.

We also continue to rationalize SKUs. We currently have 12 brands in Canada, and we will be rationalizing them to focus our innovation, investments and distributor resources on the brands with the scale and unique value proposition, which serves consumer needs and helps improve margins. This work is already underway.

As part of our innovation strategy, we have made strategic adjustments and investments in vapes and pre-rolls, which are the two largest categories after flower.

In the vape product category, we grew market share in Q3 from 11.4% to 11.7% by launching a series of new products, including new Solei Vape Mix dual packs by our best-selling and leading wellness brand Solei. New Vape Mix dual packs include two great flavors in a single pack at great value.

We also expanded the Solei brand’s functional benefits of cannabis with the launch of Solei, Renew Moonlight, CBN vape pen, formulated for nighttime use. And yesterday, we announced our collaboration with the SQDC in launching the first THC edible available in Quebec, Solei Bites by our own Solei brand.

In Q3, we also grew a pre-roll category and became the number one leader in pre-rolls with 14.9% market share from December through February. We saw a significant growth in Good Supply, one of our leading Canadian cannabis brands and the favorite among consumers and budtenders.

Good Supply launched Hash Bats, our unique take on infused pre-rolls that deliver on consumers’ claim for a consistently high potency experience that doesn’t compromise on quality, nor does it break the bank.

Hash Bats quickly achieved a 1.6% share accrual in its first month of distribution and has already become one of our fastest-growing products for Good Supply. Moving into our medical business in Canada. Q3 represented the continued evolution to our global medical platform, Tilray Medical.

We continue to increase the assortment of products within Tilray Medical, leveraging the need of patients from all our platforms, including Aphria and Symbios. Additionally, we continue to have partnership conversations with national retailers to grow patient base, reduce costs and expand the route to market in the medical channel.

Looking ahead to Q4, we remain focused on gaining back market share and have exciting innovation across all product categories. This includes our industry-leading BHO capabilities at scale.

Butane extraction allows us to further utilize naturally curing low potency flower combined with BHO distillate to provide the consumer with a better product than industry standard CO2 extraction.

Our in-house BHO capability combined with our extensive growth also allow us to launch very competitive, high-quality live products in the market, which we have done for the first time in Q3 with the launch of Broken Coast, Amnesia Haze Live Resin Budder.

We believe we are the only licensed producer able to do this set of scale and cost required to compete in the Canadian market. From an operational standpoint, we continue to identify significant cost savings beyond our highly successful synergy initiatives.

In Q4, we will invest significant CapEx to drive massive labor savings in our pre-roll capability. This is in addition to our vape automation and significant improvements to supply chain, procurement and packaging savings. These initiatives illustrate our commitment to gross margin despite a constantly changing retail environment.

In summary, we have a five-point plan to win in Canada. First, we are investing significant resources in our genetics program to capitalize on the consumer need for experimentation.

Second, our investment in our Consumer First innovation across all categories, but especially pre-rolls, which we believe will be the largest category in adult-use in three years.

Third, leveraging the scale of our distributor partnership with Great North Distributors and Rose Life Sciences, we have the most feet on the street and will be relentless in our execution. Fourth, budtenders influence one in three purchases in store.

We will leverage our brand investments and our category knowledge to ensure they know our brands and our innovation. Fifth and finally, we will do all of this with a cost efficiency mindset to ensure we preserve our margins in this competitive marketplace. I will now turn the call back over to Irwin for a discussion of our U.S.

operations before Carl closes the prepared portion of our remarks with a detailed financial overview.

Irwin?.

Thank you, Denise and Blair. I’d like to now discuss our growing CPG business in detail. Our beverage alcohol brands now include SweetWater, the nation’s tenth largest craft brewer and our recent acquisition of Breckenridge Distillery, the two iconic West Coast craft beer brands outlined in green flash.

Our wellness business consists of Manitoba Harvest, which is a pioneer and a leader in branded hemp-based foods. In aggregate, these businesses generate approximately $130 million in annualized revenue and are high-margin EBITDA positive and have exciting potential for future growth.

Of course, they also represent good adjacencies to the cannabis industry upon legalization, and therefore, fit really well within Tilray brands.

Earlier this year, SweetWater Brewing Company, who, as recently announced by the Brewers Association, is now the tenth largest craft brewer in the U.S., began operating a new 32,000-square-foot production facility and in Fort Collins, Colorado, which provides a launch pad for further distribution to the West Coast and well as open a new taproom at the Denver International Airport.

Come visit. The brand also launched an extensive new line of innovative products, including seltzers, a new beer offering developed in collaboration with our Canadian cannabis Broken Coast brand and a new vodka soda offering developed in collaboration with our Canadian cannabis brand, RIFF.

As we’ve discussed in the past, we view our ability to leverage our growing portfolio of brands as a means to launch THC-based product adjacencies upon federal legalization in the U.S. SweetWater has also launched a partnership with the largest beer distributor in the U.S., Reyes Beer Division, to bring its portfolio of brews to California.

Through this expansion, SweetWater will now be available through the western states at local restaurant, bar, grocery chains, liquor stores and other retail establishments, either on draft or in cans. We also continue westward expansion into both Washington and Oregon through our distribution partner, Columbia Distributing.

This expansion marks the 39th and 40th states, respectively, where SweetWater products are now available for purchase. During Q3, we acquired Breckenridge Distillery, the world’s highest distillery, which is widely known for its award-winning bourbon whiskey collection and innovative craft spirits portfolio, including bourbon whiskey, gin and vodka.

Distribution already reaches across 50 states, but the brand is now poised to further benefit from distribution synergies when paired with SweetWater. We are confident this will drive growth both now and in the future.

And finally, let’s discuss Manitoba Harvest, the world’s leading hemp food brand with products and distribution across 17,000 stores in North America. This brand was acquired as part of the business combination and prior to involvement, how many starts and stops it had.

We have since given this business great focus, as a result, have been able to generate measured channel growth and consumption and share gains. In Q3, Manitoba Harvest, hemp seed products grew nearly 5% in multi-outlet and convenience retail accounts. And the brand improved market share among hemp competitors to a leading 49% of market share.

The brand invested in marketing, communications in Q3 with campaigns that promoted hemp as a super food, a healthy food and a baking solution with New Year’s wellness products as part of smoothies and salads. The Manitoba Harvest team has also carefully managed its cost and implementing pricing action amidst rising cost inputs.

During Q3, Manitoba Harvest grew revenue and improved its gross profit contribution. We intend to accelerate the business through the remainder of calendar 2022 as we introduce a great deal of new product innovation, which enable us to capitalize on the consumers’ interest in hemp products and align with plant-based low carb and keto diets.

Looking forward, last month, the Natural Products Expo West at Anaheim, we introduced a line of hemp protein items blended with other powerful plants like Matcha and Supergreens. We also unveiled new formulas such as Ground Hemp Seeds, which offer great convenience to consumers looking to incorporate hemp into baked-goods, snacks and smoothies.

These items will launch exclusively with Whole Foods across North America this month and will be available at other locations in the near future. Let me now leave you with our progress on cost synergies.

Recall that we first identified at least $80 million in benefits as part of the Tilray-Aphria business combination and have since added another $20 million to our target. As of the end of February, we have achieved $76 million in cost savings on a run rate basis and $42 million actual cash savings.

And with that, Carl will now discuss our financials in greater detail.

Carl?.

Thank you, Irwin. In the face of ongoing obstacles, we continued strengthening our business, reporting profitability and distancing ourselves globally from our competition, all as already outlined.

As we look ahead, we believe that we are well positioned to navigate through near-term market challenges and emerge stronger, more diversified and more profitable. This is because we already built the foundation of key competitive differentiators that provide us with the means to succeed over the long term.

Before reviewing our financials, let me first remind everyone that because of the arrangement between Aphria and Tilray, our results in the prior fiscal quarter are based on Aphria’s financial statements, which have since been adjusted to follow U.S. GAAP and are presented in U.S. dollars.

Also recall that in July 2021, we published an appendix to our investor deck. This is located on our Investor Relations website and contains an unaudited analyst primer that breaks down Aphria’s U.S. GAAP financial statements for fiscal 2020 and 2021 by quarter.

In addition, 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.

Beginning with the top line, our Q3 net revenue grew 23% to $151.9 million compared to the prior year quarter, although as I just said, the comparison itself is not apples-to-apples because our Q3 of fiscal 2021 does not include any contributions from legacy Tilray as well as significant fluctuations in FX rates.

As an example, if the average foreign exchange rate for the first nine months of this year was equal to the rate in the prior year for the same period, year-to-date, we would have reported an additional $20 million in net revenue and reported an additional $1.5 million in adjusted EBITDA.

Q3 adjusted EBITDA was $10.1 million, which extends our track record of positive adjusted EBITDA to 12 straight quarters.

Our ability to generate positive adjusted EBITDA is the result of contributions from all our business segments, coupled with our strong focus on realizing operational and other synergies and efficiencies despite quarter-over-quarter margin pressures in our cannabis and distribution segments.

These cost management efforts showcase the traction we are making with respect to integration. On a related note, adjusted gross profit increased to $39.8 million in Q3 from $30.5 million in the prior year quarter, while adjusted gross margin increased to 26% from 25%.

We would expect to see ongoing improvement in these metrics as more of the operating synergies become embedded within the platform and are able to complete the conversion of the legacy Tilray Brands to Aphria’s cost structure.

Increased contributions from non-distribution revenues as a percentage of the top line will also serve to increase adjusted gross profit because they are higher-margin businesses. Net income for the quarter increased to $52.5 million from a loss of $258.6 million in the prior year quarter. This is our second consecutive quarter reporting net income.

Moving to our business segments in further detail. Canadian medical cannabis revenue for the segment increased 19% in the prior year quarter as we not only benefited from legacy Tilray contributions, but also from innovative product launches.

The latter included our new Symbios brand, which was created to address unmet medical needs and provide patients with more choices to manage their own health. Patients eligible for reimbursed cannabis remains strong and represent the core of our medical cannabis business.

We continue to face downward pressure caused by COVID from patients paying with their discretionary cash flow who are either unable or unwilling to see a doctor as well as increased competition from adult-use.

Our thesis remains that demand for higher quality brands in Canadian adult-use cannabis will rise as the pandemic wanes and purchasing decisions can be more positively influenced by budtenders within a retail setting. To that point, Blair provided detailed information on our increased involvement with budtenders.

Thereafter, we will then be best able to capitalize on the opportunity because cannabis consumers are most likely to behave similar to how alcohol consumers behave, purchasing products from those brands that are most differentiated and offer the highest quality, most innovative products.

However, in the meantime, as the industry is still in its early stages of development, the multitude of new entrants has led to increased competition, which resulted in loss of market share and price discounting.

Revenue for the segment decreased 10% versus the prior year quarter as we contended with these factors, along with the residual impact of COVID in terms of consumer behaviors and their heavy focus on price, although almost $4 million of the decline in revenue is directly attributable to the price reductions we introduced into the market in the prior year quarter on vapes and pre-rolls.

Those price reductions paid immediate dividends, as during the quarter, we gained market share in both the vape and pre-roll categories as measured by Hifyre data.

And while we were able to grow share in vape and pre-rolls, maintain our overall market leadership, we experienced a market share decline to 10.2% from 12.8% in the prior quarter, largely driven by weakness in demand for our flower products, a trend we believe will reverse itself as our potency levels on new harvests are increasing, and we introduce new product innovation.

Notably, our overall market share decline reflected the smallest decrease in over a year, which suggests to us that we are getting closer to stabilization as we are now near the bottom of what we believe will be a U-shaped recovery.

Wholesale revenue more than doubled to $2.8 million in Q3 compared to prior year quarter, which reflected opportunistic sales, but which will vary quarter-to-quarter going forward. While we faced challenges in Canada, our international story continues to differentiate us from our competitors.

During the quarter, our international revenue rose to $15.8 million from $0.3 million in the prior year quarter due to the contribution of legacy Tilray’s larger international cannabis businesses as well as newly obtained business-to-business transactions.

In Europe and despite COVID pressure, cannabis utilization for medicinal and adult-use will continue to gain traction, and we are uniquely positioned to win with our infrastructure as the only company with EU GMP cultivation facilities within two European countries and our demonstrated commitment to the consistency, quality, and safety of our products.

In Germany, which is by far our largest market internationally and where we are the market leader in medical, we generated 19% revenue growth in our medical cannabis products quarter-over-quarter. These growth metrics were achieved despite some patients being unable or unwilling to see a doctor due to COVID.

In aggregate, net revenue for cannabis increased 32% to $55 million in Q3 from $41.7 million in the prior year quarter. Our distribution business, which is mostly related to CC Pharma, experienced an 11% decline in net revenue during Q3 to $62.5 million from $70.2 million in the prior year quarter.

A major part of the decline was tied to the strengthening of the U.S. dollar and the inherent weakening of the euro versus the prior year period. More specifically, if the euro-U.S. dollar exchange rate had been the same in the current quarter as it was a year ago, CC Pharma would have reported an additional $6.7 million of revenue.

Turning to our beverage alcohol business, we generated $19.6 million in net revenue in Q3, representing nearly $8 million in additional revenue compared to the prior year quarter.

This was primarily due to our acquisition of Breckenridge in December, while SweetWater also contributed an incremental $2 million due to increased distribution points, primarily associated with products shipped from Fort Collins.

Looking ahead, we believe there is significant upside potential for this segment as we strengthen our strategic position in the U.S. through increased distribution points, recent and potentially future acquisitions, along with an extensive innovation pipeline.

Finally, on Manitoba Harvest, revenue contribution grew sequentially, almost $1 million to $14.7 million in Q3, but for which there were no comparables from the prior year quarter.

We are pleased that our new leadership team has now more than stabilized this business and we are presently introducing product innovation and operating improvements to this segment.

In terms of profitability and margins, adjusted cannabis gross profit increased to $18 million in Q3 from $16.3 million in the prior year quarter, but adjusted gross margin fell to 33% from 39%. The decrease is primarily related to our wholesale cannabis sale. Without this sale, our adjusted cannabis gross margin would have been 40%.

In addition, margins were impacted by our price reduction on vape and pre-rolled products originally initiated in the prior quarter. Distribution gross profit decreased to $5 million in Q3 from $9.2 million in the prior year quarter, while distribution gross margin declined to 8% from 13%.

This was due to increased costs as our primary source of products were not able to ship during border closures and during periods of peak demand. Beverage alcohol gross profit was $11.5 million in Q3, which more than doubled from $4.9 million in the prior year quarter.

Beverage alcohol gross margin increased to 59% from 41% as we benefited from contributions from the Breckenridge acquisition, which has a higher margin profile than SweetWater and a resurgence of SweetWater driven by the Fort Collins location.

Wellness gross profit was $5.4 million in Q3, and gross margin was 36%, which were both higher than a sequential period of $3.8 million and 28%, respectively, and for which there were no comparables last year.

Total general and administrative expenses rose to $38.4 million in Q3 from $24.5 million in the prior year quarter, reflecting an increase in the number of directors, executive level personnel, headcount and stock-based compensation, along with onetime costs associated with the upcoming closure of our Nanaimo facility.

Offsetting this was insurance recoveries totaling $4 million under our business interruption policy as part of CC Pharma’s property insurance and the previously disclosed flooding in the first quarter.

Net income was positively impacted by reductions in our share price in the quarter, which impacted the valuation of both the Aphria 24 convertible debentures and our outstanding warrants. Also impacting net income in the quarter was a reduction in our assessment of the contingent consideration owed on the SweetWater transaction.

Turning to cash flow and liquidity. Adjusted free cash flow declined to negative $35.6 million in Q3 from positive $6.3 million in the prior year quarter. Recall that we are working towards sustaining positive free cash flow generation and view achieving it on a consistent basis as a priority for this business.

To conclude, we have great optimism for the future as the Canadian market rightsizes and pricing normalizes at a sustainable level. This process is ongoing, but will take more time to unfold. We also eagerly await the movement to legalization across the globe, including in Germany, other EU countries and eventually, the U.S.

In the meantime, our investments in U.S. assets across our growing roster of beverage brands and in Manitoba Harvest are already cash flow positive, EBITDA positive and earnings accretive and at the appropriate time, will be leveraged for cannabis.

And as we consider our opportunities across markets and geographies, our focus remains on the highest return priorities while actualizing our business integration efforts to better manage costs. Through these objectives, we can best deliver long-term 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 through the Say platform.

Operator, what is the first question?.

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

Hi. This is Gerald Pascarelli on for Vivien. Thank you very much for taking the questions. So, just on the $4 billion revenue guide, certainly encouraging to see that reiterated and it was super helpful to go through the drivers.

I guess like taking it all together, how do you see the mix ultimately playing out once you get to the $4 billion between cannabis, alcoholic beverages, health and wellness? Just trying to get a sense on how to think about your segment mix, like overall. Thanks..

Hi. Good question. So number one, listen, a lot depends upon legalization here. And I think if I break it down, I’d like to get to $1 billion in Canada, and that is organic growth. As the market grows in Canada to a $10 billion, as I’ve said before, I’d like to do other acquisitions in Canada and also their spirits and beverage businesses in Canada.

We think one day, you live to walk into a bar in Canada, be able to order, whether it’s a beer or a bourbon or a tequila that will be infused with THC. So, that’s from -- 90% of the business in Canada would be cannabis and maybe another 10% from consumer products.

In the U.S., what we’ve talked about is to get to $0.5 billion in consumer products in the U.S., today, we’re approximately $150 million and with our current businesses, but the rest would come from upon legalization, MSOs, and we’d like to, one day, own MedMen upon legalization. And there’s a lot of other great MSOs out there that we’d like to buy.

So we’d like to own about $1 billion in U.S. upon legalization. If not, we’d have to continue to look at other consumer products. In Europe, today, we have our CC Pharma business that’s part of our business today, which is about $300 million. But the rest of the growth in Europe would come all from cannabis.

So, if you look at the total $4 billion, it’s about $2.5 billion to $3 billion coming from cannabis and about $1 billion coming from consumer products. And just let me be clear, a lot of this depends upon legalization.

Now on the other hand, there’s a lot of adjacency companies that we would continue to look at, and upon legalization, ultimately have those products infused with cannabis. So that’s the plan..

Got it. That’s super helpful color. Thank you. If I could just squeeze one more in on adult-use as it relates to Germany. Obviously, if they went adult-use, would be encouraging. But one of the things we all realize is that things take longer than expected.

And so from your perspective as it relates to Germany, what are the next steps that you need to see to drive confidence in that regulatory change? And then when do you think commercialization could reaistically take place if you had a time frame? Thank you..

So I’m going to let Denise jump in on that. But I think, listen, we were expecting and hoping in May of this year, we would start to see something. I don’t think we expected a war in Ukraine. I think it’s slowed some things down. But I mean we really like what we see today. We like what we’re hearing from regulators and the government there.

Denise?.

So, building upon Irwin’s response, we had hoped to see a framework May, June time line. We haven’t heard anything from government officials that that time line is not going to be achieved, but as Irwin mentioned, a war in Ukraine obviously takes precedent in terms of policymakers’ attention as well as still any continuing COVID-19 discussions.

So, we continue to hear that there won’t be any delays. We haven’t heard anything talking about delay, so we continue to remain cautiously optimistic.

In terms of your other question about the commercialization, and we worked our way through, as you mentioned, things take longer than you expect, we were looking at first commercialization around December of 2023, January 2024, just trying to like work backwards. So that’s with our thoughts..

I think the other good news is the commercialization. You’re seeing a movement in Italy. You see a movement in France. So you’re also basically seeing continuous increase in revenue up over 4,000% in Europe. So, demand, patients coming back after COVID. So, listen, we’d like to see something happen in Europe.

We believe, and once we see something happen in one country, I think you’ll start to see that happen in multiple countries, but we’ll be ready for it..

Our next question has come from the line of Andrew Carter with Stifel..

Just putting aside the revenue target, which has some aspirational things in there, regulations, even M&A, what do you think the margin profile of the business could be with what you just have in hand today? Because it compressed year-over-year, you still got incremental synergies, where are you in terms of investment in Canada? Just anything you can outline on the margin profile potential of the current business.

Thanks..

I’ll let Carl jump in on that, too. But I think, Andrew, one of the things, if you look at our spirits and beverage margin is in the high-50s or so. If you look at some of our margins ex our distribution business in Europe, there’s some high margins there.

Now, our margins got affected this quarter by selling off some product to some distributors which Carl - so, I’d like to see our margins in the high 40s, low 50s as you look at a consolidated margin between our spirits business and our cannabis business. Now again, there’s a lot to do in Canada as price compression hit us in Canada, hit our margins.

But still, I think you’re only seeing one quarter today of Breckenridge, you’re not seeing some of the biggest quarters of our beer business with SweetWater. So, it’s important that we got that right mix. The other thing is as we continuously take out cost. And we have almost 3 million square feet of growth.

What we’re doing, ultimately with HEXO, what we’re doing is bringing Tilray and getting the efficiencies out of those facilities and getting the grow in the yields, that’s got to help us improve margins.

Carl?.

So I think, Andrew, if you look at our margins across all the different categories. Right now, distribution business kind of has a little bit of a disproportionate share of our revenue based on where we anticipate it being in the future and it’s obviously the lowest margin of the group.

As we start to minimize that portion of the business as a percentage of our overall sales, our consolidated margin is going to increase. In the current quarter, we had some headwinds on margin in the distribution business. We had some difficulties getting the product.

We had some difficulties getting product, where there were some currency impacts, getting that product from the ideal low-cost country and having to find it from somewhere else, right? If you look at the cannabis business, we anticipated that our margin was going to drop from the normalized 45% we were at last quarter.

We think that’s somewhere in the 40s, in the low-40s normalized. The current quarter, we were down at 37%. The difference between those two numbers is really that wholesale sale that we made in the quarter that we did to move some aging product. And we’re able to capitalize and convert some of that inventory to cash.

But it had a little bit of a headwind against our margin. As we go forward, I think, as Irwin just said, something in the high-30s, low-40s is reasonable for the business, but there just -- there needs to be a couple of structural changes, grow other categories and not have some of these one-time impacts in the current quarter..

But Andrew, I think the important thing in hearing you, there’s a plan of how to get to those aspirational margins is just not the sales, it’s the margins ultimately, and it’s the mix of business. We sell products today in three different currencies. The euro hit us hard in nine months, so.

But again, there are excuses out there, but the reality is we got to get to the margins within the high-40s..

Our next questions come from the line of Owen Bennett with Jefferies..

I just wanted to come back to the international business. So, some really impressive trends there, obviously, prospects for further growth clearly compelling. Just a couple of questions on this.

So, first one, can you comment on the competitive dynamics in Germany? It does look like that market is becoming very crowded now and probably get even more so with planned recreational legalization.

So, are we seeing any pricing pressures pick up? And if so, how low do you think these could go? Just trying to go the risky given kind of pricing pressures we’ve seen in Canada, et cetera. Thanks..

So, Owen, number one, we’re used to markets getting crowded, okay? And there’s no more market -- there’s no market other than like Canada is not crowded, okay? So that’s number one.

Number two, I think the big thing, and I’m going to let Denise jump in on this, too, we have a grow facility there, we have a grow facility in Portugal, and we have been growing, I think -- and I know we can be that low-cost producer. I know we also can ship product from Canada, a GMP-certified product.

But again, it’s taking our expertise in Canada, taking our knowledge. We’re not that one trick pony out there and taking it back to Germany and taking it back to Europe and utilizing that that we can build our brands, we can ultimately be that low-cost producer.

Denise?.

Yes. Hi, Owen. So, you’re out right there. And to build on what Irwin is saying, there absolutely is pressure coming into the German market, and it’s natural. If you think about the world right now, so Canada being one of the largest markets outside the United States and then Germany coming is 85 million people larger than Canada by 2.5 times.

So naturally, there’s a lot of new entrants. We see your point. We are seeing competition coming out. But to Irwin’s point, we’ve invested in this market. We’ve got EU GMP supply. We’ve got expertise. We’ve got a brand that patients and doctors trust, and we spend a lot of time investing. And so, we have -- we’ve been investing for years now.

So, even though new entrants are coming in, we have a head start, and we will continue to take advantage of that first-mover advantage..

And I think the big thing also, Owen, is we have the infrastructure there. We have the people and then they have the resources to come back to our Canadian operations. And we have moved even people from Canada over to those facilities. So, listen, we’re used to it. We saw it in Canada, and we’re ready for it..

And then just a follow-up.

I was wondering how you see the situation with the domestic lots playing out in Germany going forward, both at the medical and then recreational? Do you think the allocations to these domestic lots will be increased? And I mean, what do we need to see for those domestic lots to be profitable? Obviously, there’s a restriction on how much the government will pay for the cannabis coming out of those facilities..

Yes, great question. And so, as you know, today, the lots are fixed based on the previous tender. I believe there will probably have to be another tender at some point once the adult-use is passed.

And I think based on our expertise and based on our relationship with the German government, we will absolutely be able to be there submitting for that tender. And as I mentioned, we have experience with the German government. We have been supplying them.

And so, I think it puts us in a best position in order to obtain either additional lots or expanded lots..

Our next questions come from the line of Rupesh Parikh with Oppenheimer..

So, two questions just related to the cash flow and the 2023 convertible. So first, on your 2023 convertible.

Anything you can share at this point on plans addressing that maturity next year?.

So, listen, it’s -- as you know, Rupesh, for me, from other days, I don’t like debt. And ultimately, the best thing that could happen is a good rebound on their stock and they convert it, okay? So, it’s something we’re monitoring closely, and it’s something that we plan to do something about it. So, that’s all I can say right now..

Okay, great. And then, just on cash flow, I know the goal is to get to positive free cash flow. Just any sense just from a timing perspective or anything else you can share in terms of getting to positive going forward..

Listen, I -- again, things happen out there and part of our cash flow this quarter as we built inventory as we’re coming into seasonality. We also now been in the spirits business, and we’ve built a lot of inventory in regards to our bourbon business, which you put inventory down for three years. We’re close there, and that’s the big thing.

And I think we’re cash flow positive in all our businesses today. And we do have -- in our Canadian market, I think with price compression that happened there and some of the things that Blair talked about in flower. So, we’re there. And the big thing is you step back for a second. We took $76 million of costs out of the business with Tilray.

We recognized $42 million, so we don’t have the rest of -- the rest of all those savings in there yet. We did have some flower challenges, which hurt our sales. Price compression came down, but we’re not that far away in regards to it, if you take out what we put back into inventory.

So, I’d like to sit here and say, don’t hold me to it next quarter, but we will be absolutely cash flow positive next year. Absolutely.

Carl, anything you want to say?.

Good answer..

I can give you the answer. Carl just got a hold to it..

Our next questions come from the line of John Zamparo with CIBC..

I wanted to start on the Canadian cannabis business, please. You mentioned you’re looking to rationalize some of your brands on a domestic basis.

Can you give us a sense of a time line on that project? And approximately what percent of cannabis sales those make up currently?.

Blair, you on the call?.

I am. Yes..

Do you want to answer that?.

Yes, no problem. Let me start, first, great question. One of the things that I would tell you is we are currently working through our portfolio strategy. And from that perspective, it really starts with the strong consumer understanding.

And then, as we do that, and that work has been ongoing to the last quarter, we will see some rationalization of brands. Marley Natural is a good example. Bingo is a good example. But more so, you’ll see a real repositioning of our brands and then the assortment of products within that.

I don’t expect that the -- any rationalization going forward would be material to our sales number..

And John, I think the market needs this. John, the market needs that. If you were to see rationalization in stores, you’re going to see rationalization in LPs. If you think about it today, there’s 800 LPs out there. And if we have 12 brands, you think about it how many brands they have. I mean, you can only have so many pre-rolls.

You can only have so much flower. So, there needs to be rationalization. And with that, if not, you can’t really educate the consumer and the budtenders. And that is a key there that we are really focused on is educating the budtenders when a consumer comes in -- customer comes in the store, what to buy.

What RIFF stands for, what Good Supply stands for, what Solei stands for. But you can’t do that if you’ve got 20 brands out there. And I think that was the problem. Everybody came up with weigh too many brands and the consumer was totally confused, and the consumer is not going to buy every single brand to try it.

So, SKU rationalization, brand rationalization, you see that in some of our numbers. I mean, as we rationalize some of these brands, that’s why some of our Canadian sales are down and to move away from them. It also helps with our inventory, helps with our grow, helps with our packaging.

So, there’s lots when you do a SKU and a brand rationalization that the benefit for the company is..

Understood and I agree. That’s helpful. Thanks. And then my second question is a broader one on M&A. It does seem like you have a lot of opportunities, whether it’s Canadian cannabis or U.S. CPG or assets in Europe. I just wonder how you approach these options and how you prioritize them.

Is it -- do you look for something strategic in nature that will help you in the longer term, or do you just approach it merely from perspective of ROI?.

So, first and foremost, it’s got to be accretive, and that’s the big thing here. What I don’t want to do or we don’t want to do is buy something that’s losing money and bring it into our portfolio. So, we got enough where we want to get to our own cash flow positive. So that’s number one.

Number two, it’s got to fit within our Tilray Brands strategy and fit within that $4 billion strategy. We don’t want to be in the retail business. I mean, we want to be in the consumer products business that’s focused on consumer products that have adjacencies to the cannabis world. And ultimately, that we can really scale, that are good margins.

And ultimately, with my past, Denise’s past, Blair’s past, Jim’s past that we have the knowledge and the base. The big thing also is how does it enhance our current brand portfolio and how does it enhance our current brands. And trust me, we see lots of acquisitions in plant-based products, in spirits, beer, in beverage, in cannabis, in CBD.

And the last thing we want to do is bad -- when you do acquisitions, you got to get them right, but making a bad acquisition would not be good for us. And there’s plenty of acquisitions we’ve looked at and some of the best acquisitions are the ones we walked away from..

Our next questions come from the line of Aaron Grey with Alliance Global Partners..

Just one question for me. So you guys talked about from the pricing you took on vapes and pre-rolls, some share stabilization there. It just softened a bit again in March. And then you mentioned flower share losses as well.

So just want to get a sense of how you’re thinking about price gaps today for your products in the various price tiers? And how you look at the balance between market share improvement as well as gross margins for the Canadian market? Thank you..

So I think a couple of things, and I’ll let Blair jump here in a second. I think as we explained here, number one, as we look at SKU rationalization and what different SKUs stand for and how we came to different price premiums for SKUs, Solei vapes, the demand for them and what we can get for them, Broken Coast.

So there will be definitely tier pricing for different types of SKUs out there. And the other big thing is they will be different pricing out there for potency and what’s infused and what type of flower. So, that’s where we got to come back and educate and be able to get pricing. It should not be everything is that $0.99 or $2.99.

There’s got to be a floor out there. And we have to make sure we educate the consumer and what the brands stand for. So that’s what’s important. But I think the thing is, this year, as we go into our fourth year, we are realizing consumers who want higher potency. We are realizing what they want in pre-rolls.

The other big thing is we’re seeing the market shift today where consumers -- 50% of the market used to be flower, now it’s moving to vapes or pre-roll some of the biggest growth out there. And what’s the differentiation out there, flower is flower.

So, I think there’s a lot we have to do there, and there’s a lot we have to do with regards to get that pricing up. But the key is who can be that low-cost producer out there that can have price that can have quality that can have potency and ultimately be able to win. And that’s what’s important for Tilray.

And with that 3 million square feet of grow, 265,000 kilos and continuously trying to take cost out, that’s where we hope to win in Canada, and that’s what’s important to win in Canada for us.

Blair?.

Yes. Great answer, Irwin, and great question. The one thing I would say about price is as much as we track pricing in the marketplace, the real angle for us is always to think about the value of our brand and the value of our brands relative to the competitive set.

So, it’s not about -- to Irwin’s point, about being low price, it’s about being in value at all times. And so, that price value relationship of our brands are important, and in Irwin talked about it in terms of potency, in terms of some of the other characteristics of our brands like Infusion. So that’s one side on the price side.

We’re always going to be in value. Conversely, on the gross margin side, we’re always looking at our cost business in terms of how do we do it more efficiently, we find other ways to extract cost into the business so we can protect our gross margin.

For us, we’re always going to try to find that value in our brands and our SKUs and balance that with the right cost on the back end of the business, and we do that in every category we compete in..

And I think I ask most people on this call today, name five brands in the cannabis business in Canada, and of course, those who live Canada. I’m not sure you could do that. If I ask you to name five tequilas out there or bourbons or rums, you could and would you pay different prices for. And I think that’s the big thing is educate consumers on brands.

Now, we’re limited in what we can do in regards to advertising, but what we can do through social media, through education through the budtenders, we’ve got to build brands. We’ve got to educate them about the brands. And that’s ultimately the key to here, not just throw out vanilla pre-rolls or different names out there.

It’s important that we have a brand that we can stand by.

And I think if you come back and look at -- and I was with the team last week and going through some of our new product innovation where we got coming up with Solei and RIFF and Good Supply in regards to our pre-rolls and flower, there’s some pretty exciting stuff, and I think that’s what’s important is getting the message across on our brands..

Our next questions come from the line of Scott Fortune with ROTH Capital..

Real quick, I just want to follow up kind of on the Canadian side and also the U.S. You mentioned seasonality picking up. And can you provide a little color of kind of what you’re seeing with the March data? As we know, usually things bottom up pricing-wise and demand in February.

And with the pricing initiatives that you’ve instituted to stabilize the market share, but can you provide a little more thought on the inflationary pressures or the discretionary spend of the consumer as you expect some seasonality pick up here? Just kind of thoughts around the pressure on the consumer right now?.

Sure, sure. I think a couple of things, and I’ll let Blair jump in here. The good news is last year this time and even four months ago, this time, we were dealing with COVID. And I promised myself I didn’t want to mention the word COVID on this call today, but I guess it’s been part of our lives for the last 2.5 years, and you can’t ignore it.

As we went through and especially Canada, with lockdowns in Quebec in regards to vaccination cards, owning a certain amount of customers, a lot of the store in regards to no one going back to their offices. So during this quarter, we almost like want to forget about it out there.

As you walked around with masks on, were you enjoying cannabis? So, I think there’s a lot here that we have to jump forward and say COVID is behind us in many ways. With that, I think there’s a lot of small LPs out there that invested in pricing and consumers went and tried them.

And I think what we’re seeing is as they’re coming back to brands that they know. On the other hand, we had some flower challenges out there, which we’ve talked about. We think we are in a good place there. So, from a standpoint there, listen, on the other hand, we see a world today with labor shortages that we deal with.

We see in regards to fuel prices, but the good news is we’re growing in one facility, and that is where the product has grown. On the other hand, there’s components that we need in packaging, vapes that are higher cost. But we’ve done a great job, and I think the key is, I keep coming back to it, the cost that we’ve taken out of our business.

And with that, we got to continuously take cost out of our business. We got to continuously get the right yields in regards to growing our products. And that will translate back into pricing.

But I don’t see a lot of headwinds out there today that’s affecting us because we’ve done a great job in regards to managing all this here and being able to reduce price to pass on to consumers.

Blair, anything you want to say on that?.

No. The one thing I would say, Irwin, and I agree with you, I joined Irwin in putting COVID behind us as much as we possibly can. What I’m seeing and out into the stores a lot is I am seeing traffic back in the stores. So I’m seeing conversations with bud tenders in the stores.

And in the Q3 alone, we had 1,076 product knowledge sessions with budtenders. So, we’re definitely seeing traffic in store come back, and that’s a good opportunity for us to talk about our brands..

And to Blair’s point, we’ve got to get customers in our stores. I remember, I think it was at Richmond and Young a few months ago, a new -- normally Richmond and Young, it’s just full of people. I could count the people on two hands of what was standing there.

But I think the big thing is getting back in the offices and getting consumers back in stores is a key here..

Perfect. And real quick, maybe for Denise, talk about the kind of percentage mix of international coming from Germany and Israel overall? And then, Denise, what are you seeing in unpacking the German sales coming from insurance versus private pay? We no private pay has been growing quickly.

Then, how do you look at that growth going forward here?.

Yes. So, in terms of looking at Germany, so we had about 20% growth in Germany quarter-over-quarter. Basically, in terms of looking at the mix there, I would call it around like 2/3 dried flower, 1/3 coming from extracts. We see the whole dried flower business growing a bit faster than the oil.

And I know Irwin mentioned he didn’t want to talk about COVID and neither do I, so I think it’s something that everyone wants to move past, but there was some -- still some lingering impact on COVID in the quarter. It is harder for our sales representatives to be at the in front of doctors during the quarter.

And so, we see the extract market as more moving as a traditional pharmaceutical market. And so, as we start to get past COVID and as doctors are more willing to accept visits from representatives where we believe that we’ll be able to see our extract business start to move more.

In terms of private versus public insurance, I actually don’t have data on the split between the two. So that’s not a question that I can I can actually answer, but I do know that our extract business is mostly covered by insurance..

Our next questions come from the line of Tamy Chen with BMO..

I have one question here. Irwin, going back to your comment about the mix of segments in the $4 billion target, I just wanted to clarify, like, are you saying that if U.S.

cannabis legalization does not happen by then, you would still look to acquire other businesses in the consumer area to ensure that you get to the $4 billion target?.

So, let me be very clear. I’m not going to buy businesses just to get to a number, Tamy. So that -- let me be very clear on that, okay? It’s not a race to a number. It’s -- again, we are a cannabis company first. And the reason we would acquire is for cannabis reasons.

So, just ultimately, the answer to your question is if cannabis does not legalize, which I believe it will, by 2030, it would be -- would it be a $100 billion business when you think about the tax dollars, cannabis will legalize. It’s just when? But the answer to your question is no.

I will not be out there just doing acquisitions to hit a $2-plus billion number in the U.S. if cannabis does not legalize over the next couple of years..

Our next questions come from the line of Matt Bottomley with Canaccord..

Irwin, just wanted to circle back to some of your comments around the Canadian adult opportunity here. You had mentioned potentially maybe $1 billion of that of the $4 billion would relate to the Canadian market.

Can you just kind of circle back around to how that might relate to market share? So, is that $1 billion to Tilray, so maybe $2 billion of branded sales on a $10 billion opportunity, are you implying a 20% market share? Just trying to get an understanding of what that -- those dollars would mean within the greater context..

Sure, sure. Listen, I’m aspirational. I mean, we were there. I’d be very happy, and I said it before, to get to a 25%, 30% market share. I -- fortunately, there’s a lot of LPs, there’s a lot of good competition, there’s a lot of good companies in Canada.

And I think what’s got to happen is the market got to grow and the market’s got to grow in regards to more consumers coming into the market from the legal market. The market’s got to grow in regards to drinks being sold in retail bars and drinks being sold in convenience stores.

I think more and more consumers getting educated about cannabis, both for adult-use and for medical. And with that gets to that $10 billion retail, which you cut by 40%, I’d love for us to have a 15% share. Then on top of that, we’d like to do acquisitions in the Canadian market in the $200 million, $250 million plus.

And then, we do like that beverage business, and there are some great Canadian beer companies or spirit companies that we’d love to do something to the Canadian market with. So, that’s what gets me to the $1 billion in Canada. So, it’s about a 15% share overall on a $10 billion retail, which wholesale is about 40% less..

Got it. Thanks. And just one other quick question, if you don’t mind. You mentioned Tilray focusing in on brand awareness and doing what you can in the current environment.

Is there -- are there any meaningful catalysts or points in time in the next year where the federal government might be listening more to what the producers are saying? I know it’s going to be a long pathway where these stores might look something similar to a beer store, an LCBO or something like that.

But I just think a lot of what’s sort of holding back a lot of producers from branding really isn’t in their control for a large part.

I’m just wondering what you think the government may or may not do, and any timing for meaningful change?.

Listen, I think what’s got to happen is this here, and it’s an excellent comment and question here. As I said and I keep saying that the Canadian government has made over $18 billion in the jobs that’s created in the infrastructure over $6 billion. They’ve got to take this industry seriously. I mean, Walmart doesn’t sell cigarettes anymore.

So cigarette tax is going to go down. Gas tax is going to go down with electric cars. In regards to electrical tax credits, and that’s going to go down. So with that, and again, there is a lot of great research coming out in regards to the benefits of cannabis.

I know Canada right now is going through in regards to the NDP getting dental for every Canadian citizen, while cannabis should be part of prescriptions that’s allowed in Canada. So, there’s stuff that we need to push upon to the Canadian government and recognize. You legalized this 3.5 years ago.

What is cannabis 3.0 and 4.0 right now? And I think the cannabis companies have done a good job in managing this in regards to safety, in regards to education and the benefits from it. And I think that’s a big thing that the liberal government got to realize, this is a real industry in Canada.

And I got to tell you, it’s probably bigger than a lot of other industries in Canada, and they just don’t recognize it..

Our next questions come from the line of Michael Lavery with Piper Sandler..

I want to come back to the revenue aspiration. And even if all the regulatory pieces fall into place, it does feel like it could be a pretty aggressive, just ambitious target.

So curious for the organic growth piece, which typically has some level of investments behind it, just how you think about the weight or importance of these targets versus balancing some of that with like a free cash flow objective or how to just have a disciplined approach to spending? To the extent there’s any tension between those, how do you think about where the pendulum swings there?.

So, I think what’s important to come back, and the last thing I want to do is give guidance out here. I gave a consolidated number based on legalization. And I was clear before that we’re not out there just to get to $4 billion, no matter what happens and just buy everything that’s in front of us.

But I would like for us, and I think it’s important, and you see the growth opportunities that in front of us today in Europe are tremendous. The growth opportunities in regards to Breckenridge is tremendous. The growth opportunities in regards to what we’re doing in the beer business with SweetWater with Green Flash and Alpine are tremendous.

So, there are certain businesses I’m looking for double-digit growth. There are certain businesses I’m looking for high single-digit growth, okay? So to get to a 50% share in Canada, I’m going to need good organic growth there, whether it’s mid to high single digits.

And to get where aspirational where I want to on the consumer side, I’m going to have to get to double-digit growth.

So with that, it comes back to in regards to margins, which I talked about before, in regards to mix of consumer products, and you can look at margins in the spirits business, the Diageo [ph] margins and others, and they are high-margin products. And our margins today in the spirits and beer businesses are great margins from that standpoint.

So with that, we’re looking in some markets for high to mid-single-digit growth, in other markets, double-digit growth. In regards to what I said before, I’d like to have our consolidated margins, and Carl will look at me like I’m crazy, but in the 40% level, is we look at the mix there. Cannabis is a plant-based product.

The big thing is we have facilities, and we’re probably one of the lower-cost producers today with our size. But with 265,000 kilos and growing more and more of that facility, our cost comes down tremendously. And listen, the other thing I didn’t talk about is every day when we talk about legalization, there’s a word at there, called free trade.

And if that ever happens, that we can start shipping cannabis into the U.S., no different than EU GMP certified into Europe now, that will be a big, big plus for us..

Our next questions come from the line of Glenn Mattson with Ladenburg Thalmann..

Hi. I realize it’s late in the call, but I had to ask because you mentioned specifically that in the U.S., the target to get to your revenue goal would include acquisitions potentially of like U.S. MSOs.

Can you just give a sense of like what your ideal profile would be? Would it be like to grab a company that has like a wide footprint? Are you looking for brands? Are you looking for specific states and markets that you’d like to get into? Just some color around what your idea and goal is there..

Listen, I think good question there because -- and every question is a good question. But I think what’s important if legalization happens, what does the legalization happen? What does it look like in regards to is it like alcohol, the 3-tier system? Number one.

Number two is, if I didn’t have to have grow my own cannabis in each state, and that’s different from a standpoint there. So, it would depend. I would want multistate. I would want brands. I’m not the most excited about retail.

So, if it had to be like the liquor industry or the spirits industry, I’d love to grow because we now know how to grow and getting better at it every day. I’d like to be able to sell brands, not necessarily what the majority of our business like to be in the retail business.

And that’s kind of what we look at, how do we be part of a multistate operator that has brands already that has good growth -- good houses to grow or could we ship product in from Canada into the market in the U.S.

One of the biggest costs today is building these different greenhouses and these grow facilities, and if you could eliminate that and just be able to sell into that market. And I think as you look at the United States, no different than Canada.

You take New York, you take California where prices -- and then you take the Midwest, what are the big markets that you really want to be in? Where are the people? And we have discussed this.

The other thing is as we look at it, how would we grow our e-commerce business in regards to direct-to-consumer and delivery to consumer is something that would be important to us..

Thank you. There are no further audio questions at this time. I would now like to turn the call back over to the Tilray team to address questions submitted via the Say Technologies platform..

Thank you, operator. Our top question from the Say Technologies platform is, “Upon federal legalization, how soon could Tilray enter the U.S.

market?” Irwin?.

So, upon legalization, and again, how quick that would be and there’s a bill right now in Congress that’s got to go before Senate. Again, 420 will be a very interesting day, not just this 420, interesting day anyway. And with SweetWater, there’s 420 Fest, which is down Atlanta, everybody should come to it.

Right now, if something happens, we have the ability to do something in regards to MedMen pretty quickly. We think it’s a brand that can ultimately be distributed throughout the U.S. There is retail and some great states out there already.

And we’ve already introduced products today with the RIFF name, the Broken Coast and the Good Supply with our different beer business. I would love tomorrow to be selling Breckenridge products, and it’s a great bourbon if you haven’t tried it, you really got to try it.

But we are looking and working on ways to infuse and hopefully, we can call it bourbon, infuse that product with a THC product where there’s multiple beers out there today that are infused with THC. And again, let me be very clear. You can’t have alcohol and you can’t have THC in the product.

So from a business standpoint, we would have businesses that have alcohol, businesses that are drinks infused with THC. And the big thing is what we would have is the distribution in the brands that are already set up that consumers know. So, we’re ready for it. And the other thing we need is legalization to happen.

And I think the last part of it is, there’s so much we’ve done on the medical side in Europe. There’s so much we’ve done with our CC Pharma and distribution business there. And what we could really do with the doctors out there in regards to prescription for anxiety, for pain, for sleep, et cetera, and really what we come into this market.

And I got to tell you, I must get asked 10 times a day, how do I get product for sleep? How do we get product for pain? Where can I get this product for anxiety? So, there is so much demand out there. Again, it’s the education and getting customers and consumers feeling good about it. And with that, I want to thank everybody for joining today’s call.

I know some people had some trouble getting on because of demand we have on. But there’s a lot going on with Tilray. And it’s an industry that’s 3.5 years old. Tilray as Tilray Brands is a company that’s less than a year old that’s coming together.

If you go back and look at where we were with Aphria, where Tilray was, what’s part of it today in regards to SweetWater, Alpine and Green Flash, in regards to Breckenridge bourbon, what we’re doing in regards to the Canadian market, I’m really excited about what we have announced with the HEXO deal.

You heard me talk or in my remarks, we’re looking for $80-plus million of savings between both companies here. HEXO will continue to stand alone, and there’s some exciting stuff there that we continuously work on. With that, we are focused on our balance sheet. We’re focused on profitability. I’m somebody who’s always focused on cash.

We’re not totally happy what’s happened in the Canadian market, but I’ll tell you, there’s a team here that’s all over it. There’s a team here that’s all over making sure we grow this business.

And I think the big thing that’s in front of us, where else is there an industry out there where today, where it is in 3.5 years, it’s heading to $100 billion in size and with the opportunities out there. And I think all we need is legalization and who is in the best place to do it other than Tilray.

I have, and I get fortunate to work with one of the best group of people out there which comes from many industries with many expertise that bring that to Tilray that are helping us do this. I have a Board of Directors that’s really focused on good governance, our ESG and really focused to take this company to the next level.

We have in place today some great grow facilities that were built over the last couple of years and ultimately, how do we now take them to the next level. We’re in the midst of technology in regards to data, content and really understanding the consumer and getting that.

We’re focused on making sure we have a very, very, very strong balance sheet because I think that’s where lot of the LPs are running into the trouble as they run out of money or losing money. The big thing is the focus on the consumer, and that’s why the brand -- that’s why the name of the company is Tilray Brands. We are a branded consumer company.

A lot of questions in regards to margins and mix and how you get to the $4 billion aspiration. But one of the things we have is a plan that’s out there to get to $4 billion. Will everything go right? Absolutely not. Will everything hit? Absolutely not. Are we in control of everything? Absolutely not. But I will tell you, we have a good plan.

We have levers to pull. And if they don’t go right, then we know another way to go. But we will get there and reward our shareholders, be true to our consumers and be true to our employees. Thank you very much for joining us, and have a great day..

This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day..