Tilray Brands Inc Stock

Thank you for joining today's conference call to discuss Tilray Brands financial results for the first quarter of 2027, ended August 31, 2026. Lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session for analysts conducted via audio. I'll now turn the call over to Ms. Berrin Noorata, Tilray Brands' Chief Corporate Affairs Officer. Thank you. You may now begin.

Thank you, Operator, and good morning, everyone. By now, you should have access to the earnings press release, which is available on the investor section of the Tilray Brands website at tilray.com and has been filed with the SEC and OSC. Please note that during today's call, we will be referring to various non-GAAP measures that 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. That 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 response to 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 those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements.

Today, we will be hearing from key members of our senior leadership team, beginning with Irwin Simon, our Chairman and Chief Executive Officer, who will provide opening remarks and commentary, followed by Carl Merton, Chief Financial Officer, who will review our financial results for the first quarter of 2027. And now, I'd like to turn the call over to the Tilray Brands Chairman and CEO, Irwin Simon. Thank you, Irwin, and good morning. Good morning.

Everyone. Before I discuss the quarter, I want to frame how investors should think about Tilray Brands today. We're building a larger, more diversified global business with multiple engines of growth, category leadership across cannabis, beverage, wellness, and pharmaceutical distribution, and a clear focus on converting that platform into stronger margins, cash generation, and long-term shareholder value. Tilray is not a single category company, and we're not dependent upon 1 market, 1 regulatory catalyst, or 1 product cycle. That matters for shareholders because diversification gives us more ways to grow, more ways to manage risk, and more opportunities to create value as consumer cannabis, beverage, wellness, and pharmaceutical distribution markets evolve around the world. We have grown Tilray from a $50 million company 7 years ago to a pro forma $1.2 billion global business today, reflecting our ability to identify opportunities, acquire strategically, integrate assets, and build platforms with greater reach. We are not done. We will continue to grow Tilray organically and through focused M&A using our infrastructure, operating capabilities, and brand building expertise to create more value from the assets that we acquire. Today, Tilray operates from a position of global scale and category leadership that few companies in our categories can replicate.

We believe we're the world's largest cannabis grower with more than 6 million square feet of cultivation capacity and a leading low-cost production base. We are a market leader in the largest federally legal cannabis markets, including Canada and across Europe. We're the number 1 craft beer supplier in the UK and the fourth largest total beer category supplier in the UK grocery market. The fourth largest craft brewer in the United States and a global leader in hemp foods, beverage, and wellness. Overall, we operate nearly 40 hospitality venues, including pubs, bars, and hotels that showcase our beers and beverages, deepen consumer engagement, and give Tilray a differentiation platform to bring our brands to life in markets around the world. In the U.S., consumers can find the Tilray product in almost every major supermarket, and our beer is now available on tap in approximately 28,000 on-premise accounts. Go try 1. This scale matters because it gives Tilray the infrastructure and commercial network to buy attractive assets, integrate them effectively, improve them how they run, and expand their distribution and make them stronger and more profitable businesses.

With BrewDog, Tilray did more than acquire a beer company. We acquired 1 of the world's most recognized craft beer brands, a passionate global consumer community, a scaled hospitality footprint, and a powerful platform for international beverage growth. For shareholders, BrewDog is a clear example of our acquisition strategy in action. We can buy a valuable brand, stabilize the business, return it to profitability, reinvest behind growth and use Tilray's global platform to expand its reach globally. Investors should also understand the cadence of our business. Not every quarter will look the same because parts of our portfolio are seasonal. And our fiscal year is more heavily weighted to the second half across beverage, cannabis and distribution.

What matters is where we are going. Tilray is becoming larger and more diversified and more globally recognized with multiple levers to drive growth, and to improve profitability over time. In the U.S., we continue to believe cannabis reform will create significant opportunities over time, and when it does, Tilray is prepared to act from a position of strength. But our strategy is not dependent upon 1 regulatory event. Delays in rescheduling have impacted sentiment towards cannabis stocks, including ours, and we believe the market too often evaluates Tilray as if we are just a pure play U.S. cannabis operator, but we are not. Tilray is a global diversified business with established positions in cannabis, beverage, wellness, and pharmaceutical distribution and we will continue to grow with or without a single regulatory outcome. In quarter 1, we delivered record revenue of $257 million, up 23 percent year-over-year, and a record first quarter gross profit.

We also expanded gross margin year-over-year, demonstrating that Tilray is not only getting larger, but also building a stronger financial profile. That progress reinforces our confidence as we move into the seasonality stronger second half of our fiscal year, and we're maintaining our adjusted EBITDA guidance for the year. Turning to international, this is 1 of Tilray's most important growth engine and 1 of the clearest examples of why our global platform matters. In quarter 1, EMA revenues, including medical cannabis, beverage, and pharmaceutical distribution combined, increased over 70 percent, reflecting momentum across our markets where Tilray already has infrastructure, regulatory expertise, and commercial reach. International cannabis revenue grew 21 percent year over year, while EU GMP medical cannabis shipments accelerated with flower volumes up 110 percent, oil volumes up 150 percent year over year. This is where Tilray is built to lead. Regulated markets where demand is growing standards are high, operating expertise matters, including scale, low cost and quality.

The leadership is backed by vertically integrated global cannabis supply chain that gives Tilray control across cultivation, production, distribution, and patient access. Approximately 90 percent of our international cannabis supply comes from our Portugal facility, which anchors our European cannabis operations and is 1 of the most strategically assets in our global network. Together with low-cost production in Canada, EU GMP capabilities in Portugal and Germany, pharmaceutical distribution through CC Pharma, direct patient access through Life in the UK, and a proprietary genetics bank, Tilray has built an end-to-end cannabis operating model designed to compete and win across regulated medical markets. Our strategy is to leverage the global scale, regulatory expertise, and patient access model to capture growing demand, improve product mix, and drive greater profitability as these markets scale. Europe has become 1 of Tilray's most important growth markets, with opportunities across Germany, Poland, the UK, and Italy, and our international opportunities extend beyond Europe. We are also expanding in Australia and New Zealand, creating additional pathways to scale our medical cannabis business and capture growing patient demand. In the UK, Life gives Tilray a powerful strategic advantage, direct access to patients.

We are focused on improving and shortening the patient journey, doubling Life's patient base and scaling Tilray medical products through an integrated pharmaceutical distribution network. Across Europe, we continue to strengthen the economics and performance of our medical cannabis operation. In Portugal, we reduced our operating and cultivation costs by approximately 40 percent, while improving strains, process, and potency. We believe Portugal is now among the lowest cost cannabis producers in Europe. And we expect this facility to deliver more than 40 metric tons of flower at full capacity in our fiscal year 2027. In Germany, Apria RX is operating at 100 percent capacity. Portugal and Germany combined with our low cost production position Canada gives Tilray 1 of the strongest global cannabis operating models in the industry.

With the scale we have, the cost structure, quality standards, and operating discipline to compete and win across regulated medical cannabis markets. Importantly, our advantage extends well beyond cultivation. CC Pharma provides Tilray with pharmaceutical distribution, infrastructure, commercial relationships, and market access in 1 of Europe's most important regulated medical markets with distribution to over 16,000 pharmacies. CC Pharma is more than a growing distribution business. It is a strategic connector across pharmaceutical distribution, medical cannabis, and patient access in Europe, strengthening our competitive position and creating additional avenues for profitable growth. In Canada, Tilray is built to gain share, strengthen profitability through scale, low-cost cultivation, low-cost processing operation, and focused commercial management. Our scaled cultivation operation gives us a meaningful advantage, particularly as we come out of the summer transition to new cultivars. These strains are improving yields, lowering costs, and giving consumers the potency and terpene profiles they expect.

Even with inflation in cannabis input costs, we have continued to reduce cost per gram and improve our margins. We're harvesting these cultivars now across our network and we're and we expect to see a larger impact late in Q2 and beyond. The cost leadership together with our brand portfolio and sharper market focus gives us a clear path to gain share in Canada. While protecting profitability, it also positions us as well as a market evolved beyond traditional cannabis formats into new consumer occasions. Cannabis beverages are 1 of the most exciting and compelling examples of that opportunity. Today, Tilray pays over CAD 100 million in excise tax, and the legal cannabis industry has become an increasingly important contributor to the government revenue across Canada. And as governments look for resources to expand that revenue base while strengthening the regulated market, cannabis beverages represents a clear opportunity for that.

Tilray is the largest producer of THC beverages in Canada with over a 40 percent market share and a broader access through bars, restaurants, and other businesses. Other regulated outlets would be a meaningful win for consumer, governments, hospitality operators, and of course, the legal cannabis industry. It would give consumers a safe regulated environment to try THC cannabis beverages, help drive traffic to hospitality venues, and create a stronger and more accessible legal cannabis market. In beverages, BrewDog gives Tilray more than a global brand. It gives us a passionate consumer following, a scaled hospitality footprint, and significant runway to expand across beer, spirits, non-alcoholic beverages, and ready to drink formats. We see BrewDog as a major growth engine for Tilray, a brand with global reach, culture relevance, and the potential to help reshape our beverage alcohol business over time. Beverage revenue increased 82 percent year-over-year to $101.5 million in Q1, largely driven by BrewDog. BrewDog also contributed to sequential growth in the beverage segment, reinforcing the early impact of the acquisition and the momentum we're building.

Importantly, BrewDog became profitable in Q1. Since taking ownership, we have stabilized operations, invested behind the brand, returned BrewDog to profitability, and began unlocking new growth. We recently launched BrewDog's first major campaign under new ownership, followed by the UK-wide Choose Craft campaign, which celebrates the quality, flavor and character that makes craft beer worth choosing. The early response has been strong since under new ownership campaign launch, and Choose Craft began rolling out Punk IPA sales across BrewDog's top 6 off-trade retailers up 187 percent over the last 2 weeks compared with the same period last year. At the same time, BrewDog has also secured over 9,000 new distribution points with the launch of its latest craft beer innovation. BrewDog has also launched 8 new on-trade partnerships across live entertainment, sports, pubs, and hotel. This is exactly the kind of momentum we expected when we acquired BrewDog, a globally recognized consumer brand that Tilray can stabilize, reinvest behind, and scale across markets, channels, and different locations.

We see a major opportunity to make BrewDog an even larger part of Tilray's international growth story. Our strategy is to grow BrewDog globally through a combination of expanded distribution, local market partnerships, and a franchise system of BrewDog pubs, bars around the world. As Tilray expands across global medical cannabis markets, we're also building relationships, infrastructure, and market knowledge that can support the broader international growth of our beverage businesses. Through strategic partnerships, we plan to expand BrewDog's operations and build bars across key markets where Tilray already has a presence or see attractive long-term opportunity, including India, Poland, France, Israel, and the Middle East. This is how we can use Tilray's global reach to take BrewDog into more markets, create new consumer touch points, and strengthen the international growth profile of our beverage business. Long term, we see room for top-line synergies between beverage and cannabis globally. We're already using BrewDog's reach to expand the beverage portfolio globally, including the launch of over 20 Tilray-owned American craft beers and functional beverages across the UK.

BrewDog also delivered strong brand proof points at the 2026 World Beer Awards with Hazy Jane, Wickman, and the Wickman Group and Mackie's Two Scoops earning Gold and Scotland Country Winner Honors. Looking ahead, our focus is clear. Continue integrating BrewDog, strengthening the business and investing behind its global brand, hospitality platform and consumer experience. With BrewDog, we're not just building a stronger beer business, we're building a broader global consumer experience rooted great beer powered by new innovation connect with today's dynamic consumers across craft beer, non-alcoholic beverages, ready-to-drink formats, food, digital engagement, and live experience. This is how we take BrewDog Beyond Beer deep in our connection with consumers around the world and build 1 of the most dynamic global beverage and hospitality platforms in the industry. Across Tilray, we're managing the business with purpose, allocating capital to the opportunities where we see the greatest potential to improve performance, expand margins, and continue to grow profitability. Controls and capital allocation remain central to how we operate. We have streamlined our operating structure, captured acquisition efficiencies, optimized production and procurement, and maintain focus around corporate costs.

These actions are creating greater operating flexibility and allowing us to invest behind the business and the markets where we see the strongest potential returns. Our Q1 result demonstrates that progress, revenue growth, record first quarter gross profit, gross margin expansion, and continued cost savings. We are building momentum. We are focused on converting that progress into stronger performance across the portfolio. In beverages, we improve gross margin sequentially and year over year, despite normal beer seasonality, higher input costs, and of course, fuel surcharges. A clear sign that BrewDog integration, costs, disciplines, and operating efficiencies are beginning to translate into stronger performance. That progress is important because it shows we're improving the financial profile of the beverage segment and creating additional margin upside over time. In U.S. beer, we're building a stronger, more competitive business.

The category is dynamic. Distributor consolidation is reshaping the route to market. And Tilray has the reach, focus, and brand portfolio to gain share in the markets where we can win. We're simplifying the business, taking costs out, continuing to scrutinize and putting a sharper focus around the channels, retailers and distributors that can drive profitable growth for us. Our spirit business is also important part of the broader U.S. beverage strategy, giving us another platform to reach consumers around many occasions, expand higher margin innovation and deepen our relationship with consumers with distributors, retailers, and on-premise partners. This work takes time, but the opportunity is meaningful. Sharpen the portfolio, improve commercial performance, and convert Tilray's U.S. beverage footprint into stronger and a more profitable growth over time. We're beginning to see clear proof points that our U.S. beer turnaround strategy is gaining traction.

According to Circana data, for the 14 weeks ended August 30, Tilray is now the number 2 craft vendor in Georgia and the West, number 4 in New York State and Sweetwater is the third largest craft brand in Georgia, representing a 12 percent of craft beer sales in that market. We're also seeing meaningful brand level momentum with Montauk Juicy IPA up 25 percent, the SweetWater highlight up 38 percent and the Karbach brand family delivering a 21 point swing and growing 7.5 percent fiscal year to date. And Breckenridge Juicy Drop up 22 percent in their respective priority markets. Just as important, our portfolio and package innovations are working. Our 4-packs, 16 ounce strategy drove 28 percent growth on the West Coast and key innovation, particularly Pop Signal Pub Light and High Voltage added more than 100,000 cases in Q1. These moves sharpen our focus, give distributors and retailers stronger reason to support our brands and position Tilray to gain share in the market where we can win. As we strengthen our core U.S. beer business, we're also positioning it for the next phase of growth through strategic partnerships that expand our scale capabilities and commercial reach.

Our exclusive multi-year partnership with Carlsberg Group reinforces the U.S. beer business we are building. Carlsberg is 1 of the world's premier brewing organizations and is widely recognized as 1 of the largest global brewers, with a business over 30 times the size of Tilray's Beverage Operations. The fact that a brewer of Carlsberg scale, global sophistication, partner with Tilray as its U.S. brewing and commercial partner matters. It validates that our brewing capabilities, our quality standards, our commercial reach, and our ability to scale international brands in the U.S. matters. Beginning January 1, 2027, Tilray will produce, market and sell and distribute Carlsberg, Carlsberg Elephant, and Kronenbourg 1664 Blanc across all channels in the United States. We expect this partnership to deliver immediate scale revenue contribution when it begins, add global recognized premium European beer brands to our portfolio and deepen our relationship across the distributor and retail network. Just as important, we expect the partnership to strengthen and evolve over time as we combine Carlsberg iconic brands, brewing heritage and global category expertise with Tilray's national go-to-market capabilities.

Taken together, BrewDog and Carlsberg gives us 2 powerful levers to build a stronger, more diversified, and more profitable beverage business over time. In wellness, Manitoba Harvest remains another strong Tilray brand with room to grow beyond its core hemp platform. We're expanding Manitoba Harvest into adjacent grants, plant-based products, and new wellness occasions using the brand's leadership in hemp foods to build a broader health and wellness portfolio that can reach more consumers across grocery, natural, and of course e-commerce channels. Across Tilray Brands, we're building something few companies in our categories can replicate, a diversified global business with powerful brands, international infrastructure, and operating capabilities across cannabis, beverage, wellness, and pharmaceutical distribution. The next phase is clear. Improve productivity, expand margins, generate cash, and convert our platform into stronger earnings power. This is why, even with industry headwinds, climbing dynamics in the U.S. beer, and planned integration growth investments, we are reaffirming our 2027 adjusted EBITDA. We remain confident in our ability to deliver through the balance of the year because the underlying direction of our businesses is strong.

Better operating performance, stronger cost controls, and growing contributions from BrewDog and international cannabis and multiple levers to expand our profitability. Our growth plan is anchored in opportunities we can control today, expanding global medical cannabis in the markets where we already operate, leveraging our low-cost cultivation and international supply chain, scaling craft beverages, growing wellness and pharmaceutical distribution, and maintaining the disciplined capital allocation. At the same time, we continue to preserve meaningful upside from future cannabis reform globally, including the U.S. Lastly, we know profitability matters and how important it is to our shareholders. We are laser focused on improving earnings, generating cash flow, driving shareholder value. But it's also important to recognize what we have accomplished today. We have approximately $221 million of cash on our balance sheet.

We have settled more than $42 million of debt fiscal year to date. We continue to actively evaluate opportunities to further strengthen our capital structure and reduce interest expense. This quarter, we report a net loss of $40 million, excluding non-cash, non-recurring items, our adjusted net loss was approximately $3 million, including roughly $5 million of net cash interest expense. Simply put it, if we continue to reduce the interest burden, earnings power of this business becomes increasingly visible. We know exactly what we need to do, improve performance, expand margins, generate cash, grow sales, and convert Tilray Brand assets and operating capabilities into stronger earnings and sustain value creation. With that, I'll turn the call over to Carl to walk you through the quarter in more detail. Carl, let's go.

Thank you, Irwin. Before I begin, please note that we present our financials in accordance with U.S. GAAP and in U.S. dollars. Throughout our discussion, we will be referring to both GAAP and non-GAAP adjusted results. And we encourage you to review the reconciliation contained within the earnings press release of reported results under GAAP with the corresponding non-GAAP measures. The earnings rate delivered record first quarter revenue and record first quarter gross profit with net revenue increasing 23 percent year over year to $257.1 million compared to $209.5 million in the prior year quarter. Both was driven by the addition of BrewDog, continued strength in international cannabis, and solid performance from our distribution business. Gross profit increased 35 percent to $77.5 million, and consolidated gross margin increased approximately 300 basis points to 30 percent. These results reflect the same principles Irwin outlined, expanding gross margin, improving the quality of revenue, and positioning the business for sustainable, profitable growth, all of which we are doing. Beginning with international cannabis, which remains 1 of our most important growth engines, revenue increased 21 percent year over year to $16.2 million driven by higher patient demand in Germany and contributions from Life in the UK.

Total cannabis net revenue was $56.1 million compared to $64.5 million in the prior year quarter, reflecting our disciplined decision to prioritize profitable growth and higher return international opportunities. Cannabis gross margin increased approximately 300 basis points year over year to 39 percent from 36 percent. Cannabis gross profit was $22 million in the quarter compared to $23.3 million in the prior year quarter, as stronger margin performance helped offset approximately $8.8 million of price compression in international markets. The margin improvement was driven by operating efficiencies, a stronger product mix in Canada, and importantly, increased utilization of our Portugal facility, which lowered unit costs as production volumes scaled. In Canada, we continued to prioritize profitable growth over volume amid competitive market conditions. Adult use cannabis revenue was affected by planned strain rotations, temporary supply constraints, and our decision to redirect approximately 1 metric ton of inventory, representing $1.1 million of potential Canadian revenue to higher return international markets. This is consistent with our broader strategy to use Tilray's global platform low-cost cultivation and processing bases, and EU GMP capabilities to allocate product where it can generate the strongest returns.

Turning to beverage, where Irwin spoke about BrewDog as a global brand and scaled platform, segment net revenue increased to $101.5 million compared to $55.7 million in the prior year period. The increase included $55.9 million of incremental revenue from BrewDog, which meaningfully expands the scale, international reach, and margin profile of our beverage platform. The acquisition transformed our beverage business from a primarily U.S.-focused operation into an international craft beverage platform, adding brands, distribution capabilities, and consumer reach across multiple markets. BrewDog also strengthened the segment's profitability profile as beverage gross margin expanded by approximately 300 basis points to 41 percent. Our legacy U.S. craft beverage business continues to operate in a challenging market. We are taking decisive action to streamline operations, improve brewery utilization, and focus investment where consumer demand is strongest. Consistent with Irwin's comments on the strategic role of our European infrastructure, our CC Pharma distribution business continued to perform well, exceeding expectations as net revenue increased 14 percent to $84.3 million compared to $74 million in the prior year quarter, supported by competitive pricing and product mix.

Distribution gross margin remained consistent at 11 percent. However, excluding a $1.3 million prior year classification difference, improved year-over-year due to favorable product mix, higher average selling prices, and cost reduction initiatives. Distribution remains an important strategic asset, supporting both profitability and our broader European medical cannabis infrastructure. Within wellness, performance was relatively stable with revenues of $15.3 million. Innovation and new product offerings continued to gain traction, although temporary constraints in the supply of organic hemp seed affected certain e-commerce channels during the quarter. We remain encouraged by the portfolio and the opportunities ahead, particularly as we continue to focus investment behind categories where Tilray can build durable consumer platforms. Moving to profitability, we reported a net loss of $40 million compared with net income of $1.5 million in the prior year quarter. Excluding non-cash and non-recurring items, adjusted net loss was $3 million, of which $5 million related to net cash interest expense.

Without the cash interest, which we are actively working to eliminate, we would have made $2 million of adjusted net income. The year-over-year change primarily reflected higher costs associated with investing back in our business, including higher marketing costs to drive growth and headwinds from fuel surcharges. Adjusted EBITDA for the quarter was $9.2 million, compared with $10.2 million in the prior year quarter. Results were impacted by $8.8 million of international cannabis price compression, as well as fuel surcharges associated with the broader geopolitical landscape. These fuel-related costs increased by $1.7 million compared with the prior year quarter, representing a discrete external cost headwind to adjusted EBITDA. Excluding these impacts, the underlying business continued to benefit from improved utilization, acquisition integration, and disciplined cost management. And we expect those initiatives to strengthen performance as we progress towards our fiscal 2027 guidance.

Turning to cash flow in the balance sheet, we ended the quarter with approximately $221 million in cash, restricted cash, and marketable securities. During the quarter, we raised a modest amount of capital through our ATM program, leaving $70 million available, and continued to reduce debt through additional note exchanges. We retired $24 million of principal during the quarter and a further $12 million after quarter end, leaving $52 million of principal outstanding. As we move toward the June 2027 maturity, our capital allocation priorities remain unchanged. Strengthening the balance sheet, reducing future obligations, and investing selectively will return support sustainable, profitable growth. From a capital allocation perspective, last quarter our focus centered on the approximately $50 million purchase price for BrewDog and an additional $50 million of short-term funding while cash collections followed 90-day payment terms. With that initial collection cycle now behind us, we expect ongoing funding requirements to be materially lower and largely limited to capital expenditures. Importantly, BrewDog required no cash injections during the quarter and was self-financing.

Looking ahead, our focus remains on the operational levers that drive stronger profitability and cash generation, expanding cannabis margins through international scale and cultivation efficiencies, realizing BrewDog integration benefits, optimizing our beverage manufacturing footprint, preparing for the transition of Carlsberg production and sales control in the U.S., improving working capital efficiency, and continuing to strengthen the balance sheet. Market conditions remain mixed across several categories, but our priorities are clear, focused on discipline execution, profitable growth, and building a stronger global platform that can create long-term shareholder value. Based on our current outlook, the strength of our diversified platform, and the actions underway across the business, we are reaffirming our fiscal 2027 adjusted EBITDA guidance of $68 million to $75 million. Operator, we can now open the call for Q&A. Thank you.

We'll now be conducting a question and answer session. If you'd like to ask a question at this time, you may press star 1 from your telephone keypad and a confirmation tone to indicate your lines in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please for our first question. Thank you. Thank you. And the first question today is from the line of Aaron Gray with Alliance Global Partners. Please receive your questions.

Hi, good morning and thank you very much for the questions today. A first question for me is just on the international cannabis dynamics. I know you mentioned some of the pricing pressure. As we think about the broader competitive environment with 2 of the largest players potentially combining, how are you thinking about the international landscape, you know, and how you're best positioned to ensure that you have, you know, durable sales growth. Thank you.

Thank you, Aaron, and good question. Number 1, I think the most important thing is that we have the growth and with the facility that we have in Cantignette and what we have in Germany. So we have tremendous amount of grow for either flower or oil. Second thing is, listen, we've been in the marketplace internationally now for 7 years so we have infrastructure of people, we have our relationships with doctors, um, we've expanded in other countries. So again, it's just getting out there and selling our products. And 1 of the other things that we have different than a lot of other companies, we have something called CC Pharma, which is a pharmaceutical distribution business that goes direct to drugstores. So I really, really feel like good about our international business. Um, and and it's not that we have to go out there and look for grow to sell.

We have plenty of growth. We don't have enough grow. We have, you know, Canada to be able to serve us. So we have product, we have oil, we have flower, we have infrastructure. We have great relationships out there. We have CC Pharma, um, that sells into 16,000 in drugstores. So, you know, I'm not concerned about the potential combination that could happen out there.

Okay, great. Appreciate that, Irwin. Second question for me, just on the alcohol side, specifically on the gross margin, just given some of the dynamics you talked about, um, with distribution consolidation and broader structural challenges. How do you think about the gross margin evolution, you know, for the category? And think about BrewDog now being integrated and other dynamics that you could have. Thank you.

So, again, from a gross margin standpoint, listen, you know, we got into this business 2020 with Sweetwater. Montauk came along, which we integrated into Sweetwater. And then came the ABI businesses and the Montauk, and then Molson businesses. All of a sudden, we're sitting with 8 to 10 breweries. So number 1 was getting rid of some of the smaller breweries, which we had in regards to Revolver, in regards to Terrapin, Fort Collins, and there's probably 1 more, you know, we sold off Atwater. There's probably 1 more that we could integrate, that we can close and integrate, in which there's some big savings from there. So number 1, it's integration of our facilities and getting them down to 5 or 6 facilities that have tremendous capacity that are strategically located.

And, you know, bringing on Carlsberg is going to be a big feat for us, which there's going to be a lot of product and a lot of opportunities with that. So that's number 1. And with that, combining that, all these, you know, breweries is also getting the benefits of hop supply, getting the benefits of, you know, other ingredients, cans, etcetera. So that is in place. Number 2, as we all know, as this 3-tier system, there's been a lot of change going on with distributors, for instance, in New York, we've we have AB1 that has Bluepoint and Shocktop. We have someone else that has Montauk, another distributor that has BrewDog and we'll have Carlsberg. So we're in the midst of trying to consolidate distributors out there so we only have certain shipping points and we become an important part of that distributor and that's happening. And in a 3-tier system is not the easiest that, you know, to make happen. And the third thing is what we're really changing is the way we go to market, where we were dependent upon distributors going into the pubs and at retail.

And, you know, now what we're doing, whether it's Kroger, whether it's Walmart, we're calling on them ourselves and making sure we get the pods. So it's coming together. A little different than a consumer package goods business where you just went to a Walmart and like my old company, Hanes, and you sold and you shipped it to Walmart's warehouses. But the good news, and what I feel good about, is the lineup that we have in the beer categories today on a regional basis, not so much on a national basis, and with Carlsberg. We have 2 great national brands out there. And again, as we look at our beer brands from standpoint, with 18 beer brands, do we put 1 or 2 of them together and just get out of some of the smaller brands? So we continuously look at that. We'll continuously expands into the seltzer business, which we've been doing. We continuously with Highball, which is our energy drinks.

We're looking at other things with water. You know, there's lots of innovation out there. You we saw a constellation paid for a vodka seltzer business yesterday, you know, that that is a mix. We can go out and create them and not go buy them. So there's a lot we'll create as we have. We have manufacturing, we have distribution, we have tremendous amount of infrastructure and R&D. So there's lots out there for us to do with this whole beer category. And listen, my hope 1 day we can sell cannabis drinks because if we could sell cannabis drinks throughout the United States or, you know, our hemp drinks. There's either a few hundred million dollars or a billion dollar opportunity business force, and we have the infrastructure and the ability to do that.

Appreciate that color and outlook, Irwin. I'll jump back in the queue. Thank you.

The next question is from the line of Bill Kirk with Roth Capital Partners.

Hey, good morning everybody. Um, so there was a line in the release uh about BrewDog reaching profitability in 1Q. I don't recall that having happened in 4Q, and I think BrewDog was at an operating loss for years. So Irwin, you talked about ways BrewDog can grow. But maybe can you add a little bit more detail on how you were able to quickly turn years of losses into a profit, and do you expect it to stay profitable?

Well, number 1, you know, the big thing is I was not saddled with a lot of their bars and pubs that were losing money. So that's number 1. Number 2, you know, we right sized in regards to people that we did not have to take. When you went to administration, there was a lot of leases that we didn't have to take or new leases that we renegotiated. Um, so from a standpoint, that was a big part of it. And we really put good cost controls in place as we, you know, there's a big facility, you know, up in Aberdeen that we really focused on, we moved away from unprofitable businesses as the spirits business. They'd already shut it down. So there are things that we did.

We also had a great, great summer with the World Cup with our bars that we did have open. And again, the opportunity in which we're seeing today as we launched the campaign, okay, you can cut your way to profitability, but it's growth within the brands. And, you know, when we took this business over, the brands were declining double digits and, you know, started to claw their way back and now we're seeing good growth among the brands from a depletion standpoint with the campaign. When we took this business over, people thought BrewDog went away. So do I. Absolutely. The budget for this year is profitability and some good profitability coming from BrewDog. And what I'm excited about, too, is the expansion opportunities, not only in the UK, is what we'll do in Australia. What we'll do here in the U.S. and different partnerships that we plan to do in both brew pubs and distribution in other countries. I'm going to add 1 more point.

Hello?

Thank you. And then if I could follow up on the Canadian adult use contraction. You know, Carl outlined a few reasons and decisions that contributed to the year-over-year contraction. I guess going forward, would you expect a similar deliberate headwind dynamic? Are some of the factors more specific to 1Q, decisions made in 1Q, and year-over-year looks better here after 1Q.

So more decisions, whereas this Q is, this happens all the time as we come off the summer months and yields, and as we transition from different strains. That is number 1. Number 2, you know, we're focused on margin. And I think what's important, you know, from a standpoint there is being focused on profitability. The other thing which again, which I feel good about Canada, you know, Canada is 40 million people and half the population in the age that can consume cannabis. You know, there's a couple of big things that we have to do there is move more and more away as we're looking at from the illicit market. And 1 of the opportunities that's in place right now that could happen is cannabis drinks being sold, you know, in food establishments in restaurants and bars and in beer stores and that's on the table in Ontario a couple other provinces and with us having over 50 percent share and having the production for us that would be big 1 of the big things in Canada his excise tax and we pay over CAD 100 million in Canadian excise tax. If we were just if we were selling, you know, alcohol and we would be half that.

And what all these governments are looking at, you know, sales are down on American brands and alcohol and sales are down on alcohol, how do I replace that with additional cannabis of sales. And, you know, there's stuff going on in Quebec in regards to age. There's additional products that can be sold in convenience stores. So that's the way the Canadian market ultimately is going to grow is more and more cannabis products that are available not just through you know cannabis stores.

Thank you, everyone. I'll pass it along. Thank you.

The next question is from the line of Pablo Zuanic with Zuanic & Associates.

Thank you and good morning everyone. Look, 2 part question regarding Carlsberg. Can you give us a sense, you know, what's the upside there in terms of revenues? I don't know who's producing or distributing Carlsberg before, you know, what were their peak sales? Anything to help us frame the potential for Carlsberg in the U.S. that would help. And then the second part to the question relating to Carlsberg, I think you said, you know, in your prepared remarks, you expect the partnership to strengthen and evolve over time. If you can give more color in terms of what that could mean. Thank you.

Thank you, Pablo. Listen, I spent a lot of time with the Carlsberg team. One of the largest beer producers in the world today. And, you know, they have tremendous growth across their brands and some of the other products. As I spent time with them on their innovation, as product development, their brewing capabilities. So that brings a tremendous asset to Tilray that we can tap into a company of that size, that scale as a partnership here. And there's other companies out there that partner with other cannabis companies on the cannabis side. We're fortunate to have a partner like Carlsberg to partner with us on the beverage side.

So from a standpoint, right now we obtain, it's a venture, a profit sharing that all the Carlsberg products will be produced in our U.S. plants. We have the distribution, marketing, selling rights to all of the U.S. And with that, it's all Carlsberg products and we're the opportunities, additional innovation that comes from Carlsberg. And, you know, there's other markets that 1 day that we hope to talk to Carlsberg about that we can sell to. And there's a lot, there's a big country out there that we would expand in and Carlsberg is around the world. And the other opportunity is this here, Carlsberg Distributing some of our products in certain markets that we'd like to go into. So there's lots of opportunities and it's been a pleasure to work with them. And I think what they ultimately see is this here, U.S. being 1 of the biggest beer markets here, and they were basically seen as an import. They really want to see, you know, U.S. being a big foothold for them and their growth factor.

Right, thank you. Look, in terms of M&A, I know Carl spoke about cash deployment and priorities in terms of cash allocation, but I understand you're building a diversified business platform, but in the first quarter, you know, beverages were 54 percent your gross profits compared to the to cannabis 28 percent. So just looking forward in terms of M&A, you still need to make acquisitions in the case of cannabis, whether in Canada or overseas, or is it more about expanding the beer business and pretty much doubling down on beverage exposure? Thanks.

So, you know, I think, again, you got to come back and see how they're complementary. You heard what I said about Canada. Number 1, yes, we'll continue to grow recreational and medical cannabis in Canada, but Canada's only so big in size. But what's the opportunity is the synergies in the beverage business and growing other products in Canada. Okay, and I think that is a big, big opportunity. Like I say, if I could get our beverages into multiple additional outlets in the Canadian market, that's big for us and something will happen there. So again, as I put these 2 businesses together, and what happens, Pablo, as beverages and cannabis can come together, there's lots of overhead sharing, there's lots of cost savings, a lot of infrastructure that we put together that's going to be beneficial for this company.

You know, the same internationally. Now as we look at different countries internationally, whether it's India, whether it's Israel, whether it's Poland, whether it's Spain, as we go in there with medical cannabis, the same team that's focusing on medical cannabis, we'll focus with our beverage team and look for partnerships or franchises along with our BrewDog products and some of our American beers. So yes, again, as we put these 2 businesses together, they're complementary and they both will absorb overheads that we have to put in place. For 1 business, and that is the big thing for us today, scale. As we get to that billion 2, listen, being a cannabis company today, you know, we're stuck with much higher insurance costs. We're stuck with much higher IT costs, much higher grow costs in regards to R&D and quality. You know, what Health Canada makes us do. So if we can take a lot of those costs and share them among other business.

It's a big, big, big benefit for Tilray.

Thank you. If I may, can I ask, I'm going to add just 1 more. In terms of the changes in Germany on reimbursement on extracts and flower, I believe that started July 1st. Can you frame that? Did you see any impact from that? Or is your business mostly cash payer versus members? Thank you.

So number 1, majority of our business there is flower, and most of our patients are paying customers. In regards to differential, it is for new patients coming in, not the existing patients. So will there be some impact? Yes. But is it extremely impactful to our business? No.

Thank you.

Thank you, Pablo. Our next question is from the line of Brenna Narrod with ATB. Please proceed with your questions.

Hi, thanks for taking our questions this morning. So, regarding the recent cultivation expansions, based on my analysis, for the size of the current and pending EU GMP facilities that Tilray has, I'm estimating that Tilray has 1 of the largest, if not the largest EU GMP footprint of the peer group. So I would just love to get a little bit more color on when and how you think we might be able or we might see the real power of the footprint show through in Tilray's international sales.

So again, number 1, you're seeing the power and with Maison in Cantignette, Quebec, that's just coming on now and ultimately within the year that will become EU GMP certified. And in regards to what we're growing today, you know, in Europe. As I said before, the power is we have the product. And the thing is, is this here in talking to our patients and talking to our customers and distributors out there, they want consistency. It's not like they want to be buying from 5 or 6 different growers out there and not what they're getting. So again, you know, in Portugal, I mean, I mean, from a standpoint, in regards to how many, what do we grow? What's the size? We have over 40 metric tons, and then we have 4 or 5 metric tons that will come out of Germany. So we have plenty, plenty of capacity.

And with that, as you can see, we're 1 of the lowest cost producers out of our Portugal facility today. So again, you're seeing it. That's why you see our margins improving, and that's what you'll continue to see. And the big thing is this here, this is 1 of our smaller quarters in regards to selling, you know, cannabis. You can't look at it quarter over quarter. So again, you know, from a sales standpoint, as sales continuously increase. And the big thing is our margins even grew even with price compression out there, which is pretty amazing.

Okay, that's great color. Thank you. And then just tapping on to 1 of the previous questions on the potential for THC beverages in the U.S., we'd just love to get any color on what you're hearing. If there might potentially be a carve out for this segment in the Farm Bill that we're expecting this fall. Listen,

Again, if I go to the polymarkets and maybe I should, and see what they're saying is this here. And I never wanted to guess about politics. You know, everything we're hearing is, there's 2 different things. There will be an extension, and it will go to the next Congress, and the new Congress will approve. So I don't believe that hemp, this whole hemp business will go away. There's too many jobs, and there's too much, you know, from the farmer's standpoint, it's too big for the farmer, for farmers just to be shut down in this business. So I think there will be another extension beyond December 11.

And then I think the new Congress will approve where there's a certain amount of milligrams that could be sold. Okay, I understand. And I think the big thing is Tilray is hanging around the hoop there. We have products, we're selling, we're not out there aggressively doing anything. We're staying in the marketplace waiting to see what happens and we can turn on pretty quickly depending on where it goes.

Perfect. Thank you so much. I'll jump back into the queue.

Thank you. The next question is in the line of Ryan Neal, TD Cowen. Please receive your questions.

Good morning everyone, this is Ryan on for Derek and thanks for taking my questions. Just to start off, and apologies if I missed this off the top, but do you have an idea of what beverage segment growth would have been excluding BrewDog?

Our beverage business ultimately would have been down, excluding BrewDog, and that is because we've gone through SKU rationalization and brand rationalization.

Okay, great. Thanks. Just as a follow-up, I'm just curious on the gross margin compression we saw in wellness this quarter. Is that a function of any promo spend, etcetera? How should we think about margins in that segment moving forward?

So that compression was really caused by a 1-time organic seed shortage that was feeding our e-commerce business, and so we had a slight change in mix.

Okay, great. Thank you.

Thank you. At this time, I'll turn the floor back to Matt for further comments.

Thank you very much everybody for getting on our call today. As you can see, there is a lot going on at Tilray and there's a lot to understand within Tilray and I'm not sure, you know, on a regular basis as we try to explain our business in in regards to our different businesses, as we explain our businesses in regards to our different categories. And the other thing is geographically. Today, we sell in over 25 countries around the world. We deal with multiple currencies. We have wars that are going on that affect us from a utilities, from fuel standpoint. And we have different teams as we pull together. But I think the big thing is this here, really look at what's under the hood at Tilray, there's some incredible brands.

We have we produce 95 percent of our own products around the, you know, around the world. We grow, which growing cannabis in over 6 million square feet. And today, you know, over the metric tons that we could, you know, we really grow. And we step back in what we're doing in regards to cannabis from a medical standpoint and research out there in regards to sleep, anxiety, pain, PTSD, epilepsy are some of the exciting things that we're doing and building awareness out there. And as things expand, whether it's peptides, psychedelics, Tilray will continuously look at that. Canada is the only country in the world where cannabis is legal from a recreational standpoint. And I think that's ultimately the way it's going to stay.

So we really have and we're positioned so well in the cannabis industry. We do not have to go to buy cultivation. We don't have to go buy anything for other countries. Can expand our business today in so many different ways and flower and oils you know we have tremendous amount of research development and scientists that work with us in regards to the cannabis industry. In regards to the U.S., let's listen, it's been waiting and seeing, and we're used to delays, not used to things happening. But the thing is, is this here. There's 3 or 4 good things. Number 1, if the U.S. happens, it will be great for Tilray and we'd be ready to pounce and jump in for whatever way it happens.

Number 2, if something happens with the hemp drinks, we're ready to go and there's a big opportunity for us there. Number 3 is this here, if nothing happens and it continues to drag along. You know, we have businesses all over the world that will, you know, fuel our growth. We'll continuously look at acquisitions. And the proof is, you know, what we've done with BrewDog very quickly. And yes, it's not, you know, proved as quick as with our beverage business, but it's something that's a great infrastructure and you see still. Acquisitions and multiples of valuations. And I think we've created something very unique up there. So there's a lot within Tilray that we're doing.

We have over 40 pubs and restaurants around the world that sell our products, both BrewDog and our American beers that we learn a lot from our consumers. We have in place tremendous amount of research that we continuously get from these pubs that we know what consumers want. In regards to cost today, as a stand-alone as a company today, that's size, there's tremendous costs in regards to IT, AI, like I said, insurance. And what we have in place today to cover it as a public company and be in a small company out there today and not have a scale is difficult. And that's a big thing today. Tilray could easily absorb another half a billion to $1 billion of sales with its infrastructure in place. And I think that's a big advantage that a lot of companies don't have today. Scale to absorb all the additional SG&A costs, whether it's being public or just being a company out there today that can support the growth, that can support the R&D, that can support the infrastructure, that can support the process of the analysis, the finance that is needed within a public company or what's needed in any company today.

So I'm proud of what we're doing. Yes, sometimes there is frustration, how the stock reacts just on a cannabis multiple, just on a cannabis news. But at the end of the day, when I step back and I look at our brands, I look at what we do, I look at how strong our balance sheet is and we have opportunities, lots of levers. We have an incredible team. Um, I'm proud of where Tilray is today and where Tilray can go. So thank you very much for your support and I look forward to speaking to you in the near future. Thank you.

Thank you. This will conclude today's conference. Thank you for participating. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

Thank you. Thank you for joining today's conference call to discuss Tilray Brands' Financial Results for the Fourth Quarter and Fiscal Year 2026, ended May 31, 2026. [Operator Instructions].

I will now turn the call over to Ms. Berrin Noorata, Tilray Brands' Chief Communications and Corporate Affairs Officer. Thank you. You may now begin.

Thank you, Operator, and good afternoon, everyone. By now, you should have access to the earnings press release, which is available on the investors section of Tilray Brands' website at tilray.com and has been filed with the SEC and OSC.

Please note that during today's call, we will be referring to various non-GAAP financial measures that 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. The 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 response to 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 those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements.

Today we will be hearing from key members of our senior leadership team, beginning with Irwin Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary; followed by Carl Merton, Chief Financial Officer, who will review our financial results for the fourth quarter and fiscal year 2026.

And now I'd like to turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon.

Thank you, Berrin. And good afternoon, everyone. And thank you for joining us today. Fiscal 2026 proves something important and exciting. Tilray Brands is more than the company many people think it is. Today, Tilray is a diversified global consumer products and pharmaceutical distribution company with leadership positions across cannabis, beverage, hospitality and wellness. We are no longer defined by one category, one market, or one regulatory outcome. We have transformed Tilray into a company with multiple cash-generating businesses, positive cash flow from operations excluding working capital, and significant runway for future growth. There is no other company with the scale, diversification, global infrastructure, or interconnected business segments across cannabis, beverages, hospitality and wellness that Tilray has built brand by brand.

Since I took the helm in 2019, when Aphria was a singularly focused a $50 million revenue company, we have pursued disciplined acquisitions and thoughtfully invested in assets, infrastructures, and capabilities that define Tilray today. And we've done it with financial discipline. We ended fiscal 2026 with approximately $235 million in cash and marketable securities, net debt essentially a breakeven and nearly $700 million of operating assets. Those aren't just numbers on a balance sheet. They represent real brands, real facilities, real infrastructure, real operating capabilities that are generating cash today and creating long-term value for shareholders.

The result is a scaled global operating platform with leadership positions across multiple high growth consumer categories. Tilray Brands is the largest cannabis cultivator with over 6 million square feet of cultivation capacity around the world. The revenue leader in Canadian cannabis, a leading medical cannabis company across Europe with the largest share of the German medical cannabis oil market, a top 100 global beverage company, the #1 craft supplier and fourth largest beer supplier at grocery in the U.K., and the fourth largest craft brewer in the United States, and a global leader in hemp foods and wellness.

Tilray Brands now spans in more than 20 countries with more than 40 brands, supported by 22 production facilities, 37 pubs, 16 franchise pubs, and 3 hotels, with approximately 93% of our products are made in-house across our vertically integrated operation facilities.

The market doesn't value companies like SpaceX, Amazon, or Tesla solely on what they've earned in a single quarter. It recognizes the long-term value of the infrastructure, the capabilities, and platforms they've built and how they changed the world. We have built Tilray and that same long-term mindset, investing in business and brands that generate returns in cash today while creating a much larger platform and strengthening our competitive position for the future.

What makes Tilray different is not simply the breadth of what we own, but the way our businesses work together. Cannabis, beverage, hospitality, and wellness, each create distinct opportunities. But together, they give us consumer reach, brand building power, operating leverage, and multiple pathways to growth that a few companies can replicate today. That interconnected model gives us flexibility that single category companies do not have. We can allocate capital where we see the strongest return, bring brands into new channels, use our hospitality footprint to create direct consumer engagement and adapt as markets evolve. That is how we intend to keep building sustainable long-term shareholder value across categories, geographies, and consumer occasions.

We continue to believe that medical cannabis is the future of medicine and remains one of the world's most compelling long-term opportunities. And Tilray is uniquely positioned to lead the future. As medical cannabis becomes increasingly integrated into patient care, we have the genetics, cultivation expertise, pharmaceutical manufacturing capabilities, clinical relationships, bodies of research and evidence, and international infrastructure to meet patients' needs and scale with demand.

We also see a future where emerging therapeutic areas, including peptides, psilocybin for mental health, become part of the broader conversation around next generation patient care. In the U.S., cannabis markets, we continue to see encouraging regulatory momentum, including federal cannabis rescheduling. But our long-term growth strategy has never depended on a single regulatory event or one country. As a global leader in medical cannabis today, when the U.S. medical cannabis regulatory framework is in place, Tilray Medical is established and ready with the playbook, capabilities and optionality to meaningfully expand our medical cannabis platform across the U.S. when the opportunity opens. Tilray opportunity is global. We're already building leadership in marketplaces outside the U.S. where medical cannabis, pharmaceutical distribution, consumer health and wellness are expanding the fastest.

Beer is the most consumed beverage alcohol in the world, making it one of the most resilient and enduring customer categories. AI is not replacing beer. Our acquisition of BrewDog added a globally recognized brand, a scale hospitality platform and significant international growth potential. We have looked at acquiring BrewDog at different valuations over time and ultimately acquired the business strategically at an administration at an incredible price.

Today, we believe we have a jewel in our business that has accelerated our global beverage expansion, together creating an approximately $500 million beverage platform and accelerating the growth of our brands globally. Together with cannabis, beverages, and wellness portfolios, Tilray's diversified consumer product strategy is positioned to capitalize on evolving consumer preferences while expanding profitability, strengthening cash flow, and creating long-term shareholder value. Our strategy is working, our financial results prove it. Fiscal 2026 was a milestone year for Tilray. We delivered record revenue of over $915 million on an annualized pro forma basis. Tilray is now approximately a $1.2 billion global revenue company.

We also achieved record adjusted EBITDA of $61.1 million, or $63.4 million, excluding the temporary impact of fuel surcharges. These results demonstrated the underlying strength and the accelerating momentum of our global businesses. At the same time, we continue investing in the future of our business through our acquisition of BrewDog. Since acquiring BrewDog for approximately $54 million, we have further invested nearly $50 million of additional working capital to support the business.

Importantly, we made these investments from a position of strength. Even as we invest in BrewDog and the future of our business, we ended the fiscal year with approximately $235 million in cash and marketable securities and a significantly strengthened balance sheet.

Positive cash flow from operations, excluding working capital, improved to approximately $18 million, an increase of over $50 million year-over-year. We reduced our debt by approximately $60 million as of this filing, lowering our net debt to less than $1 million at year end, a 95% improvement year-over-year.

We've increased gross profit by 8% to $260 million and grew our adjusted EBITDA 11%, demonstrating discipline, cost control, and execution across our businesses. These results validate the strategy we have been executing against, which is building a diversified global consumer products and pharmaceutical distribution company with multiple engines for profitable growth. We are generating stronger cash flow, allocating capital with discipline, investing behind our highest return opportunities, and building a more resilient business designed to create sustainable long-term shareholder value.

Now, turning to our business segments, beginning with Canadian cannabis. In fiscal 2026, Tilray reinforced its position as Canada's largest cannabis company by revenue. Adult-use cannabis revenue grew 5% year-over-year, driven by continued demand for ready-to-consume formats. We drove growth, improved profitability, strengthened our brand and product portfolio, and positioned the business for continued growth. Our strategies align with how the Canadian cannabis market is evolving. During the fourth quarter, pre-rolls grew 38%, edibles grew 39%, vapes grew 28%, and the THC beverage business grew 6%, increasing our exposure to Canada's fastest growing product categories.

Canada is one of the most competitive cannabis markets in the world and Tilray continues to lead with the #1 market share in pre-rolls, the #1 THC beverage, #1 in oils, and #1 in chocolate edibles, and continue to hold leading positions across every other major product category. Cannabis flower premiumization also remained a strength with Broken Coast delivering its strongest fourth quarter in 2 years, growing 10% year over year.

Looking ahead, our priorities are clear. Accelerated growth in vapes, infused pre-rolls, rebuild momentum in flower, expand our medical platform through HelloMD, and continue to optimize our cultivation and production network.

Turning to our international. International is one of Tilray's greatest competitive advantages and one of our most compelling long-term growth opportunities. Over the past year, we established international as one of Tilray's strongest growth engines. On a pro forma basis, our international operations now represents approximately $700 million of revenue. During fiscal 2026, we strengthened every part of our European business from medical cannabis, pharmaceutical distribution to beverage and hospitality, while delivering record international revenue, quarter after quarter since Q2, despite regulatory complexity, pricing pressure, and evolving market dynamics.

We strengthened our cultivation and manufacturing capabilities across Portugal and Germany. Portugal, which supplies approximately 85% of our international medical cannabis business, reached approximately 80% utilization during the fiscal year. And now with ample opportunities to expand, we have a clear path to operate our Portugal facility at full capacity. In Germany, our Aphria RX cultivation facility is fully utilized, and our new ARX brand has launched successfully with strong early patient response.

Our execution delivered strong results. Medical cannabis revenue grew 34% to approximately $85 million, despite permit delays, regulatory complexity, and approximately $21 million in price compression. Germany and the U.K. each grew 25%, Poland grew 73%, Italy grew 53%, driven by expanded distribution, innovation, and higher volumes. Medical cannabis flower grew 87% and Tilray remains Germany's leading provider of medical cannabis oils with a 45% market share.

CC Pharma continues to be a significant competitive advantage. Through one of Germany's leading pharmaceutical distributors, we reached approximately 16,000 pharmacies and major wholesalers. Fiscal 2026 revenue grew 21% to $327 million, strengthening both our pharmaceutical business and our medical cannabis leadership.

Life completes our vertically integrated U.K. medical cannabis business by connecting cultivation, manufacturing, clinical care, dispensing, and pharmacy services. It gives Tilray direct patient access, stronger demand visibility, and greater participation across the patient journey. Together our cultivation assets, CC Pharma, Life, Tilray Medical have created one of Europe's most comprehensive medical cannabis and pharmaceutical distribution business. As we continue to scale, we also are improving profitability. Since the beginning of fiscal 2025, we've reduced our cost per unit by more than 30%, demonstrating the operating leverage. We continue to unlock across the business.

Turning to our beverage business. In fiscal 2026, beverage revenue grew 6% to $254 million, which includes the acquisition of BrewDog in quarter 4. Tilray in the last 5 years has strategically built one of the most scalable global beverage platforms in the industry. And today, we are a top 100 beverage company with the brand's brewing capability, hospitality footprint, and commercial infrastructure to drive profitable growth around the world.

Importantly, as we did not build this through transformational capital spending, we built it through strategic acquisition, operational integration, and brand investment, creating a scalable global beverage business positioned to deliver increasing returns time over time. BrewDog is the cornerstone of that strategy and one of the strongest examples of disciplined capital allocation. We acquired an over $200 million annual revenue business for approximately $54 million with globally recognized brand, scaled hospitality network and significantly international growth potential. In just a few months, we have stabilized operations, improved product availability, accelerated innovation, and begun unlocking synergies across our global beverage platform.

BrewDog has significantly expanded our reach across the United Kingdom, Australia, and other international growth markets, while also becoming the gateway for introducing Tilray's American craft portfolio internationally. During fiscal 2026, we launched 23 American craft beers and non-alcoholic beverages from 9 Tilray brands into the U.K., demonstrating how quickly our global commercial infrastructure can scale brands into new markets and have sold out each of these shipments in the U.K. In less than 2 weeks.

Our pubs are far more than hospitality assets. They're powerful consumer engagement platforms that strengthens our brands, deepens consumer loyalty, generates valuable consumer insights and creates experience that most beverage companies simply cannot replicate. The World Cup demonstrates the power of that model. Throughout the tournament, including every England match, our 1,800-capacity flagship BrewDog Waterloo pub sold out, showcasing the strength of our hospitality platform and the demand for our brand.

Across the 6-week tournament, our brew pubs generate approximately GBP 412,000 of incremental revenue above budget, welcome more than 28,000 pre-booked guests, and generate approximately GBP 123,000 in ticket revenue. Our 2 strongest trading days generated GBP 218,000 and GBP 188,000 in revenue, respectively, or continually to build upon this momentum.

Our brands also performed exceptionally well. We sold approximately GBP 1.3 million of BrewDog beer during the tournament, led by Lost Lager. While Tilray's American craft beer brands accounted for 58% of all guest beer sales, with Shock Top emerging as the strongest performing American craft beer brand. While we also launched our GBP 1 million bar tab campaign, one of the largest consumer activations in our company history, turning fan excitement into a global brand moment across our pubs and digital channels. Together, these activations generated more than 600 million organic creator and earned media impressions, extending the reach of our brand well beyond our pubs.

This is the power of Tilray beverage and hospitality strategy. We just don't own a great brand. We own places where consumers experience them and can come together. That gives us a direct connection to consumers, building loyalty, drives traffic across our venues, and creates opportunities that traditional beverage companies simply cannot replicate.

In the United States, Tilray has built one of the country's leading craft brewing platforms as the fourth largest craft brewer, we combine iconic regional brands and national brewing and commercial capabilities in growing hospitality network and strengthen our brands and deepens consumers' engagement. While the integration and optimization of acquired brands from Molson and ABI has taken longer than expected, particularly in beer category facing broader headwinds, we continue to see significant strategic value in the platform we've built.

Our distributor network, retail customer relationship, on-premise presence, manufacturing capabilities, and brand portfolio provides the infrastructure to support our beverage business today while creating meaningful optionality if the THC beverages are permitted at scale in the future.

Our exclusive long-term U.S. partnership with Carlsberg, the world's fourth largest brewer, is a powerful endorsement of that platform. Beginning January 1, 2027, Tilray will brew, market, sell Carlsberg. Carlsberg Elephant 1664, and Kronenbourg 1664 Blanc across the U.S. Carlsberg partnered with Tilray because of our brewing scale, operation excellence, and national commercial capabilities.

Innovation remains a competitive advantage. During the year, we expanded our portfolio with Pub Light, Shock Top High Voltage, Sweetwater Big Trip, Popsicle Hard, and a new 10 Barrel RTD, extending the trusted brands into faster growing beverage occasions through disciplined innovation, and strategic partnerships.

Breckenridge Distillery also continued to build momentum by expanding innovation, strengthening distribution through Southern Glazer's network into New York and California.

Today, Tilray has built one of the most scalable and diversified global beverage platforms in the industry across craft beer, spirits, ready-to-drink, energy beverages, hospitality, for improving asset utilization, expanding margins, driving profitable growth. While federal hemp-derived THC beverages regulations are still pending in the U.S., Tilray beverage platform is ready to dominate the opportunity with the brands, products, manufacturing and distribution already in place at scale to win coast to coast. Beverage is becoming one of Tilray's most important growth engines, and we believe we're still in the early stages of unlocking full potential of this business.

Wellness is another important engine within Tilray's diversified global business, positioned at the intersection of Better for You foods, functional nutrition, and everyday wellness. This business continues to benefit from the changing consumer preferences and growing global demand for Better for You products that leverage health and wellness trends.

In fiscal 2026, wellness net revenue grew 9% to $66 million, driven by a continued demand for clean ingredients, functional foods, and everyday wellness products. We see significant opportunities to accelerate that momentum through innovation, expanded distribution, and continued brand investment.

As we are broadening our international footprint, we're targeting high growth markets across India, the Middle East, Asia, where a rising consumer demand for health, nutrition, and wellness presents meaningful long-term opportunities. We're also seeing strong momentum with HiBall Energy, which has more than tripled since we acquired the brand. Together, these initiatives position our wellness business to become an increasingly important contributor to Tilray's long-term profitability and global expansion.

Before I close, I want to expand a moment on capital allocation and the company we built. Every capital allocation decision we have made has been guided by one objective, maximizing long-term shareholder value. We have invested with discipline, focused on opportunities that strengthen our operating performance, expand our commercial reach, and improve our ability to generate durable cash flow over time. We continue to believe the market has not fully recognizing the value of what we've built. When you look at the strength of our balance sheet, the quality of our assets, the scale of our business, and the diversification of our global platform, we believe our stock price does not reflect the value of the global enterprise we have built.

As we look forward, the focus is execution, converting the assets, brands and capabilities we have built into stronger margins, higher cash flow, and sustainable profitable growth. Fiscal 2026 demonstrated that our strategy is delivering results, and we believe the opportunity ahead remains significant.

Looking ahead, AI will become another growth driver for Tilray across our businesses. AI and data-driven technologies are helping us build a smarter, faster, and more efficient company from improving genetics, cultivation, yields, quality and cannabis to optimization demand, planning, production, inventory management, and commercial execution across our beverages, our wellness business, pharmaceutical distribution, and hospitality business. AI is strengthening every part of our operations. We believe AI will enhance productivity, improve margins, and accelerate our innovation.

I'll close with this. We entered fiscal 2027 with clear priorities: expand margins, improve efficiency, accelerate innovation, and convert the scale of our business into stronger earnings power. We have a clear path forward supported by organic growth, discipline acquisitions, innovation and global expansion. The next chapter for Tilray is about converting our scale, diversification and global capabilities into even greater growth, profitability and long-term shareholder value. We know what we need to do. We'll focus on delivery.

Carl, you ready?

Thank you, Irwin. Before I begin, please note that we present our financials in accordance with U.S. GAAP and in U.S. dollars. Throughout our discussions, we will be referring to both GAAP and non-GAAP-adjusted results, and we encourage you to review the reconciliation contained within the press release of our reported results under GAAP with the corresponding non-GAAP measures.

As Irwin stated, fiscal 2026 was a milestone year for Tilray Brands and a clear demonstration of the strength, scale, and resilience of our business model. We delivered record revenue, record adjusted EBITDA, strengthened our balance sheet, reduced debt, and ended the year with approximately $235 million in cash and marketable securities. These results reflect disciplined execution across our diversified global platform and the benefits of operating multiple growth engines across cannabis, beverage, hospitality and wellness. With a stronger financial foundation, improved cash generation, and significant liquidity, we enter fiscal 2027 well-positioned to invest behind our highest return opportunities, drive profitable growth, and create long-term shareholder value.

More specifically, net revenue increased 11% in fiscal 2026, both organically and from acquisitions, to a record $915.5 million, compared to $821.3 million last year. On an annualized pro forma basis, Tilray is now approximately a $1.2 billion global revenue company. Importantly, revenue increased across all 4 business segments, demonstrating the breadth of our platform, with beverage growth supplemented by the strategic addition of BrewDog.

Net cannabis revenue increased 8% to $268.3 million driven by international demand, broader distribution, particularly in Germany, improved supply availability grown in international markets, and Canadian adult-use innovation. These gains were partially offset by lower Canadian medical revenue, softer wholesale sales, and international price compression.

International cannabis remained one of our strongest growth engines, with revenue increasing 34% to $84.9 million. Germany continued to lead growth, supported by improved supply and broader distribution, while Poland and the U.K. also contributed to year-over-year gains. The Life acquisition further strengthens our U.K. medical cannabis platform by adding direct patient clinic and pharmacy capabilities.

While international cannabis revenue was impacted by approximately $21.1 million of price compression during the year, it is important to understand that price compression has a direct impact on profitability, as it largely flows through to gross profit and the bottom line. Even with that headwind, we sold higher gram equivalents and continued to generate attractive relative margins. That reflects the strength of our international platform, our ability to allocate inventory to higher return markets, and our focus on building the infrastructure needed to support profitable growth as European medical cannabis expands.

We are currently harvesting at an annualized rate of more than 30 metric tons from our Portugal facility, from 4 metric tons 24 months ago, a significant increase in capacity to meet growing demand without significant capital investment. In Canada, gross adult-use cannabis revenue increased 5% to $236.4 million, supported by innovation across multiple product categories, including pre-rolls, vapes, edibles, and THC drinks. Canadian medical cannabis revenue decreased 5% to $23.7 million, predominantly due to Veterans Affairs reimbursement changes, which we calculate for fiscal 2027 will have a $4 million a year impact on revenue.

Wholesale cannabis revenue decreased 60% to $7.3 million, reflecting our disciplined reallocation of inventory to higher-margin international markets.

We also continued investing in cultivation, including the decision to restart our Quebec facility to support demand in Quebec, Canada, and internationally. The product from Masson will first reach market in September. Early harvest suggest yield improvements of 20% from the last time we grew cannabis in the facility. Another example of capacity increases without significant capital allocations.

Distribution revenue increased 21% to $327.2 million and was driven by competitive pricing, higher velocity skews, increases in average selling price and units sold, and favorable foreign exchange. Together with our international cannabis footprint, this platform gives Tilray meaningful scale, infrastructure, and access across key European pharmaceutical channels. Beverage revenue increased 6% to $254 million, including $51.1 million from BrewDog following the acquisition in the fourth quarter.

On a run rate basis, BrewDog adds over $200 million in annual revenues in the U.K., Australia and the U.S. and expands our international beverage scale, brand reach and hospitality footprint. Excluding BrewDog, our legacy U.S. beer business reflected broader industry dynamics, but we continued to take disciplined actions to improve the quality of revenue and strengthen profitability. These margin-focused actions reduced revenue by approximately $16.6 million during the year but support more profitable growth over time. We also made progress with spring resets with our legacy U.S. beer brands capturing a greater share of craft shelf space.

Wellness revenue increased 9% to $65.9 million, supported by product innovation and continued momentum in HiBall clean energy drinks. By revenue contribution, cannabis represented 29% of net revenue, beverage 28%, distribution 36%, and wellness 7%. Gross profit increased 8% to $260.4 million. Gross margin was 28% compared to 29% last year.

Full adjusted gross margin remained consistent at 29% in both periods. Despite higher revenue, adjusted gross margin was largely unchanged as disciplined cost management and operating scale helped offset the impact of international cannabis price compression and a greater mix of distribution revenue.

By segment, cannabis gross margin remains strong and consistent at 40% as international price compression offset the benefit of higher gram equivalent sold. Beverage gross margin was 36% compared to 39% last year. While adjusted gross margin was 37% compared to 39% last year. While margins reflected lower overhead utilization, higher input costs and portfolio mix, we see a clear opportunity to improve the profitability profile of this business.

BrewDog is margin accretive to our beverage segment, with gross margins expected to be meaningfully higher than our legacy U.S. beer platform. We have also strengthened our beer leadership team with the appointment of a Chief Operating Officer, whose primary focus in fiscal 2027 will be to find cost savings through rightsizing our footprint and cost structure to support stronger margins, greater operating efficiency, and more profitable growth.

Distribution gross margin increased to 12% from 11% due to favorable changes in product mix and increases in average selling prices. Wellness gross margin increased to 33% from 32%. The increase was driven by strategic price increases that largely offset an unfavorable change in sales mix. Net loss improved significantly to $105.2 million or $1.09 per share, compared to approximately $2.2 billion, or $24.56 per share last year. The improvement was primarily driven by the absence of the approximately $2.1 billion non-cash impairment charge recorded in fiscal 2025.

Adjusted net income improved 87% to $12.2 million or $0.11, compared to adjusted net income of $6.5 million or $0.7 in the prior fiscal year, which represents our continued focus of improving profitability. Adjusted EBITDA increased 11% to $61.1 million, reflecting revenue growth, gross profit improvement, and continued operating discipline. The result was impacted by approximately $2.3 million in unanticipated fuel surcharges. Excluding that impact, adjusted EBITDA would have been $63.4 million, which is within our guidance range, highlighting the underlying strength of the business and consistent with the risk we identified when we reconfirmed guidance in Q3.

Cash used in operations improved to $69.1 million compared to $94.6 million last year. Before working capital investments, our operating businesses generated $18.2 million of cash from operations, representing a $50.3 million improvement year-over-year. This demonstrates the underlying cash generation of the business, while our working capital and capital expenditures reflect deliberate investments to support growth across BrewDog, international cannabis, and our broader platform.

Cash used in working capital was $87.4 million for the year, compared to $62.6 million last year. The increase was primarily driven by approximately $50 million of working capital impact from the BrewDog acquisition, together with inventory investments to support international cannabis growth. The BrewDog working capital impact was largely timing related. Because the pre-closing receivables were not able to be acquired as part of the administration process, the revenues generated after closing had not yet converted to cash by year-end, reflecting standard 60- to 90-day payment terms with U.K. grocery customers. Overall, we view these investments as deliberate and aligned with our highest return opportunities, including BrewDog and international cannabis, as we continue to build scale in markets with long-term growth potential.

Adjusted free cash flow improved to negative $86 million compared to negative $114.2 million in the prior fiscal year, reflecting meaningful year-over-year progress. This result included nearly $50 million of working capital investment in BrewDog and approximately $30 million of global capital investments back into the business, long-term strategic initiatives and build a higher growth, more scalable platform for the future.

Turning to our fourth quarter results, total net revenue increased 25% to $281.7 million from $224.5 million, with growth across all 4 businesses. Cannabis net revenue was $71.5 million after $19.1 million of excise taxes and was comprised of $57.3 million in Canadian adult-use, $27.2 million in international cannabis, $5.4 million in Canadian medical, and $0.7 million in wholesale revenue.

International cannabis revenue increased 22% year over year, continuing its growth trajectory with its third consecutive quarter of more than 20% year-over-year growth and represented the second consecutive Q4 that international cannabis revenues were up over 20%. Beverage revenue increased 61% to $105.6 million, including $51.1 million from BrewDog. Distribution net revenue increased 15% to $85 million, compared to $74.1 million in the prior year quarter. Wellness net revenue increased 16% to $19.7 million compared to $17 million in the prior year quarter.

Fourth quarter gross profit increased 34% to $90.5 million and gross margin improved to 32%. By segment, cannabis gross margin remained consistent at 44%. Beverage gross margin remained consistent at 38%, but improved on an adjusted basis to 40%. Distribution gross margin increased to 14% from 10%. Wellness gross margin remained consistent at 33%. Fourth quarter net loss improved significantly to $37.9 million or $0.43 per share compared to approximately $1.3 billion or $13.01 per share last year, primarily due to the absence of the prior year non-cash impairment charges. Adjusted EBITDA for the fourth quarter increased 15% to a record $31.9 million, compared to $27.6 million in the prior year quarter, reflecting strong quarterly execution.

In the last year, we, one, allocated capital to pay down our convertible notes balance in advance of their maturity in fiscal 2028. Two, allocated capital to build our cash reserves for strategic acquisitions and to integrate previous and current acquisitions into our core business before beginning to replenish our cash reserves late in the year, particularly around the U.S.'s rescheduling announcement. Three, utilized $54 million of the cash reserves to purchase the BrewDog entities and Life. And four, utilize approximately $50 million of the cash reserves to fund the initial working capital needs of the BrewDog entity. These actions reflect our focus on reducing debt, maintaining balance sheet flexibility, and investing behind opportunities to support scale, integration, and profitable growth.

Cash used in operations was $37.3 million and adjusted free cash flow was negative $43.4 million for the quarter, which included the previously mentioned $50 million investment in working capital at BrewDog. We ended fiscal 2026 with cash, restricted cash, and marketable securities of $234.6 million, providing financial flexibility as we enter fiscal 2027 and continue investing behind our highest return opportunities.

Since the beginning of fiscal 2026, we have significantly improved our capital structure, as we've reduced debt by approximately $60 million, including $25 million repaid on term loans, and $17 million of convertible debt non-cash settlements during the fiscal year, as well as a further $18 million of convertible debt non-cash settlements after year end.

Since April, we raised $87 million of gross proceeds, or $84.9 million net of commissions and other fees, through our ATM program at an average sales price of $6.77 per share, including raising over $50 million in the 5 trading days related to the U.S. government's announcement of rescheduling medical cannabis to Schedule III. We intend to use ATM proceeds for strategic and accretive acquisitions, investments, and capital expenditures, including opportunities in the U.S. and internationally, just like the BrewDog opportunity. We ended the year with an improved net debt position of less than $1 million compared to net debt of approximately $14 million last year. Overall, fiscal 2026 was a year of meaningful progress. We increased scale, strengthened our balance sheet, improved adjusted EBITDA, enhanced our international cannabis and distribution platform in Europe, and expanded global beverage through BrewDog.

Importantly, we did this while maintaining the disciplined financial approach and continuing to invest in the areas where we see the strongest potential returns. As we look to next year, our priorities are clear and financially disciplined. Profitable growth, margin expansion, integration, operating efficiency, stronger cash generation, and disciplined capital allocation across the businesses.

For fiscal 2027, I already mentioned our revenue run rate of approximately $1.2 billion. We expect our combined international business revenue to be approximately $700 million, or 60% of our consolidated revenue. We have no pending maturities on our debt, yet continue to constructively reduce the current $70 million outstanding balance in advance of its 2028 maturity. And lastly, we are providing guidance of adjusted EBITDA between $68 and $75 million, representing a double-digit increase from fiscal 2026.

Operator, we can now open the call for Q&A.

We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question will come from Kaumil Gajrawala with Jefferies.

Hi, guys, that was very thorough. Thank you for that. If I may try to maybe simplify for investors, how do you think about the whole machine moving together with all its various parts now? You know, is there an adjustment or a long-term algo that maybe, you know, some periods things will be better, some periods, things will be worse? But what is the sort of entirety at the group level? Which direction should it move, at least, in terms of the environments that we operate in now?

So, thank you for that question. And then, and again, it's an interesting question because, number one, if you go back and whether it's brand by brand and as last week, as I sat through our strategic planning meetings and Board meetings, and I look at what's in Tilray Brands today, it's pretty amazing and not that I'm complimenting myself and my team, but it's pretty amazing what we own in brands, businesses, infrastructure distribution today.

And again, as we started in the cannabis business, and we started from basically almost scratch in Canada. We built a $200 million plus cannabis business in Canada with a population of 40 million people and half the population cannot enjoy cannabis. So it's what we built in Canada with, you know, high excise tax, something called COVID in between, and we went ahead and built that. And, again, the opportunities in Canada are tremendous in regards to ready-to-drink cannabis drinks that ultimately, hopefully, will be sold in beer stores, hopefully, sold on tap is the opportunity there. And as more and more consumers consume cannabis, we think there's a much bigger business.

As a matter of fact, in the month of January, which is a dry January, there was more cannabis consumed than alcohol.

So we see tremendous opportunities in cannabis. We see the growth there continuously, both in recreational and major and medical. And medical have been sold through drugstores, which is the case in Europe. So that is the machine there. But the machine there also encompasses us getting much bigger into the beverage business with our brands in Canada. And we see a much bigger business in Canada, with cannabis drinks that will be sold whether on premise or in the Canadian beer stores or liquor stores.

Listen, the U.S., some time in my lifetime, I hope I will see legalization happen, whether it's a medical standpoint or recreational. I think we will see medical standpoint. There's lots of movement on peptides, psychedelics. So with that, as we had to parlay into some type of businesses, with synergies is the beer business and the beverage business and the wellness business. And from a standpoint, if I always say this here, if I could sell cannabis drinks in the U.S. today, it would be a billion dollar business for us. Ultimately, there's lots of discussions going on with hemp drinks.

So what Tilray has today is a beverage business in the U.S. It has 8 manufacturing facilities, it has 18 brands. It has a major distribution system. As we know, we have that 3-tier distribution system with 900 distributors. We have a major sales force in place. So we have infrastructure in place for consumer products and ultimately, is it connected with hemp-type products? Is it THC products? And/or is it just consumer products? And what you heard me say within the alcohol industry, beer is the most consumed alcohol. Also, we've gone into the water business with Liquid Love. We've gone into the energy business with HiBall. So we have the infrastructure, we have the brands, we have the manufacturer, we have the distribution, we have the sales organization in place. So good diversified business.

Europe, which today, ironically, is our largest business within all of Tilray and probably not getting the value for it. But on the other hand, if you come back and look already, we built $100 million medical cannabis business throughout Europe today. And that will continue to grow and there's opportunities we're seeing in India and other places. As you see today what we built in regards to our distribution system, and when we acquired that distribution system, it was acquired as part of a tender. But what we're seeing with that distribution business today, how it's becoming a major vertically integrated business within Tilray Medical and what it's helping us with licenses, potentially a compounder for pre-rolls and vapes, or depends what happens in the whole psychedelic market.

And then last but not least, the acquisition of BrewDog has been phenomenal for us. It's given us 16 brew pubs in England, Scotland, London, and Ireland. It's given us a couple in Australia. It's given us 16 franchises out there. And with that, we can see us building our beverage beer business throughout the rest of the world. And so far, as we introduced our American beers in the U.K. for the World Cup in our brew hubs, I mean, it almost became half of our sales over there within our brewpubs.

So bringing it all together, we have brands, we have manufacturing facilities, 93% of our products are made by ourselves. We have distribution systems. So we -- basically we're not a one-trick pony, but does it all come together with cannabis? Does it all come together with beverage? Or does it all come together with wellness and consumer products businesses. And with that, we've built a strong balance sheet and we built a good company that's got a lot of brands in it. So there's many, many, many ways for it to come together. And what I'm not sitting here today waiting for, as MSOs are a lot of others is legalization rescheduling to happen in the U.S. If it happens, and as we said, we're on a run rate to a $1.2 billion, none of that is basically projected in any of our numbers.

Okay, got it. And then on the recent acquisitions on becoming more vertically integrated, why is that the right structure to have sort of full vertical integration on the medical side as opposed to either being on one end of it or the other, given your infrastructure, you probably had the choice, but you've made 2 big moves on becoming a bit more vertically integrated. So what was the decision process behind deciding that's how you wanted to approach the market?

So, just number one, it's Grow and consistency of Grow. It's the genetics out there. It's the potency and basically from a cost standpoint, one of the big things, as you saw a lot of Canadian growers dump the product in the marketplace, one of the reasons a lot, you know, of distilleries, a lot of pharmacies want to deal with us. They know they're going to get consistent growth. They know they're going to get quality. They know the genetics we can use. They know the potency we can use. And with that, if we're going to invest money, which we are, in research and development, and doing testing and that out there, we want to know what's coming out of our facilities.

And today we have over 6.5 million square feet of Grow around the world where we know, depending on where the market goes, we're going to have to get consistent Grow. So we're not going to be out there buying in a spot market. We're not going to have to go out there and try and buy different genetics and different potencies and different products, whether it's for pain, anxiety. We can plan all that out ourselves. So that's very, very important for us.

What we did in the U.K. with our Life acquisition from a vertical integration. Today, we have the doctors on staff, we have the pharmacy on staff, and ultimately, we are supplying that facility. So we've made a lot of good moves in regards to the cannabis business from a vertical integration.

We've made a lot of good moves in regards to the beverage business with the U.K. acquisition of BrewDog. There, we have a major manufacturing facility. In Aberdeen, Scotland, we have 16 brew pubs, which we control what goes in those brewpubs, what is being sold, what is being tested. And then it expanded our footprint throughout the rest of the world.

And our next question will come from Robert Moskow with TD Securities.

Hi, this is Victor Ma on for Rob Moskow, and thanks for taking the question. So my first question is on beverages. It seems like 4Q organic growth, excluding BrewDog, was down 17% despite the World Cup. I know the BrewDog acquisition and Carlsberg partnership will contribute outsized growth next year. But what gives you confidence that you can still fix the company's underlying beverage brands?

So number one, the decline is a couple of things. We went through a major skew rationalization, some brand rationalization. So some of that was basically self-inflicted, and then ultimately, where businesses that we were just not profitable. As you take our beverage business, and we're the #4 largest craft brewer, we put this business together in 2020. We bought SweetWater, we bought Montauk, Green Flash, Alpine, Nelson. We bought the 8 businesses from ABI and then the 4 businesses from Molson's which we ultimately sold one.

So with that, there was integration that we had to do. There was facility closing we had to do. There was skew rationalization. There is distributor rationalization and something in between those five years or something called COVID where on-premise was closed. And let's not run away from it, the beer category declined 5%. So with that, we have done a major overhaul and with new products, with going through the skew rationalization, with really focusing on certain regional markets and Shock Top and Carlsberg will be our 2 national brands and the rest will be regional brands, we feel good going into this year that we'll get the growth. We've also brought in new people in regards to the operations and taking some costs out. So with that, we feel very good about going into this year with our beverage business.

Got it. Okay. And then my second question is on Canadian adult-use growth. So it seems like this slowed sequentially to 3.2% and 4Q from 9% in 3Q. What was the split of this 3.2% between volumes and pricing? And can you provide color on what drove the slowdown? Was it negative mix? Was it market maturity? Any color would be appreciated.

So I have Blair MacNeil on, who runs our Canadian business, but I'll jump in first. First of all, it was 5% growth on recreational cannabis is number one. Number two, some decisions, again, we make, and that was supply for our international business. We did not supply any wholesalers, and we got away from that. And we focused, and that's why our margins are up, we focused on businesses that are going to contribute margins to us and going to contribute profitable growth instead of just going out there and being in the price competitive market.

Listen, I've come out, we talked about our growth in pre-rolls, our growth in chocolate edibles, our growth in vapes, our growth was down in flower and the flower market is being cannibalized by pre-rolls, vapes, and other categories. So that was the main reason there.

But it's not it was not really on price. It was some of these again, our decisions and that's why you see our margins improve overall within the company. Blair, anything you want to add to that?

No, you're exactly right, Irwin. That was -- 90% of that was mixed. We actually had a little bit of positive pricing contribution on top of that, but it was the international shipments and the deprioritization of wholesale.

And again, that comes back to the point before about being vertically integrated with our own supply. You know, we don't buy cannabis from anybody else. We don't depend on a spot market, other pricing out there, different terpenes, different genetics. We know what we -- we know what we grow, we plant it out there ourselves. So that's what's important for us. And there's big time demand out there to buy cannabis from us. And that's not the business we're in.

We're not going to supply our competitors and ultimately, hopefully, grow it to sell within ourselves. So that's what's important for us, that we have the Grow out there that we have today.

And this past year, Blair and his team went ahead with the facility in Masson, where originally we were growing cannabis and cucumbers and converted that back to 100% cannabis, which the majority of it sold into the Quebec market. We have an outdoor grow in Cayuga. And with that, we're using it all between Canadian business and our international business to have consistent supply and make sure that we have supply.

And we'll go next to Aaron Grey with Alliance Global Partners.

Just regarding EBITDA, quick question there. First off, in terms of the sequencing for the year, just with the BrewDog acquisition, seem to expect the same quarterly sequence that we've seen historically for you, guys? And then a bigger picture question, how best to think about maybe the medium term EBITDA margin aspirations and where you believe you can get the company to on a profit margin perspective.

I'll let Carl answer the first one and I'll tell you my aspirational EBITDA percentage, okay?

So we've talked about this before on other calls, Aaron, and I really don't think it's going to change with BrewDog. We might see like a small softening, but realistically, we're still looking at quarters 1, 2 and 3 being roughly half the year, quarter 4 being the other half of the year. And within quarters 1, 2 and 3, you should see a relatively even breakdown on EBITDA. Now, that doesn't work perfectly. There's a little bit of room in each of those pieces. And you can see this year we actually beat the 50% in Q4 by a little bit, but it's a really good rule of thumb for our business.

So my aspiration, and again, you got to look at us from our branded products business. If you look at our branded products business today, I'd like to see us as a 15% to 18% EBITDA business. But you got to back out of there is our distribution business with 5%, 6% margins. With that, at 11.2% today, I think if you backed out that part of our business, our EBITDA percentage would be a lot higher.

So from the standpoint of that, it's 15% to 18%, including our CC Pharma business because we're looking to transform that business in many, many ways where it is a compounder and it's -- again, it is a seller of cannabis products, with much higher products -- with much higher margins. So that's what I aspire to 15% to 18% EBITDA margins. I'm not telling you that's this year, but over the next couple of years, absolutely. We saw a great increase in our EBITDA percentages this year.

Second question for me. Just as we think about the U.S. opportunity with Phase 1 rescheduling for FDA medical, potential for Phase 2 coming, I just want to kind of double back and you provided some commentary already. But how are you thinking about potential M&A within the U.S. as we've seen some plant touching, operators now uplist to major exchanges. Does that open up more opportunity for you to enter the U.S. organically or inorganically? And does that change potentially with Phase 2 whole plant rescheduling anticipated to come in the fall?

As you step back and since I've been at this, everybody's talked about how we got to do the U.S., how we got to do the U.S., neither I nor no one else has truly figured it out yet. There was -- number one, if you bought a medical business in a certain state, you could use that. But what's your limitations there?

In regards to rescheduling, what I can say is this here. If rescheduling happened tomorrow and it was federally legal and you had to go through the FDA and get the FDA approvals, we'd be right in there to spend the dollars on the research or taking some of the research that we've worked on in other countries in regards to cancer-induced drugs, epilepsy, pain, anxiety, et cetera, and taking our findings there and going to the FDA.

And then as we've talked about, and the question I was asked before about vertical integration, and hopefully supply-wise, we would have enough supply to be able to supply it into the U.S. So we're ready with supply, we're ready with brands, we're ready with research, we're ready with historical cannabis that we sell in countries today that are prescribed by doctors.

It's just, what is the path you go down here with the FDA? And is the FDA ultimately going to approve cannabis as a medical drug to be sold in distilleries? I'm not sure that's the right thing that you walk in and you get someone in a distillery that's recommending certain medical cannabis. And should the right way be similar to what's in Europe. It has to be prescribed by a physician. It has to be prescribed by a pharmacist, and that's the way it should be done.

So, again, Tilray is ready for -- acquisition-wise, we'd be ready to acquire. And the reason we haven't jumped into this or we're listed on a NASDAQ exchange. So we don't have to do what some of the other companies do to get listed, but we're going to wait and see. And once we know the path, we'll be ready to jump into it because we're in this business as one of the largest growers in the world. I've never been lucky buying a lottery ticket, so I never really want to take a guess what's the right way to go about this until we know what the course is. And like I said, I've been down the path where we looked at it many, many ways, but it just did not make sense for us. And we've looked at, do we buy compounders? Do we buy different things? But is that the right path? So we're going to be disciplined and really know what is the right path before we just jump in and buy anything with a clear path, but knowing what we bring to the party.

And our next question will come from Pablo Zuanic with Zuanic & Associates.

I realize it's been a long conference call, but congratulations on the progress you've made in fiscal year '26. So my first question, as some U.S. companies get ready to export and claim they have a very low cost base, can you comment first on how cost competitive is Tilray in the export market? And second, your views on when U.S. companies may be able to export and whether they can be cost competitive versus producers like yourselves.

So, as I've displayed in our U.S. -- our European cannabis business, Pablo, I mean, our supply and our growth, all that is coming from Tilray. So I think what's important is ultimately one thing we see is the growth opportunities internationally. And with those growth opportunity, it's going to need supply. We know where there is growth internationally. And I think the thing is this here, we know, and what a lot of our customers are knowing that Tilray will be able to supply and supply to the custom of what the customer wants in regards to oils, in regards to the potency, the genetics, et cetera.

And today with almost 1 million square feet of grow in Portugal and Germany, and close to 5.5 million square feet in Canada, we have plenty of supply to go about supplying growth in Europe. And again, I come back and I say this here, and why was I aspirational on my EBITDA numbers, I think we can be one of the lowest cost producers out there just because of our scale and size. Because if you're buying from a third party, Pablo, everybody else got to make margin. We got to make margin among ourselves and then sell it to the end user.

Yes. No, understood. Look, and I'm sorry to go back to the U.S. question. I think you covered most of it with Aaron, of course, but I know you keep talking about knowing the path, but let me give you this scenario, right? Let's say the U.S. reschedules medical, they already did, and also recreational, but they keep the current state silo model and there is no FDA oversight. So it's not the medical model that you have in Europe. In that case, would you still want to enter the U.S. market and how? Or would you prefer to wait for interstate commerce and clarity on import and exports and FDA direct involvement?

So, again, would we enter the U.S. market on all states that are legal? I'm not sure. Would we look to enter the big states where there is opportunities? Yes. Would it be more costly? Yes. And again, it's kind of coming back and doing the economics, does it make sense? And I come back and say this here, if it did happen in this administration, would it change in the next administration? So that's what we would have to weigh out is all the components and what's real and what's not. Canada today, we know the country is legal, both recreational and medical and staying there. We know what's happening in Germany, we know what's happening in Poland, we know what's happening in the U.K. What I wouldn't want is us to buy certain medical licenses in certain states. And ultimately, the next administration changes that.

We'll hear next from Brenna Cunnington with ATB Cormark Capital Markets.

Congrats on the quarter. Just a quick question from us regarding CC Pharma. The gross margin improved to what I believe is the highest level ever seen. Please correct me if I'm wrong. But could you just provide some more color on the key factors that underpinned this improvement? And then as a sort of secondary question to that, you mentioned in response to one of the earlier questions that you're looking to transform the CC Pharma business in a number of ways. Could you elaborate a little bit more on that and then maybe provide some color on how we should think about that segment's gross margins going forward?

Right. I have Rajnish Ohri, who is our Head of International on the phone, and he can jump in. But number one, the big growth there is having different medicines to supply and growing our footprint in Germany from 13,000 drugstores to 16,000 drugstores. Our gross margin improved 14% and that's just a good array of mix. And it also is us just buying medicines at much better prices. And the big thing there is having the capital available to do it.

In regards to CC Pharma, one of the big things that we're looking at CC Pharma is having CC Pharma as a licensed cannabis facility that can store and sell cannabis, at the same time, can become a compounder. And as a compounder, you can compound and we could sell pre-rolls, we could sell vapes, and we can do different things with cannabis. So looking to do a lot and also looking to expand the CC Pharma format, whether it's in the U.K., whether it's in Italy and other different countries. So that's what we're looking to do with CC Pharma and also looking at it from a medical direct-to-consumer standpoint. So there's some of the things, whether we're looking at growth, we're looking at approving the margins, and we're looking to expand it throughout other parts of Europe.

Rajnish, anything I missed on that or anything I need to be corrected on?

No, I think -- Irwin, I think CC Pharma has been, as you rightly said, first portfolio management and margin improvement basis, which is really looking at the right portfolio and also the right decision-making in buying. The right capital allocation to use it effectively in running the business profitably. I think on the compounding and the days how we want to structure the medical cannabis business through CC Pharma improves high value businesses and, therefore, finally affects the margin and the bottom line in the business.

And thirdly, I think the extension what we just talked about, I think we are already now in U.K., we are working with our partners in U.K., in the NHS hospitals, et cetera. We are making inroads into Italy, they are looking at businesses outside the European market into the Middle East markets where we are talking to certain partners there. So that all is going on. And then finally, a direct-to-consumer model for a specialized services which we will provide in the German market. So, I think there are a lot of pillars of CC Pharma which we are working on today to see how the business is going to be.

And the big thing here is here, CC Pharma is a $350 million business, if we can grow, which our plan is a big part, our gross margins by another 5 to 7 points. What that is to contribute to our bottom line? So that's the big thing when you're asking the questions about where your EBITDA can go the growth here is just taking our existing businesses and growing the gross margin and taking more costs out of our business. And, again, like I said, there's a lot of costs that putting all our beer businesses together and purchasing today. There's close to a $0.5 billion beer business today, excluding Carlsberg coming in. If you come back and look at CC Pharma, there's $350 million of sales. So if you can grow just these businesses without organic growth, without other acquisitions, what we can drop to the bottom line by improving the gross margin on both of these, which is substantial.

And our next question will come from Indigo Baylis with Canaccord Genuity.

Congrats again on the quarter and especially your performance in the international cannabis. I was hoping to understand really how you expect to see international cannabis business grow, especially having seen this 34% in fiscal '26. And then also, if you have any commentary around how you plan to really protect margins, especially as you bring on your full capacity of your Portugal facility.

So, a big part of the growth is having supply where we did not have supply throughout last year. The second part is, you know, we've really worked with both the Portuguese government, the German government, and other governments not to depend upon delay of permits. And that's a big thing, which you've got to realize in Europe. And what I think a lot don't understand is the regulatory environment that we play within here. So when we get a PO, we need to get a permit from that country. We need to get a permit to ship into the other country. So it's the speeding up of permits.

The next thing is this here, just the demand, for medical cannabis in these countries continues to grow. Last year, we were maybe less than $5 million of what we sold in the U.K. and what we've added now in regards to our Life acquisition. So where's our growth coming from? Number one, having supply. Number two is ultimately our speed of permits, and that way they can reorder. Number three is with our Life acquisition and being vertically integrated there with both the doctor part and with the pharmacy part.

And as we look to grow into new markets. We potentially will talk about another time what some of the things we're potentially doing in India and other countries. So that's how we expect to grow our international cannabis business from standpoint. The big thing is, there is having supply. And listen, we went through some major price compression in Europe this year, too, and we're able to deal with it.

And this now concludes our question and answer session. I would like to turn the floor back over to Irwin Simon for closing comments.

Thank you everybody for joining us today and listening to our fiscal 2026 year. It was not without its challenges. It was not without its opportunities. And you come back and think about, what we accomplished in regards to our Canadian cannabis business since we started the year off, we had some challenges with Grow, but Blair and team overcame that and how we dealt with that, increasing our revenue and taking some costs out of business and dealing with some of the challenges out there.

In regards to the beer market, with the beer market being down and bringing all these brands together and really growing the distribution out there with new products and timing on new products and pods and making sure that we were able to supply and not get left behind. Winning and doing a deal with Carlsberg, the fourth largest beer producer in the world, and it's incredible what Carlsberg sells in the U.S. today. But trust me, they just didn't put their hand up and say, I'm picking Tilray, and they are pretty stringent on the quality, the product, the partnership, and we work with them pretty thoroughly to be able to go ahead and produce Carlsberg beer which will start here on January 1st.

In regards to our wellness business and some of the restrictions on hemp, our growth in HiBall, we felt this year we had some -- with our Delta-9, we thought we had a good-sized business and Mitch McConnell and crew decided that they wanted to block this and let's see what happens there because there is potentially some things going to change there.

In regards to BrewDog, listen, I am really excited about the opportunities in BrewDog. At Tilray, we looked at this before and valuations were in the hemisphere and sometimes in life you're better off being luckier than smart and we got lucky here and I think we've acquired a great brand that gives us an entree and taking our beer brands into international markets, which would have been very difficult for us. So we're set up for a lot of great things in 2027, whether it's our balance sheet, whether it's our brands, whether it's the businesses that we have in here.

But last but not least, I can't stop thinking about how great our people are. And there's close to 4,000 people within Tilray today, and they work pretty damn hard and I'm very lucky and fortunate to work with them. So I want to thank you, thank all our people out there that are part of Tilray today because they are the major part of our success. We have a Board that works very hard on multiple things and I want to thank them. I want to thank our consumers that buy all our products, whether it's pre-rolls, whether it's vapes, whether it's flower, whether it's our beer, whether it's our hemp products, whether it's visiting our brew pubs. I want to thank you for the support.

And it was very interesting during the World Cup. And when I was in London for the World Cup during the England games, and especially our Waterloo facility where we would attract close to or over 1,800 people along the way, when I'd be on our way to our brew pubs, I could pass 50 brew pubs on the way there. But they were coming to BrewDog and they were coming to our facility because of our food, because of our ambiance, because of the energy there, and hopefully, which they were to buy BrewDog beer.

So with that, I really think we're really in a good spot. And you come back and you look at companies, you look at your brand, you look at the financial situation, you look at what they've done, you look at the people, and we check a lot of boxes. Disappointment? Disappointed in how our stock performed and not the rewards we get for that. But we'll put our heads down and we'll keep plowing. At the end of the day, we know what we got and we know what we should be valued at and that's something that we will continue to do.

I want to thank everybody for jumping on our call today. Enjoy the rest of your summer. Hopefully, go out there and buy some of our products because we've got some great products, and we look forward to talking to you in the near future. Thank you very much.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.

Thank you for joining today's conference call to discuss Tilray Brands' financial results for the Third Quarter of Fiscal Year 2026 ended February 28, 2026. [Operator Instructions]

I'll now turn the call over to Ms. Berrin Noorata, Tilray Brands' Chief Communications and Corporate Affairs Officer. Thank you. You may now begin.

Thank you, operator, and good morning, everyone. By now, you should have access to the earnings press release, which is available on the Investors section of the Tilray Brands website at tilray.com and has been filed with the SEC and OSC.

Please note that during today's call, we will be referring to various non-GAAP financial measures that 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. The 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 response to 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 these described in those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements.

Today, we will be hearing from key members of our senior leadership team, beginning with Irwin Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary followed by Carl Merton, Chief Financial Officer, who will review our financial results for the third quarter of fiscal year 2026.

And now I'd like to turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon.

Thank you, Berrin, and good morning, everyone. It's been an exciting year at Tilray Brands. We delivered a record quarter with continued international expansion across our platforms. I also want to briefly highlight our BrewDog acquisition. When you have good news, you go to the tallest building and scream it and don't wait. This transaction positions Tilray at approximately $1.2 billion global revenue company on an annualized basis and meaningfully strengthens our long-term growth profile.

I've done over 100 acquisitions in my life, and I've never received more calls, congratulations and a brand with more awareness on a global basis, which helps Tilray to be at the forefront around the world. Since 2019, we have transformed the company from a Canadian cannabis business with approximately $50 million in revenue to a global lifestyle consumer products company approaching over $1 billion in revenue on an annualized basis, providing the strength and effectiveness of our strategy and our execution going forward.

We are building a diversified global platform grounded in a long-term vision of bringing people together through meaningful connection. With a strong team and clear priorities, we remain confident in our path forward. Today, Tilray leads its global platform as the #1 cannabis company in Canada by revenue, the fourth largest craft brewer in the U.S., a global leader in medical cannabis and a wellness leader in North America.

And now with BrewDog, the #1 craft brewer in the U.K. Transforming this business has not been easy. We operate in highly regulated environments globally. Face cannabis regulatory reform in the U.S. and navigate constraints across international markets. At the same time, we've strengthened our global brand portfolio, scale and optimize our cultivation capabilities and our brewing capabilities, built a $0.5 billion beverage platform within a long-established category and established a meaningful wellness strategy. This level of progress reflects both the pace of our execution and the strength of our strategic foundation and the teams that we have in place.

Yes, there have been challenges along the way, particularly with integration, and there will continue to be challenges. This takes time. But today, we see the pieces coming together in the way that few businesses can replicate, and we're building something truly differentiated. And our Q3 results reflect this in the third quarter and consecutively from Q2 to Q3, we delivered record results with net revenue reaching $207 million, reflecting 11% organic growth year-over-year and gross profit increasing to $55 million, up 6% from the prior year despite ongoing industry and macroeconomic headwinds, we also maintained a strong financial position ended the quarter with $265 million in cash, restricted cash and marketable securities and approximately $3.5 million in net cash, providing the flexibility to invest in growth while maintaining financial discipline.

Our Q3 results reinforce the momentum we outlined last quarter, improving fundamentals, sharper execution and increasing leverage from our diversified global platform.

Turning first to our cannabis business. We delivered strong results this quarter across our global platform, with continuous momentum in both Canada and our international markets. As the regulatory environment evolves, particularly in the U.S., we're well positioned with scale infrastructure and experience to expand this business globally, we've built this platform deliberately, and we're ready to execute as opportunities develop. Q3 was the largest quarter ever for international cannabis growth. We generated $24.1 million in net sales with 73% year-over-year growth and 20% sequential growth. This was driven by exceptional sales volume growth.

Medical cannabis flower volume was up 100% year-over-year and medical cannabis oil volume was up 90% year-over-year. Tilray holds top position by a significant margin in the medical cannabis oil category across leading international medical markets while we leverage our expertise and reputation in the doctor-led distribution channels.

Germany, our largest international market grew 43% year-over-year, an important achievement for our international team as they continue to navigate evolving regulatory framework and significant price compression across global markets. Notably, we overcame $7 million in price pressure that flows directly to the bottom line.

Turning to our medical distribution business in Europe. I'm extremely proud to say that CC Pharma was recognized as one of the top 100 innovators, leaders and trusted partners in the European pharmaceutical market. Congratulations to the team on a great accomplishments for continuously driving our business forward. Our Tilray Pharma business grew 35% year-over-year to $83 million, making it our highest ever third quarter for sales and profitability. The increase in distribution revenue in the period was driven by portfolio optimization, mix, positive market trends and increased medical device sales.

Our recently announced partnership with Alliance Healthcare further strengthens our leadership in Germany, expanding our reach to more than 16,000 pharmacies, up from 13,000 previously. In addition, we entered into a partnership with Smartway, a leading U.K.-based pharmaceutical distribution company to expand the availability of our pharmaceutical products across the United Kingdom. Together, these partnerships speak to the strength of Tilray Pharma as a valuable strategic asset within our global medical cannabis platform.

Looking ahead, our distribution business is laser-focused and driving future operational efficiencies, be automation, centralized sourcing, harmonized packaging and label that sets us up with vertical integration for our cannabis business.

Turning to Canada. Our Canadian cannabis business continues to deliver strong results. We reinforced our position as Canada's leading cannabis company by revenue on a trailing 12-month basis, and our adult-use medical grew 8% year-over-year to almost $40 million of net revenue. This performance speaks to the strength of our portfolio and the resilience of our commercial execution and the team that we have in place today.

From a market share perspective, Tilray maintained the #1 market share position in cannabis dried flower, pre-rolls, beverages, oils and chocolate edibles. Importantly, this leadership reflects the strength of our tiered brand strategy in dried flower, Tilray is the only licensed producer with 3 brands in the top 10. In pre-rolls, we hold 2 of the top 3 brands. And in beverages, we delivered the top 2 brands in the market during quarter 3. This approach diversifies our reliance across brands and facilities while allowing us to serve the seed consumer segments with clearly differentiated offerings.

From a brand portfolio perspective, Broken Coast delivered its strongest quarter in the past 2 fiscal years, growing 16% year-over-year. We also continue to innovate with our core categories launching Good Supply, Where's My Bike and Blueberry Donuts cannabis strains during the quarter. both of which finished the quarter among the top 10 dried flower SKUs in British Columbia, and we plan to scale them nationally and introduce additional genetics in Q4 and into fiscal 2027.

Finally, we also introduced a new brand, Portal, featuring vapes, infused pre-rolls late in the quarter. While still early, we're beginning the national rollout. We expect to launch a Portal to build upon our momentum and drive meaningful growth in these key categories going forward. And we're also making clear progress in high-growth price-sensitive categories such as vapes. Quarter 3 marked our strongest vape quarter in the past 2 fiscal years, reestablishing Tilray as a top 10 player in the category. Importantly, this performance reflects our disciplined approach to revenue generation. We intentionally scaled back our vapes volume until we achieve the right cost structure and return the category to profitability.

After 7 years of federal cannabis legalization in Canada, we are modernizing the store. We built a strong foundation on Canadian cannabis, and we're now advancing to the next phase transforming our cultivation platform through AI-driven growing systems, next-generation genetics and improved yields across our operations. We're executing a comprehensive end-to-end upgrade of our cultivation capabilities.

And while this transition is still underway, we're already seeing progress as we move towards more consistent, higher quality and more efficient production. This evolution is designed to enhance margins, strengthen product quality and position us ahead of the curve as the industry continues to mature.

In the U.S., we continue to monitor the rescheduling of medical cannabis and are actively engaged with legislators and regulators. We're also evaluating our participation in the center for Medicare and Medicaid Innovation pilot programs. Tilray is well positioned to contribute to the pilot program with its proven track record of operating at a scale in a highly regulated medical cannabis globally.

Moving to our beverage business. This quarter and shortly after the quarter end, we successfully executed against our key strategic priority to expand our global beverage platform through a strategic licensing partnership with Carlsberg and the targeted acquisition of BrewDog, strengthening our portfolio, improving utilization and advancing our global growth strategy. We are honored and proud to begin our partnership with Carlsberg, one of the world's leading brewers starting in January of 2027. Through this partnership, we'll produce, market and distribute a portfolio of leading Carlsberg brands across the U.S., leveraging our brewing network, commercial capabilities and our national distribution footprint. We expect this to drive immediate scale accretive to revenues, supported by increased volumes, expand shelf presence and a more favorable product base.

Following the Carlsberg announcement and post quarter close, we acquired craft beer icon, BrewDog, creating approximately $500 million global craft beverage platform on a pro forma basis. We acquired BrewDog's global IP, strategic brewing and brewpub assets across the U.K. Ireland, Australia and the U.S., creating immediate scale, strengthening our infrastructure and broadening our international reach. This positions us to extend our reach into previously untapped markets such as the Middle East, Asia Pacific and take our U.S. brands globally while strengthening their portfolio with a highly recognized craft brand. We acquired this platform for approximately EUR 40 million, which reflects a fraction of its replacement cost. This strategic acquisition has significantly accelerated the implementation of our global strategy by several years.

Now turning to the results of our beverage business. We're making disciplined progress on the integration of our beverage acquisitions, while staying focused on the work still ahead to generate growth and profitability. As expected, beverage net revenue of $43 million in Q3 was impacted by margin-focused actions as well as industry-wide softness. These margin-focused initiatives are delivered and necessary to reset the business for profitable long-term growth.

What's important is that the underlying fundamentals are improving. Through Project 420, we rationalized the portfolio, removing nonstrategic SKUs to improve velocity, margin and execution. We continue to focus on cost discipline, delivered over $6.2 million in annualized savings during the quarter, completing our target synergy program of $33 million enabling us to achieve approximately 32% gross margins despite significant input costs and headwinds. Without these decisive actions taken, margin would have been more significantly impacted.

Operationally, we're building a more focused, higher performing portfolio, we're prioritizing fewer, bigger, better innovations aligned with consumer demand. Products like Pub Light are expanding distribution and our ready-to-drink cocktails on the West Coast are delivering margin accretive growth. We're also starting to see sequential improvement across our core brands, including Sweetwater, Shock Top, Blue Point, Revolver and Montauk.

Looking ahead, we expect continued momentum on improving fundamentals and a stronger path to growth. Within the spirits category, in Q3, we focused on enhancing our commercial plan. Wholesale completions were 160 basis points above the national spirits trends, demonstrating strong consumer demand and awareness. Our ongoing efforts remain focused on expanding product distribution to additional states and beyond.

Regarding our U.S. hemp-derived THC beverage business, we continue to offer Fizzy Jane's, Happy Flower, hemp-derived THC beverages in 5-milligram and 10-milligram formats through nationwide retail partnerships, including major wine, liquor and grocery outlets across the country. While federal and regulatory changes may affect HDD9 products after November 2026, we continue to stay engaged with legislators and regulators who are closely monitoring the development in Washington.

Turning to wellness. Net revenue increased by 16% to $16.4 million in the quarter, driven by our focus on value-added innovation across superseed, better-for-you breakfast and snacking and continued momentum in the high-vol energy grade. We'll continue to focus on distribution expansion broader assortment and promotional improvements while continuing to strengthen the profitability profile of wellness business.

With that, I will now turn that over to Carl. Carl?

Thank you, Irwin. Before I begin, please note that we present our financials in accordance with U.S. GAAP and in U.S. dollars. Throughout our discussions, we will be referring to both GAAP and non-GAAP adjusted results and we encourage you to review the reconciliation contained within the press release of our reported results under GAAP with the corresponding non-GAAP measures.

This quarter, we achieved record third quarter revenue and strong year-over-year improvements in gross profit and adjusted EBITDA and we are reaffirming our adjusted EBITDA guidance for fiscal 2026. Net revenue was a third quarter record of $206.7 million, an 11% increase year-over-year. Revenue growth was across multiple businesses.

Cannabis net revenue increased 19% year-over-year to $64.8 million during the quarter, driven by strong growth in gross international cannabis revenue of 73% and 8% in net Canadian adult-use and medical cannabis. The exceptional revenue performance of our international cannabis business solidifies our point from the last conference call that Q4 2025 and Q2 and Q3 of this year's performance are more indicative of what investor expectations should be going forward.

Growth in international cannabis accelerated based on an enhanced supply chain, increased patient adoption in certain markets and our targeted expansion into emerging markets. This quarter, we continue to strategically reallocate supply from the Canadian wholesale market to higher-margin international markets and we'll maintain this approach as those markets continue to scale. Year-to-date, we allocated approximately 6 metric tonnes of product from Canada to international markets, which continues to supplement our ever-increasing cultivation in [indiscernible].

Distribution net revenue increased 35% to $83 million based on a focus on higher velocity and margin SKUs and positive impacts from foreign exchange rates. We expect distribution to continue to be a strong contributor as it complements and scales alongside our international business.

Beverage net revenue for the quarter was $42.6 million compared to $55.9 million in the prior year. However, the results do not fully reflect the operational progress we have made in the segment. During the quarter, we successfully completed Project 420, closing and delivering $33 million in annualized cost savings, which improved the underlying cost structure of the business. Those cost savings are not always visible in our margin results as they've been largely offset by almost $2.9 million of higher aluminum costs year-to-date and lower overhead utilization rates. Getting our cost structure right in beverage has been and will continue to be a key focus area for us.

Looking ahead, Carlsberg represents a compelling opportunity for us through a partnership with one of the largest global brewers. The relationship enables us to improve overhead utilization without deploying capital to acquire a brand while creating meaningful operational leverage. It also provides multiple avenues to strengthen the platform including increased scale with key global raw material suppliers and the ability to collaborate and learn from one another on innovation and best practices to support long-term growth.

BrewDog represents an equally compelling opportunity to strengthen our beverage business in the future, but for different reasons as it is more about an international opportunity. The BrewDog transaction was unique because it represented a chance for the business to start with a clean piece of paper and hand select the best and most important elements of a strong business that was placed in administration for reasons other than its core business. After this transaction, Tilray strengthens BrewDog, BrewDog strengthens Tilray.

Lastly, wellness net revenue in the quarter was $16.4 million, growing 16% year-over-year based on our focus on high-value innovations the continued strength of high-vol and growth in the ingredient sales channel. In terms of contribution, cannabis accounted for 31% of revenue, beverage revenue was 21%, distribution was 40% and wellness was 8%.

Moving on to profitability. We achieved a record third quarter gross profit of $55 million, a 6% year-over-year increase. Gross margin was 27% compared to 28% last year. By segment, cannabis gross margin was 40% for the quarter compared to 41% year-over-year and remained largely flat, primarily due to price compression in international markets, which reduced international cannabis revenue by approximately $7 million despite higher gram equivalent sold.

Distribution gross margin increased to 12% this quarter compared to 9% year-over-year due to favorable changes in product mix and increases in average selling price during the quarter.

Beverage gross margin was 32% this quarter compared to 36% in the prior year quarter. This change was a function of lower overhead absorption rates and higher input costs, including the previously discussed aluminum costs.

Wellness gross margin increased to 33% during the quarter from 32% year-over-year as strategic price increases largely offset an unfavorable change in sales mix.

Net loss was $25.2 million, a $768.3 million improvement compared to a $793.5 million loss year-over-year or a net loss per share of $0.24 compared to a net loss per share of $8.69. The improvement in both net loss and net loss per share is primarily driven by the onetime noncash impairment we reported in the prior year quarter.

Adjusted net income and adjusted net income per share, which both exclude the noncash impacts of amortization, stock-based compensation, impairments and nonrecurring charges, improved $5.3 million year-over-year to $2.4 million and $0.02 per share, compared to an adjusted net loss of $2.9 million and adjusted net loss per share of $0.03.

Our adjusted cash operating income for the quarter was $4.1 million compared to a loss of $3.1 million last year. Adjusted EBITDA for the quarter increased 19% to $10.7 million compared to $9 million last year, reflecting continued execution against our strategic plan, particularly from our international cannabis business.

Cash flow used in operations was $21.9 million compared to $5.8 million last year. The increase in cash used in operations was largely related to inventory ahead of our seasonally stronger fourth quarter and accounts receivable for our growing international cannabis business. Excluding the impacts of working capital, cash generated from operations was $3.4 million compared to cash used in operations of $9.3 million in the prior year. We ended the quarter with cash, restricted cash and marketable securities of $264.8 million and a net cash position of $3.5 million, which improved $40.2 million from a net debt position year-over-year.

As we have recently demonstrated our strong liquidity position has enabled us to act decisively in a dynamic environment and provides continuing flexibility to pursue strategic opportunities. We remain focused on managing and strengthening our balance sheet throughout the remainder of the year and beyond. Lastly, we are reaffirming our fiscal 2026 adjusted EBITDA guidance of $62 million to $72 million.

Operator, we can now open the call for Q&A.

[Operator Instructions] And the first question is from the line of Kaumil Gajrawala with Jefferies.

Can you guys hear me now?

Yes.

Yes.

Great. I wanted to first maybe ask about the supporting the international business in the context of Canada looks like it's also stabilizing. So you have a lot of growth and great margins in one. But on the other hand, you've got stabilization in your bigger markets. So how are you managing the balance between those two?

What was the line? I didn't hear. You broke up the last piece, the cannibalization?

Not cannibalization, but just managing the balance between supporting your international business and what looks like stabilization in Canada?

And you're talking cannabis right now for us, right?

Yes, cannabis. I'm sorry, this is about cannabis.

Yes. Yes. Okay. So listen, I think the big thing is, number one, we are bringing on our Masson grow facility in Gatineau, which is increases our -- we're going from 137 metric tonnes of grow to almost 200 metric tonnes of grow. And also, we're bringing on outdoor grow in Cayuga. So number one, when we now have plenty of growth, and this has been a tougher year on yields in that, and that's sort of what you heard me say as we're overhauling things and modernizing things on better yields in the Canadian market.

On the other hand, the good news is our Cantanhede facility in Portugal and our Germany facility is probably producing some of the best yields and some of the best flower that we ever had. So the number -- the most important thing is we have plenty of supply to supply the European market. The other thing is we're seeing price compression, which I talked about, with the growth that we're having with yields, we'll be able to support that. And I think the most important thing in Europe is this here, consistent supply. We've not had consistent supply. Number one.

Number two, one of the things in Europe, you have to wait for permits, and that has slowed down to getting our sales out there. We've seen a real big improvement in the Portuguese government. I want to thank them. They modernize this now, where sometimes it'll take a month, you can see 3 days now. So being able to get product to our customers is something very important.

And then with that, we have perfected our grow and our yields, that will help our margins continuously, and deal with price compression. And I think the important thing is from Tilray standpoint, with our Tilray products with our innovation, with our brands, the big opportunity for us is if we got consistent product, we're going to get the volumes and how do we deal with price compression? If price compression consistently happens, we have supply, and I think we have more supply than anybody there.

So it's something that we're aware of. We dealt with it in Canada. We've had $250 million of price compression over 5 years in Canada, and we dealt with that. So not that I want to see that in Europe, but it's something we can deal with either now having supply, now having good yields, now having good grow over there to do it both in Canada and Europe. And there's no one else out there that has the supply that we have, both from the Canadian market today and the European market.

Got it. And on Project 420, now that I guess, it's coming sort of towards the end or at completion, is there a new project? Or is it sort of more ongoing business as usual as we look forward from a productivity standpoint?

This is a good question. I mean there is absolutely project ongoing. We never just say, okay, we made a $33 million, $35 million of cost savings, stop. Now with BrewDog in the mix and bringing that together, both internationally and domestically in regards to buying hops, cans, labels, et cetera. And it's definitely something as we combine now.

And just remember, we've gone from a $200-plus million beer business, almost $0.5 billion now in size. So from scale, that's going to help us. And as we look at rationalization continuously on our plants, we look at rationalization on distributors. We just said, how do we bring all the organizations together, there'll definitely be additional cost savings available to us.

Our next question is from the line of Robert Moskow with TD Securities.

This is Victor Ma on for Robert Moskow. So I just want to ask about international first. International grew 73%, Germany grew 43%. What drove this delta? Was it shipment timing or permit delays that -- from the previous quarter that were fixed this quarter? And in terms of kind of looking at growth going forward, is that 43% growth rate for Germany? Is that kind of a good run rate to use and looking at growth for the segment?

So number one, there was some products that did not get shipped in the second quarter because of permits, but there's products that did not get shipped in the third quarter because of the permit. So it equals out. In regards to what was the growth? The growth was based on us having supply and demand. And I'm not sure, again, we have a big fourth quarter, what is the true run rate there.

And the big thing is what I said before, what the market is realizing, what patients and what doctors are realizing is that we will have supply. We will have good flower, we will have lots of innovation, we'll have some good oils. And again, we will be price competitive.

So what is the right growth number? I'm not ready to give that yet. But again, there's big opportunities for us in the international markets, not only in Germany and Poland, the U.K. and other markets, it's additionally other markets that we're looking at to open up and what will happen in Spain, what will happen in France. And so we're really excited.

The other thing that we have there with our CC Pharma, Tilray Pharma and some of the stuff that we're doing in the U.K. and being vertically integrated as we sell through our distributor and sell directly through our distributor into the drug stores, helps us that where we're a grower, where we've got a brand. And then we have -- the third part of it is where we have from a vertical integration, the distribution going to the drugstores. So that helps us tremendously, too.

Got it. And then my second question is on the beverage segment. So in terms of just rising aluminum costs from the Midwest premium related to the tariffs and then additional supply shocks from the Iran conflict. How -- can you offer any color in terms of how hedged you are on your aluminum exposure? And how -- what's the benefit in terms of kind of scale that adding Carlsberg into the U.S. portfolio give towards managing that cost impact?

So I'm going to let Carl talk about the hedge in a second because we are hedging on some things. But listen, adding Carlsberg in there with a good-sized business, adding BrewDog in there and then being able to buy on global contracts is going to be very, very helpful for us.

Right now, a lot of our hops for BrewDog internationally come from Washington State. But we, right now, as we put this together and listened, having Carlsberg, who is one of the largest brewers in the world and possibly buying into their contract, and we still have left over whether there are hops in that from our ABI stuff. So there's lots of opportunities from a scale to be buying hops and cans, and that's the big one to watch out for is as aluminum prices have gone up and Carl, will talk about hedges. Listen, the big watch out there is what happens with fuel and from a standpoint there is the unknown. But Carl, from where we're hedged -- Carl, do you want to talk about that?

Yes. I mean you answered most of it, but just specifically on the hedge for aluminum, we're currently hedging 65% to 75% of our buy on a month-to-month basis, and we're hedging a year out.

Got it. And just one last question, if I can. In terms of just the distribution gains from the shelf resets that typically happen in the spring. How are those conversations going? How is that tracking? Any color you can share there?

So going well. I will say this here, we gained and we lost. And the big part of it is this here, we're in the craft beer category, lost some space out there. But I think the big thing is this here, where we didn't -- when we bought the Molson's piece and prior to that when we bought the ABI piece, from a timing standpoint, we lost a lot of SKUs where we had no influence in no part of it. So again, it goes against us.

Now we've gained a lot of distribution. And the big thing is this here just because we gain distribution and make sure the product sale. So plus-plus, we probably lost more. But again, it's okay because it was the SKUs that were not part of us at the time. And the new SKUs and the new products and new innovation is what we're excited about and where we've gained. And we had some big days at Walmart. We had some big days at Kroger, Albertsons and some other ones across Shop & Shop across the board.

So all in all, we're happy with what we got. And listen, I'd rather the set get smaller and us be a bigger player in a smaller set than just have a big set out there. So there's a lot of resetting happening within the craft beer industry in regards to the size and what retailers need out there.

Just to supplement that a little, when Irwin talked about the acquisitions, it's more about the timing of the acquisitions because we bought those brands after the initial discussions on spring resets that already happened.

And we were not the ones presenting those spring resets. But now whether it's the Molson or the ABI, and that's sort of where we'll be next year in January as we take on Carlsberg, we'll be out there presenting in February -- January, February for the next spring resets for Carlsberg.

Our next question is from the line of Bill Kirk with ROTH Capital Partners.

I want to spend a little time on the improvements at Tilray Pharma. Carl, you mentioned a focus on the highest velocity SKUs. So what SKUs or product types are those that are leading the way? And then maybe more importantly, how can you or how are you leveraging this improved CC Pharma for your cannabis business in Germany?

So I'm going to -- Rajnish, since you're on the call, I'm going to let you jump in here because you're the one managing this. I think there's three things here. Number one, it's the buying that our guys are doing over there. Number two is our assortment. And number three, as we now look to sell our products into Italy and we sell our products into the U.K.

Rajnish, do you want to go into the specifics of what the products are that we've really seen the increase in sales?

I mean, there is a group of products revenues, we have about 2,800 SKUs. So what we have done is basically identified SKUs which have higher velocity to go. So there is a bunch of about 50 top SKUs which are right now working where there is a high velocity which we focus on, not just on velocity, but also on the gross margins. So these are the two criteria for us to look at in terms of the growth.

And then we are adding the medical cannabis portfolio. I mean, the medical cannabis portfolio is helping us to grow both in margins as well as in revenue because per unit revenue is much higher and margins are better. So these are the two big things in terms of the selling side of the business. And of course, on distribution, we are now -- with our new alliances, which are coming forward, we are now actually increasing our distribution across the pharmacy channel, which helps us to grow not just per unit, but also in the depth of distribution and the width of coverage of pharmacy. So this is really on the seller side.

But more importantly, also on the buy side, I think we are now -- our purchasing is becoming much more robust in terms of the timely decisions. We've implemented automation in our purchasing system, which predicts the pricing patterns and then it helps us to take decisions quicker.

So I mean these are a few things which in the pharmacy distribution is helping us to grow. And then, of course, on the operations side, a lot of our business, we are also looking at in-house packaging to out-house packaging and whichever way is working for us, there's a big team, which is working to make sure that there is a consistency in supply from the operators, both in-house and out-house, and that's also helping us to improve the margins.

When we bought CC Pharma, that was a big part of it. But again, it was bought during the Aphria time was for a tender, and was the age of sub-pharmacies. That was not really happening, number one.

Now -- and there was challenges with getting different medicines as we're buying all different types of medicines. But as Rajnish said, we're focused on the core medicines with the higher margins. And we've done a lot of automation at CC Pharma. The other thing is what's happened, we've gone from servicing 13,000 drugstores now to 16,000 drugstores. So we've expanded the amount of drugstores in Germany.

The other major thing is as we expand out CC Pharma into Italy and into the U.K. is a bigger platform that we'll be selling through. Not the highest margins, but again, as the volume grows, there's a lot more contribution. And as we put a lot more cannabis through it with much higher margin, you're going to see the margin grow there dramatically.

Awesome. Thank you for the detailed answers. My second question, Irwin, in the opening comments, you talked about now being a run rate of $1.2 billion in revenue. The last 12 months, I think, it's something like $850 million. So is the bridge between the two? Is that mostly the revenue from acquired BrewDog assets? And I asked because you didn't take all the assets. So how much of the BrewDog revenue that they've released in their annual reports is generated by the assets that you took on and now have? And how much of their annual revenue was tied to assets that you didn't take.

So let's say between $225 million to $250 million is what we have taken, okay? And again, we took all the U.K., Ireland, Scotland distribution through retail, we've taken it through on-premise. And we've taken 16 brewpubs in U.K., Ireland and Scotland. We've taken the brewpubs in Australia, we've taken the distribution in Australia. We've taken three brewpubs ourselves, and -- 2 brewpubs ourselves and there's three franchises. There's 15 other franchises out there today around the world that we sell them beer to and we get some type of royalty.

In regards to the U.S., we've taken the distribution, the manufacturing in the U.S., and we've taken with them Las Vegas, Columbus, St. Albany and Cincinnati is -- and Cleveland, I'm sorry, and the airport in Columbus. That's what we've taken there. So it's somewhere between $225 million and $250 million in sales that we have taken.

In regards to the other piece, Bill, it's all coming from growth, and that's where it's going to come from. And don't forget, you saw from a standpoint there, what we've gone through is SKU rationalization in regards to our beer business. If you take what we're down this year and what was SKU rationalization, what was distributor rationalization, and what was product rationalization, I mean quite a bit of sales come out of our business.

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

First question for me. I just want to dig a little bit more in terms of hemp. So in terms of your outlook potentially for changes to come before the ban on any product is more than 0.4% THC coming to fruition in November. And then taking that into context, how you're looking at the CMS program, you mentioned potentially looking to enter into that. So how are you looking at potential opportunity there, particularly if there is a restriction on THC products and how appealing that program will be for patient adoption or rejection? And then just how you think about that longer-term opportunity there?

So number one, let me go back to HDD9 and how we're looking at that. We're looking at it three ways. Number one, it gets extended and stays as is. Number two, there is some type of new legislation that comes out that regulates it either 3, 4 or 5 milligrams, and which would be great and that way we can sell it or the ban in November of 2026 happened, and it completely stops. Listen, I think it's going to be one or two. That will be my opinion.

In regards to our CBD drinks into Medicare and that within the U.S. Listen, we have Happy Flower, we have the drinks, we're prepared for that now. It's just making sure that as we talk to the FDA, and we talk to them that how we go about it and how we do it. So we're able to do it. We have the products to do it. It's just making sure the right approvals, and we have a team that is working on this within the U.S. regulations and what could happen here. So stay tuned for that.

Okay. Great. Appreciate that color, Irwin. Second question for me, I just wanted to go back in terms of alcohol gross margin and the outlook. Carl, I know you mentioned in terms of how you guys are hedging some of the aluminum. But just taking a step back and -- level, there's been some lumpiness. You guys now have Project 420 now completed. So how should we think about that margin for the segment going forward? 4Q, I imagine obviously be higher just given the higher sales flow-through, but just on a full year basis, just how best to think about the gross margin there?

So Aaron, good question. If you look at where we are right now, I think this represents the bottom. We have done a significant amount of work, and we'll continue to do work to manage costs and to keep costs at a reasonable level versus where our volume is. As we said on the call, we've got some headwinds with aluminum costs, and there's potential for headwinds with fuel surcharges and things like that, that we're going to keep a close eye on. But the key is really in the overhead utilization rates. And as we've adjusted to that, and we continue to make adjustments going forward, like we'll see that start to come up over time. And right now, we think this is the bottom of the trial.

And Aaron, I think there's -- once again, you remember, we get in the beer business in late 2020, with Sweetwater and the acquisitions of the three brands in the West Coast and Montauk and then the ABI pieces and the Molson pieces. We had a onetime had 10, 11 manufacturing facilities. And since then, now with Carlsberg coming on, with the rescaling of the beer business and the SKU rationalization. It hasn't been the easiest road for us, but nothing dissimilar that was cannabis in regards to as we opened up the grow facilities, and we had to go deal with it.

But now we got time. We now have the right sets in place. We have the right new products in place. We had some new products out there that didn't do as well as we thought. So as Carl said, now with the purchasing power between BrewDog International, between bringing Carlsberg on with us, we feel good about moving forward where we've done a lot of the overhauling. We're now down to 7 manufacturing facilities. We might even get smaller in regards to that.

In regards to the facility in Columbus, Ohio, which is a beautiful facility. And what are we moving there from HDD9, if that is a product that's able to stay within the portfolio. We have a great energy drink called, High Voltage, that's growing in leaps and bounds. Some of the other non-alc products that we have out there today that we will move into our facilities. And as we introduce a lot of Vodka Seltzers and some of the other drinks that we're doing, we'll look to bring most of that in-house. And we will have capacity, as we have a great plan to grow Carlsberg. We think the growth opportunity of Carlsberg is tremendous of what we can do with that brand.

So again, it's -- we've only been at this 5 years where most craft brewers have been out there a long, long, long time. And we've had some pain, but we've managed through it. And I think we've really got it in a good place now from a scale standpoint. I don't -- I know, I could be wrong, I think we'll combine with BrewDog and what we're doing today, it's almost 18 million cases of beer that we'll be selling that's between the worldwide. So we're buying lots of cans, we're buying lots of hops, we're buying lots of ingredients here. And yes, some of it is across the water. We're buying lots of kegs, but how do we utilize that? We're just not a little craft brewer anymore from a standpoint there.

Our next questions are from the line of Pablo Zuanic with Zuanic & Associates.

Yes, congratulations on the very strong international growth and also very nice to see the share count being stable quarter-on-quarter. Look, I have three questions on Germany specifically, and I'll try to keep it brief.

The first question I want to get your take in terms of the advantage of being vertically integrated versus the many distributors out there, I mean for a while, we saw that the distributors were growing faster. We saw consolidation, Curaleaf by Four 20, High Tide by Remexian, more recently. But now with lower prices, some of the distributors are being squeezed out and they don't seem to have a very stable supply chain. So I'm just trying to understand if you can remind people of the advantages in Germany, especially where the market is evolving or being vertically integrated versus the distributor model.

The second question is that it would help if you can expand on your route to market? Like how many people do you have on the ground? How many people are visiting doctors? How many people -- what are the efforts in terms of reaching out to patients given all the restrictions. But just if you can give more color on your route to market in Germany.

And the third, which is related to all of this, I could make the argument, playing devil's advocate, that pharmacy reach does not matter too much, right, that all these numbers that we hear about CC Pharma and Alliance now are not so relevant when the doctors and the patients are making the decision and the 80/20 rule applies, right? We know that maybe 50 pharmacies, especially online account for the bulk of sales and only 1 of 7 pharmacies sell medical cannabis. So why does pharmacy reach matter in the short term and in the long term? I know there's a lot there, but there are three questions on international that would help if you can cover.

I hope I can remember all three, okay? And number one, to your point, and I stressed this before, from a growth standpoint of having our Cantanhede facility and that up and going the way it is today and growing some of the best cannabis that it ever has and having the permits to get out of Portugal into Germany is a major, major advantage to us, and this is what helped us in the quarter to get the sales. And again, as we're getting yields and flower to become that low-cost, that low-cost seller in there in the marketplace and deal with price compression.

Number two, you heard me talk about now as we bring on our facility in Gatineau, Quebec, that is a GMP facility. And that from a supply standpoint, and I got to tell you, because originally, we were going to sell that and thank God, we didn't because from electricity costs, from labor cost, that is an excellent facility and it's an excellent facility for us to have and supply the international market, and that's what it will do because it's GMP, because it's a lower cost facility.

And then our German facility, which originally we were selling 2 to 3 metric tonnes that are there and Rajnish and the team has done a great job of getting that up into additional metric tonnes and before that we were only allowed to sell into the German government there.

So to your point, Pablo, yes, we have supply. Yes, we can be that lowest cost producer. And yes, the big thing is we can be consistent. In regards to the customers that we're selling to. I'm going to let Rajnish talk about what we have on the ground there and the infrastructure in a minute, but just going through the pharmacies, you may not agree that having a vertical integration.

So number one, having CC Pharma. The big part of the CC Pharma today's business is not the cannabis business. But there's 3 things CC Pharma does. It has 16,000 pharmacies and a lot of these pharmacies, Pablo, are buying medical cannabis. So now they have the ability and at the end to sell, it has the ability to go to pharmacies, number one.

Number two, there's a lot they can do in regards to online and selling online through CC Pharma, and that is something that we're working on. And again, as we look at expanding our product lines in Germany, whether it is vapes, whether it is pre-rolls, CC Pharma has medical license and an application that they can do these things for, and we're looking at numerous things with the CC Pharma.

So today, having it, it's very important for us. It has a tremendous network too with other CC Pharma types of distributors that we can sell products through them too. So CC Pharma has a relevance to us, and it's a big relevant for us in the cannabis grow market where no one else really had a CC Pharma today.

Rajnish, in regards to your sales organization on the ground, go ahead.

Yes. So two things here. I mean, so there is a price compression in Germany, which is kind of changing the route to market and the route to market is diverting, becoming more integrated. The distributor is now getting squeezed out because of the margins, et cetera. So I think -- we don't see it now, but we do see it going forward that the route to market will become more direct to pharmacies and through the channels of prescriptions to doctors, et cetera. So CC Pharma and our medical team there is presently working along with the prescribers and also in the pharmacies to work and build this integrated supply chain to reach the patients. So that's number one.

Number two, to your question of what's the feet on street we have today 2 teams which work on the street. One is the one which work with the prescribers. This is a team of about 20-plus people who are medical representatives and medical advisers, who work on with the prescribers. And then we have a team with CC Pharma, which is also about 7 to 8 people who are basically telecall services people who continuously to work with pharmacies to make sure that the prescriptions, which we reach there and the stocks are available for them. So there is a twin approach there, both at the pharmacy and at the prescriber level at the ground in Germany.

And as we go and see this forward, I think -- and these are signs which we see in the market today that the route to market is going more direct than through the distribution. So with CC Pharma and Tilray Medical team, I think this change we are seeing, and we also see data coming to us, which is telling us that the pharmacy sales are improving, still small, but improving compared to what the distribution sales have been.

And Pablo, not only that, what we have internationally today, I mean, basically, we have marketing teams, we have R&D teams, we have quality teams. We have a researchers working on our different cannabis streams and genetics over there from a medical standpoint that when doctors prescribe for pain, for anxiety, for cancer we can grow and support it.

So again, what we're not is just somebody selling into the marketplace. I mean, as Rajnish said, we have a big infrastructure in Canada and Portugal, we have in Germany. And then we have a team that support it in London in regards to the marketing team, and there's a whole supply team. And the good news is we have moved a lot of our Canadian colleagues over there to help us with this grow.

You were going to ask something else. Go ahead, Pablo.

I mean, that's great color. Can I add just one more quickly? You mentioned that you're keeping an eye on the CMS program in the U.S. for a full-spectrum CBD. Does that mean that you would be considering or looking at buying a U.S. CBD brand?

So we have a brand today called Happy Flower, okay? We produce CBD products internationally. So we have formulations. We have products. It just got to fit to what the U.S. standards are and regs are here. But, listen, I've always liked if it made sense to buy something that gives you a foothold in there. But like anything, we have the ability today to do our own with CBD products.

Our next question is from the line of Kenric Tyghe with Canaccord Genuity.

The majority of my questions have been asked, but just a couple of quick follow-ups. With respect to the beverage segment, you called out trough margins in quarter. Is that including or excluding the BrewDog integration? Just trying to get a handle on whether that's a trough on legacy or trough on go forward, and how we should think about that evolution of the margins?

No. BrewDog, from lease margins, BrewDog was acquired, March 2, so there's nothing in here in regards to BrewDog. And there's nothing in here in regards to Carlsberg from a margin standpoint. And again, from a procurement, from the sales, from an infrastructure, from manufacturing, again, I'm not going come out there with numbers, but I would think there would be upside just putting volume.

Great. And that was the gist of the question was just on that evolution from here forward with Carlsberg and BrewDog, but I can leave it there.

Just a follow-up with respect to the brewpubs and that footprint. Just with how consumer trends and consumption patterns have changed. How are you thinking about that footprint going forward? And is it becoming more important to you as a sort of a strategic buffer on the consumption side? Any color around the BrewDog -- sorry, around the brewpub footprint would be useful.

Listen, good question. It's something today within Tilray, we have 18 of our own brewpubs here in the U.S. So again, it's something we understand. In regard to the U.K., Ireland, Scotland and the other markets, listen, I'm big on brewpubs to look at them from a marketing tool and to build our brand out there. So bringing people together. And that's the whole thing on longevity today to bring people together.

And a big part, and I plan to spend a lot of time looking at our brewpubs in regards to what we got to do to interact with our customers that come there, how do we serve them good food and good value. I've also talked about whether it's Carlsberg, Guinness or our other beers of how we bring other beers into there because if they don't want BrewDog, we want them to come to our brewpubs at least to enjoy our food, enjoy the environment, and maybe we can convince them to have BrewDog.

Is that going to be a big part of our growth as a part of our strategic plan to open up another 100 of those? No. It's a big part of those to look to upgrade them, to put more TVs, more interactive types of communications in regards to getting more and more of our consumers to that and is something, yes. Is there an opportunity for us to franchise more and more BrewDogs, where we did not take them and make them franchisees? Absolutely, yes.

So there's some exciting things here as we look to grow from a franchise model as we look to increase the sales with the ones we own and where we license the brand today in airports. And that's something that we're looking at too because there's -- with airports today, you license your brand name, you collect a royalty and you sell product. So that's how we're looking at these brewpubs.

At this time, I'll turn the floor back to management for closing remarks.

Well, thank you, everybody. Number one, it April Fools' and our numbers are not April Fools' joke. So that's the good news, okay. Our numbers are some real strong numbers out there. Congratulations to the team on the growth. And not one of these businesses, nothing has been easy out there, in regards to what we deal from a regulatory standpoint, what we deal in regards to pricing, in regards to tariffs and just looking at the consumer today. And again, if you stop and look at Tilray from 2019 to hitting over that $1 billion mark with the acquisition of BrewDog, it's a very exciting time for us.

In regards to where we're going in 2027 and with 2 months left in our quarter of 2026, there's a lot to be proud of here. And as you heard me talk about the big overall that we're going to do in the Canadian market in regards our genetics, in regards to our strains, in regards to using AI to help us there, in regards to how we modernize those facilities and take out lots of costs. And Blair and the team have done a tremendous job in doing that.

And again, as you come back and think about what we have in grow today and how we've converted these facilities to much more economical and dealt with the challenges of the cost of utilities in Ontario. So again, we've accomplished a lot in the Canadian market and the only market where recreational cannabis is legal in the world and at the same time, dealing with and growing our medical market and introducing more and more patients and consumers to the product.

In regards to the U.S., listen, again, I'd like to see some better results coming out of our beverages business. But on the other hand, as you bring everything together since late 2020, and we're here where we are today, I see some good light at the end of the tunnel here of what we're building here and being the fourth largest craft brewer out there and the fourth largest craft beer business. There's been a lot of changes in the craft beer business, it's been a lot of changes in the beer business.

And one thing I can tell you is I really feel we got the footprint right, we got the model right, and now we got the product right because we brought up a lot of SKUs. We have over 18 brands. We have over 900 distributors. We've had multiple people, multiple contracts out there that we had to deal with, whether it's buying kegs, cans, hops, et cetera. So as we bring all that together.

In regards to our spirits business, you heard me talk about our depletions on Breckenridge being up. We've dealt with lots of distributor transition out there with RNDC, now being acquired by Reyes, which is good news for us, and it's something that we will consolidate into the new Reyes distribution system.

In regards to some other changes in the market, it's something we're going to do. But what I'm really happy about and seeing our Breckenridge, some of the new stuff that we're really coming out with in regards to our tequilas, our drinks with moonshot -- our Mountain Shot, it isn't moonshot. Some of our non-alc drinks and some of our products there. But it's great to see some of the stabilization that's going to happen in regard to the distribution business.

Listen, this industry is a difficult industry with a 3-tier system, and you can have the greatest products, but it's the distribution that you need. In regards to international, again, Rajnish and team have done some great things in regards to the international piece and the grower and dealing with the regulated market in regards to medical cannabis, dealing with permits when you ship out of the country or permits when you ship into the countries.

And again, what we've had to do to get our Cantanhede facility up to the yields and up to the grow that we've done in Canada and up to being able to supply consistent product to the marketplace and back to Pablo's point before, that's something that Tilray now is going to be known for because if you think about it, look where our volumes are today and look where they were a year ago and how we've doubled in the quarter. So a lot to be proud of there.

And again, there's a lot more that we're going to do in those marketplaces. We had to overcome Germany being only sold into the German government, which we're losing money and almost doubling the amount of production coming out of that facility. And now we're running Cantanhede probably at 50%, 60% capacity, and we have tremendous opportunities to grow more and more in our Cantanhede market.

Really, the highlight is where we've come with CC Pharma. Where we are at 2%, 3% margins and closer to 5%, 6% margins now and really see the opportunity in that business and see opportunities from an integration standpoint and even seeing it grow throughout the rest of Europe.

And last not -- well, our wellness business in regards to Manitoba Harvest, and the growth within that business and the growth in regards to some of the beverage businesses that's been in that business. Listen, we'll see what happens in regards to Delta-9, I think as you heard me say, there's three options out there, either 1 or 2 will happen. I'll be disappointed if it's 3. But again, we're out there in full force selling our products today that we have in the marketplace and sticking with it and out there lobbying the government to really take a hard look at that.

So last but not least, on March 2, I just sort of want to step back one second in regards to Carlsberg as we announced our partnership with Carlsberg. And it's something I'm very proud of because I grew up in Carlsberg. It's a worldwide brand. It's one of the largest brewers out there. What a class organization to be associated with. I spent lots of time with the Carlsberg team. And it's tremendous what we can learn from Carlsberg. And what we have the ability to tap into their knowledge base, tap into their new products, tap into their marketing things. And I always say this here, when I grow up, I like just to be like Carlsberg. It's something that we aspire to, and having that for the U.S. and the U.S. being the biggest beer market in the world, Carlsberg is looking for some big things for us, and I promise we're not going to let them down.

Last but not least, in regards to BrewDog. Listen, I looked at BrewDog numerous times throughout the years in the acquisition, I congratulate the founders for what they did in regards to building this brand and what they did in regards to opening up these beautiful brewpubs around the world today. And since 2015, and basically 10, 11 years what they've built.

Unfortunately, not everything goes as planned. And Tilray, when it had the opportunity to participate in the administration to buy this without being able to do due diligence, the way we could, but we knew the brand, without being be able to go into data rooms and ended up buying this at a little over EUR 40 million is something that I'm excited about. But I always say it's not what you bought it for, it's what you do with it. And with that, there's a lot to do.

And this changes a lot within Tilray in regards to our beverage business, our worldwide known of who Tilray is. You heard me say in my comments, that I've done lots of acquisitions, whether it's at Anheuser or here, and I've never had so many reach outs about the brand, BrewDog and the excitement that is. So we're pretty excited. It's just a month that we owned the business. We're in the midst of getting our hands around this. And one of the big things, this business as it was going through in administration was in the midst of either being shut down or sold in pieces or sold as a whole like us.

So it's almost like we're starting this back up again, and getting it back up to capacity, getting the factories back up, making sure we have hops, where suppliers didn't get paid and there are ransom suppliers that we've got to do that. There was employees that had their resume on the streets that didn't know if they were going to have a job or not, and that's something that we've got to make sure. So stabilization, as I keep saying, is the key to this here.

And with that, we will have in place great strategic plans to grow the business in the U.K., Ireland, we'll have great plans in place for Australia. In Europe markets, we'll have plans in place for a franchise and what we will do with our current brewpubs, and what we're going to do in the U.S. So there's a lot of exciting things with BrewDog that we can do and will do. And remember, there's a lot of heavy lifting there and how do we integrate it within our business.

So with that, some exciting things happen at Tilray. Let me tell you, as I always say, there's 2x4s that hits you in the head every day. And that's something we live by and how do we deal with it. I want to thank everybody for getting on our call today and listening to us. Happy Passover, Happy Easter to everybody, and enjoy some good beer out there, enjoy some of our good cannabis and to March Madness. Hey, when you're watching March Madness this weekend, make sure you have one of our great beers that we produce out there. Thank you very much for listening to us today.

This will conclude today's conference. You disconnect your lines at this time. Thank you for your participation. Have a wonderful day.

Thank you for joining Tilray Brands conference call [Operator Instructions] I will now turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon.

Thank you, operator. Good morning, everyone. Good afternoon for those listening internationally, and thank you for joining today's conference call. I'm excited to discuss the strategic acquisition of BrewDog, an iconic global brand in the beer business that will join Tilray's portfolio. The acquisition included BrewDog's worldwide brand intellectual property, certain assets from its profitable U.K. operations, including the scaled brewing facility in Ellon, where I am today, along with 11 bars across the United Kingdom and Ireland for GBP 33 million.

I'm here today at the Ellon facility, as I just mentioned, and what an unbelievable and exciting facility. I can't tell you how impressed I am with the facility, the team and of course, they brew great beer. We're also progressing towards the acquisition of certain U.S. and Australia BrewDog assets, which we expect to close in a later date very shortly. Before I get into the transaction details, it's important to step back and look what we built at Tilray since 2019.

Over the past several years, we've transformed Tilray from just a $50 million business into a global consumer packaged goods platform with well over $1 billion of revenue operating with more than 40 brands in over 21 countries through disciplined investments, operational execution and strategic partnerships and watching our balance sheet. We've established a reputable craft beverage platform across beer, spirits, energy drinks and emerging categories earning the trust of major global partners such as Carlsberg.

With the recent addition of BrewDog, our beverage business is projected to generate approximately $500 million in annual revenue. I personally admired the BrewDog brand for many years, watching its evolution across multiple valuation cycles, including when the company was valued well over $2 billion in 2021. Our approach has always been to be patient and disciplined and wait for the opportunities and waiting until we have built the scale and infrastructure and operating expertise required to be the right long-term steward for a brand if this became available.

Today, Tilray is recognized globally as a meaningful player in the beverage industry with our craft beer portfolio increasingly present across major national and international channels, including leading airlines you can find in on such as JetBlue, Delta and British Airways. The acquisition of BrewDog represents a fresh start for the brand and natural steps in the execution of a global beverage vision, which we set in motion several years ago.

And it's clear -- and it's a clear win for Tilray, our shareholders, our consumers and for BrewDog and their employees. First, it immediately strengthens Tilray's global beverage platform by adding a scaled international brewing capacity, established an infrastructure and one of the most recognizable international craft beer brands in the world. Second, the purchase price reflects disciplined capital allocation with a clear pathway to accretive value creation supported by multiple operation and commercial growth levers and ultimately additional levers that we will pull.

Third, it provides BrewDog with the operational expertise, capital and long-term stability needed to refocus the business and return the brand to sustainable and organic growth as we plan to invest additional working capital into the brand, into the business and into our people. And fourth, we acquired a world-class brewing infrastructure, a high-quality craft beer portfolio and strategic real estate at a fraction of the capital and a time required to replicate this footprint from the ground up.

And we expect it to be cash flow positive and accretive to EBITDA in 2020 -- in our fiscal 2027. This is a great deal for Tilray, our shareholders and BrewDog. You could not simply build this platform in Europe today for the amount of money we pay. Importantly, we're acquiring select operating assets that already delivered meaningful scale, strong brand equity and establish a route to market. BrewDog's Ellon Brewing facility currently produces 800,000 hectoliters annually and has the capacity up to 2.4 million.

So we have a job. We have to double the capacity here. This available capacity immediately enhances Tilray international operating footprint and allows us to efficiently expand distribution of our craft beer beverage across key international markets, including introducing craft U.S. brands like Shock Top, SweetWater, Montauk and Ten Barrel. Simply put, this is a disciplined, highly strategic, financially compelling fit for Tilray. BrewDog has built on the bold ideas and innovation strong quality standards and entrepreneurial spirit, which we will continue.

Its core craft lineup includes globally recognized brands such as Punk IPA, Hazy Jane and Wingman, each supported by strong consumer loyalty, complementing the core craft brews are more mainstream brands like Lost Lager, Black Heart, which broaden consumer accessibility. BrewDog has also provided an expanding range of low and nonalcoholic beverages, including Punk AF, Hazy Jane, Cold Beer and a Lower ABV Lager.

This portfolio strategically positions the company and one of the beverage -- in the company's fastest-growing industry. This is a brand requiring -- this is not a brand requiring reinnovation. It's a strong brand that will benefit from our expertise, operational execution and brand-building capabilities, working within the existing team and areas where Tilray has demonstrated success in the past. What BrewDog adds to us in the media? International distribution. The Ellon Brewing operation alone represents over GBP 100 million of invested capital.

This gives Tilray the infrastructure to introduce our leading U.S. craft brands into Europe through an existing production and hospitality platform. We are not entering Europe from scratch. We are not leasing capacity, and we're not testing distribution relationships market by market. We now own a proven scale European beverage platform, accelerating our beverage strategy by years. This is both a strategic and financial win for Tilray.

From a financial perspective, BrewDog represents a compelling transaction and win for our shareholders. As a result of license transfer time lines from the administrator to us, we expect minimal impact from brewing operations on the revenue and EBITDA side in our fourth quarter, beginning fiscal year 2027, BrewDog is expected to generate approximately $200 million in annual revenue and split 67% from brewing operations and 33% from brew pub operations.

And approximately $6 million to $8 million in annual EBITDA, we expect the acquisition to be accretive with the business becoming cash flow positive beginning in the first quarter of 2027. Importantly, this is a playbook we have successfully executed across our global platform, and it is a proven repeatable model following our leadership team has the operational expertise and discipline to execute it again as we unlock BrewDog's next phase of growth.

Now I want to speak directly to BrewDog employees and to the equity punk community about why this is a win for you as well. I know the past several months and especially today have been challenging. Administration creates uncertainty. It impacts teams. It impacts confidence. And I promise you, today brings clarity. My commitment to you is to continue clarity and communications going forward.

BrewDog now has a long-term capital global infrastructure, operation scale behind us, creating a strong foundation for the future called Tilray Brands. This brand was built through creativity, passion and willingness to challenge convention. That entrepreneurial spirit is exactly what made BrewDog a great brand and is something we respect and intend to preserve. We are not here to corporize BrewDog. As I continuously said, beer is not going away, and we're fully committed to making beer fun again like we've had with a lot of our other brands.

We're here to strengthen the business fundamentals that allow us to grow sustainably to you and can join the beer you love for years. That means stabilizing operations, improving efficiency, investing behind core SKUs and expanding international distribution. To the equity punks, you've helped build this brand to what it is today. Your belief and support shape this brand. We respect your community. Our objective is to preserve what makes BrewDog different from what's strengthening the business model and what supports it in the long term.

Before we go to questions, I'd like to ask Rajnish Ohri, President of our International business, to join us on this call. Rajnish, who is here with me today, is based in London and Dubai. He joined the Tilray team a year ago and will lead the BrewDog business together with the BrewDog team. With his deep CPG and international operation expertise, Rajnish has already played a critical role in accelerating our international growth strategy and building the groundwork for our international beverage business and up-and-coming U.K. launch of [indiscernible] Energy. I am confident in Rajnish's ability to expand our international beverage operation. Rajnish, go ahead.

Thank you, Irwin. I'm incredibly excited to lead BrewDog's operation as a part of Tilray's International beverage business. BrewDog is an iconic brand spirit by passionate people, a strong brew pub culture and a loyal community of beer lovers. And our focus moving forward is to strengthen that foundation. My priority is to return the business firmly to its core, great beer, great people and an exceptional brew pub experience while improving operational execution across brewing, distribution and hospitality.

We see meaningful opportunity to grow BrewDog by investing behind its beer first heritage, supporting the teams that make the brand special and expanding thoughtfully across international markets where demand for premium craft beer continues to grow, including some of the opportunities we see in the Middle East, Asia and Asia Pacific. Thank you.

Thank you, Rajnish. We'll now turn this over to questions. Baron, can you manage that?

[Operator Instructions] Our first question comes from Pablo Zuanic with Zuanic & Associates.

And of course, congratulations to Irwin and team on this transaction. So the first question, can you talk about the state of the business? What were peak revenues historically? I know you spoke about $200 million. I think you talked about an administrator handling the business right now. I read the Financial Times talk about a $37 million loss in 2024. Just talk about the state of the business, where are we versus peak? What went wrong in your opinion? And how are you going to fix it?

Thank you, Pablo, and great questions. Number one, listen, the state of the business, and we wouldn't step into something unless we felt the state of the business still had strong fundamentals. So number one, the fundamentals absolutely are still very strong. The brand has still very strong brand recognition. The brand has still strong distribution. I visit supermarkets here in Scotland and the U.K. and has a strong presence.

In regards to the sales, where they got off track, in my opinion and the team's opinion is this here. BrewDog at one time had close to 60 brew pubs with a lot of capital invested in that. And again, I don't think brew pubs were the right way to go in some of the markets they did, in which today we'll end up with about 13 brew pubs. And they've been closed or will be closed or will be sold off and will not be part of this deal.

In regards to the people, there was a lot of uncertainty here and a lot of uncertainty what would happen with the facility, a lot of uncertainty who would end up owning this and it would be gobbled up and there would be no more infrastructure than that behind it. So again, Pablo, this business needs some love. This business needs some innovation. And with that, I think we can easily get this business back to growth.

You heard what I said in regards to EBITDA between $6 million to $8 million in 2027. That's our next fiscal year, being cash flow positive. There's a lot of cost to take out of this business. And the important thing is, again, what we ended up acquiring this business for, and you could never replace these assets. This facility where I am today in Ellon, you couldn't replace this for GBP 100 million today. What's in the U.S. So there is work to do on the brand. There is work to turn this around. There's opportunities with us in regards to what we can do with our products.

And it's amazing once this press release come out, the calls that we're getting from around the world of how do we partner with you guys, how do we franchise. And it's just even with our retailers now that if it's stabilized, how we'd like to see you to do more with Tilray. So there's a lot of work to do, Pablo, here, but I feel there's a good trajectory of what could be done.

And just I know you're still negotiating on the U.S. and Australian assets. But can you talk about the size of that business just to have a reference in terms of sales or revenues?

So in Australia, Total sales is about -- in U.S., in regards to sales, it's about a $20 million business. And that comes from the brew pub in Las Vegas, the brew pub that's in Columbus. There's one in Cleveland, and there's one other one. And again, it's about a $10 million brand at retail. We do have a strategic plan for that of where BrewDog will be sold within the U.S. and what we can ultimately utilize that facility for. It's an unbelievable facility they built in Columbus, Ohio on 20, 25-plus acres along with a hotel. So -- and then Australia, which is high consumer of beer there. Again, we're taking 4...

2 pubs.

2 pubs and there is distribution going into ALDI and some of the other supermarkets within Australia. Not a big business. But today, there's also franchise in Dubai. There's franchise in India, franchise in Japan that are out there, and that's some of the stuff that we'll continue to look at where we can franchise this brand.

And one very last one, if I may. I mean, obviously, your alcohol business, as you said in the call, in the press release, now approaching $500 million. That's a long way from where you started. So congratulations on that. But compared to, say, Boston Beer, $2 billion, Guinness and a number of other companies, they're still relatively small. So just trying to understand in that context, where do you stop? Do you stop at $500 million? Or is M&A and expanding the alcohol business via M&A is still a big part of the strategy for deal? That's all.

So first of all, we only got in the beer business in 2020. They've been around much longer than we have, Pablo. So I think we've done a lot. It's not how big you are. It's how profitable you can get these businesses in a tougher category today. And I think what we've done in a short period of time and acquired, integrate, taking costs out is great. But again, I think this creates a lot of opportunity for our domestic brands to bring internationally.

I think, again, is the brew pubs that we're acquiring today gives us the opportunity to turn them into brew pubs that sell multiple beers. I'm quite excited about the Carlsberg business that we just partnered up with Carlsberg within the U.S. So there's lots of opportunity for growth, and there's lots of opportunities for strategic acquisitions. As we've done in the U.S., we've acquired brands where we've built out these regional brands, whether Montauk in the Northeast, SweetWater in the Southeast.

So we'll continue to do that and continue to utilize the strength of purchasing, procurement and distribution. But I think, again, the brands you mentioned have been around for a long time. We've only been around in this business for 5 years.

The next question comes from the line of Bill Kirk with ROTH Capital Partners.

Irwin, you talked about filling the excess capacity of BrewDog, which of your U.S. brands do you envision have the best international opportunity with that capacity? And then how do you begin marketing those brands in places that are probably today largely unfamiliar with them?

Good question. I think, again, number one, it would be Shock Top, it would be Montauk and probably SweetWater, okay? They would be the 3 brands. We're also, as you heard us say before, well before this, the team was in the midst of introducing high ball into the marketplace. We're looking at multiple areas in the seltzer area that ultimately we're looking at. So they're the brands that we would focus on and probably because of the infrastructure, the sales team, having our own brew pubs out there and brew pubs are great sampler, great testing.

So number one, we would immediately get those brands into our brew pubs. We would look to go ahead and partner with one of the major retailers on some new unique products. And of course, we'd have to spend some marketing dollars on that. So that is some of the things that we would plan to do. The other thing is, like I said, this facility here, again, how do we fill up this facility with growing the brands. If we look to franchise the BrewDog name and selling kegs in that around the world, we would do that. And would we potentially look to do some co-packing for some other brands out there with this facility.

Excellent. And then I think you mentioned -- so maybe a point of clarity first, but I think you mentioned 33% of the business was in the brew pubs or on-premise. I guess is that -- did I hear that right first? And then second, when you're looking at those opportunities to get BrewDog back to growth, is it more in the pubs? Or is it more off-premise?

It's more off-premise, of course. But here's the thing. BrewDog, one of the things we ran into when you're a competitor with a brew pub, would you bring this into your pub within the U.K. and there's a lot of beer consumed. We're going to look at bringing BrewDog into the pub market, which was not something that BrewDog did before. So you don't walk into a regular pub in the U.K. today and find BrewDog on tap.

So that is something we're going to look to do how do we push BrewDog through some of these pubs within the U.K. And how are we going to be part of events and whether it's sporting events, et cetera. And again, we do have today Dubai, which is a franchise, which is an exceptional franchise. We do have Japan, which we have a joint venture there. The Middle East with our nonalcoholic drinks there. So how do we ultimately look to expand into those markets.

The next question comes from the line of Frederico Gomes with ATB Capital Markets.

Congrats on the transaction. You mentioned $6 million to $8 million adjusted EBITDA for fiscal year 2027, but you also mentioned, Irwin, that there are costs to take out of the business. So I'm curious what does that guidance for adjusted EBITDA implies in terms of what the business is actually doing today and what's related to cost savings that you need to implement?

So Frederico, it's Carl. That's why we -- that's one of the reasons why we said there'll be minimal impact in Q4. So part of that issue has to do with licensing transfers and those are going to -- there's some time that has to happen for those to occur. And then once the licenses are officially transferred and we can start recording revenue, we can start recording EBITDA on it, we're expecting to have the exit costs roughly equal the EBITDA in that quarter. So we're looking at 2027 as more of a clean year.

Perfect. And then a second question on the guidance there for, I guess, the top line $200 million in annualized sales. Does that include the additional assets in the U.S. and Australia that's still being negotiated? Or is that upside to that guidance?

That's outside of the existing guidance we've given in this release.

This now concludes our question-and-answer session. I would like to turn the floor back over to Irwin Simon for closing comments.

Thank you very much, operator, and thank you to those who jumped on this call in short notice. As it's been a crazy day and again, as we had to go through a process with the administrator, which had to go through the courts and get that approval before ultimately it was signed off. And that's why there was a halt on the stock, and that's why there was a delay with the 5-hour time difference and letting the employees know here.

And again, we've met with the employees, a lot of excitement, a lot of good energy here. And I got to tell you, sitting here last night, and we didn't know until last night that we ultimately were going to be the successor behind this. But being here, being with the employees, being in stores, I really feel good. And I really feel good about the opportunity. I feel good about what this brings to Tilray and its shareholders. I feel what we can do with this brand with consumers. I feel good what we paid for this brand and knowing multiple times when I've had meetings and what the expectations were.

Again, it's only then what we can do with it. And with the team that I work with and some of the team members that I met here, I'm excited about what this ultimately will do for Tilray. So look forward to speaking to you on our earnings call and sometimes in April. And thank you very much for getting on the call in such a short order. Have a great day, everybody.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.

Thank you for joining today's conference call to discuss Tilray Brands' financial results for the second quarter fiscal year 2026 ended November 30, 2025. [Operator Instructions]

Now I'll turn over the call to Ms. Berrin Noorata, Tilray Brands' Chief Corporate Affairs and Communications Officer. Thank you. You may begin.

Thank you, operator, and good afternoon, everyone. By now, you should have access to the earnings press release, which is available on the Investors section of the Tilray Brands website at tilray.com and has been filed with the SEC and SEDAR.

Please note that during today's call, we will be referring to various non-GAAP financial measures that 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. The 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 response to 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 those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements.

Today, we will be hearing from key members of our senior leadership team, beginning with Irwin Simon, Chairman and Chief Executive Officer who will provide opening remarks and commentary; followed by Carl Merton, Chief Financial Officer, who will review our financial results for the second quarter of fiscal year 2026.

And now I'd like to turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon.

Thank you very much, Berrin, and good afternoon, everyone, and happy new year. Thank you so much for joining us today. We delivered a strong second quarter marked by record results and a beat against analyst expectations in the face of strong headwinds. We recorded our highest ever Q2 net revenue of $218 million achieved in an adjusted EBITDA of $8.4 million, and a reported reverse stocks with adjusted EPS loss of $0.02, all while generating an adjusted cash operating income of $6 million.

More importantly, the quality of our performance continues to improve. Highlights this quarter include a 51% sequential growth in the international cannabis revenue and a meaningful year-over-year improvement in both net income and free cash flow.

We also continue to strengthen our balance sheet. We ended the quarter with approximately $292 million in cash and marketable securities and reduced our debt by approximately $4 million during Q2, leading to a strong net cash position exceeding our debt by almost $30 million.

In a rapidly evolving global cannabis regulatory environment, particularly in the U.S., our liquidity and balance sheet strength remains a clear strategic advantage. Today, Tilray operates more than 40 brands in more than 20 countries. We are a global leader in cannabis trusted by patients, health care professionals and regulators worldwide. We are the #1 cannabis producer in Canada revenue, the fourth largest craft beer brewer in the United States and a market leader in branded hemp wellness products across North America, where our high-protein hemp food portfolio holds a nearly 60% market share.

Our Q2 results reinforces the momentum we discussed last quarter, improving fundamentals, sharper execution and increasing leverage from our diversified global platform across cannabis, beverage and wellness. Let's turn to our cannabis business, which is strategically positioned for its next phase of growth.

While global cannabis markets continue to evolve, we believe the industry remains early in its long-term development cycle. The decision by President Trump to federally reschedule cannabis in the U.S. represents one of the most consequential regulatory shifts that the industry has seen in decades. Thank you, President Trump, if you're listening today. This is a moment Tilray has been preparing for methodically for years. And guess what, we are ready to go. We believe that cannabis rescheduling for Schedule III will lead the U.S. towards a federally compliant medical cannabis brainwork consistent with our other developed international markets, Tilray is positioned to act immediately. We already have the platform, regulatory experience, operating capabilities and leadership team in place with Tilray Medical U.S. to execute responsibly and to scale.

Globally, Tilray Medical is expected to generate approximately $150 million in revenue on an annual run rate. We offer over 200 medical cannabis products, serving more than 500,000 registered patients worldwide. We have participated more than 25 medical cannabis studies and clinical trials conducted in the U.S., Canada, Australia, Argentina and across Europe with leading hospitals, physicians addressing conditions such as pediatric epilepsy, cancer-related nausea, PTSD, chronic pain, anxiety, essential tremors, alcohol use disorders, glioblastomas, cannabinoid impairment and driving performance. These initiatives reinforce Tilray's reputation as a science-driven evident-based medical cannabis company and they underscore the trust placed in us by health care professionals, patients and regulators globally. We also possess one of the largest banks of cannabis genetics, which we intend to study in order to support research on the endocannabinoid system and advance medical cannabis science further.

Now let's turn to Q2 cannabis performance. Global cannabis revenue increased to $68 million, our high-margin international cannabis business led the growth, increasing 36% year-over-year and 51% substantially to $20 million, marking one of our strongest international quarters to date, and we fully expect this momentum to continue as we expand our global footprint. This performance is particularly notable given ongoing permit challenges, regular transitions in Portugal and Germany and continued price compression, especially in flower.

I'd like to acknowledge and thank the international team for their focused execution under these circumstances. I also want to recognize our Canadian cannabis team for their expertise, support and supply contribution. Additionally, I appreciate the cooperation of Infarmed and the Portuguese regulators to facilitating improvements to permission approval time lines.

Looking ahead, Europe, particularly the U.K. and Poland represents a significant growth opportunity for us. Execution will be driven by operational disciplines, including process improvement, automation, cross-functional coordination and increased utilization at our cultivation facilities in Portugal and Germany and utilizing our Canadian facilities. Tilray operates one of the largest cannabis footprints in Europe which we're continuing to expand and our advantage lies in scale, speed to market data-driven decisions making and experience gained from our Canadian operation.

Moving on to Tilray Pharma and our distribution business. As discussed last quarter, we're expanding our pharmacy reach in Germany, utilizing Tilray's Pharma expansive pharmacy network and salespeople and expect to triple our medical cannabis distribution footprint in fiscal 2026. We remain on track to achieve these objectives.

In terms of Q2 performance, revenue grew by 26% year-over-year and 15% sequentially to $85 million, making it our biggest quarter ever, while improving our gross margins. The increase in distribution revenue in the period was driven by competitive pricing, portfolio optimization and increased focus on medical device sales. Looking ahead, Tilray Pharma is laser focused on enhancing operational efficiency to support its commercial expansion into 3,000 additional pharmacies through strategic partnerships.

As medical cannabis continues to expand globally, Tilray Pharma is positioned to play a significant role in our overall growth by utilizing insights gaining through integrating our medical operations Tilray Pharma aims to strengthen its business value and create new growth opportunities within both the European medical market and the U.S. International markets remain one of Tilray's most compelling long-term growth drivers as we expect market opportunities, revenue, profitability continues to grow.

In Canada, our cannabis business continues to reinforce its leadership position. During Q2, our adult-use medical sales channel, net of excise tax, grew to $46 million with recreational cannabis growing 6% in the quarter. Tilray continues to hold a leading market position in dried flower, non-infused free rolls, beverages, oils and chocolate edibles. Our disciplined approach to product mix, margin management and premium pricing has supported our strategic reentry into the high-growth segments as base and induced pre-rolls with a focus on accretive margins. In Q2, we advanced our innovation pipeline with the launch of Redecan amped live resin liquid diamond vapes, addressing consumers' demand for the full spectrum of [indiscernible] strain-specific [indiscernible] that deliver in a [indiscernible] profile. This product combines 80% of live resin with 20% of liquid diamonds, maximizing potency while maintaining natural flavor integrity.

In addition, we entered the Quebec market with [ dates ] with a good supply brand, rapidly achieving that top 3 SKU positions in the province while underscoring effective execution and strong consumer update. Operationally, we hit our highest quarterly volume in 2 years with over 5.5 million units shipped in Canada in Q2. We also completed our first harvest from our restarted outdoor cannabis [indiscernible] in Cayuga, Ontario, exceeding expectations on the THC content. With this extra biomass, our cannabis cultivation capacity rises to 200 metric tons annually but this boost not only allows us to provide high-quality products at reduced costs and improve our profit margin, but also helps us expand into fast-growing markets, supplying both Canadian and international customers, including those in Europe to meet increasing global demand. The positive momentum of the past two quarters reflect the trajectory of Canadian cannabis business. With the right product mix, healthy margins, we're well positioned to elevate this business in the second half of 2026 and beyond.

With the reschedule of cannabis in the U.S. now is the time for Canada to modernize its regulation and secure its position as a global cannabis leader, including excise tax reform, marketing flexibility, health care integration and on-premise consumption. Without modernization, Canada risks becoming an exporter of raw products while value creation, intellectual property and long-term economic growth moves elsewhere. As a global policy accelerates, the choice is clear, modernized Canada's cannabis regulation to support economic competitiveness, consumer education, sustainable growth or risk being left behind in an industry Canada helped to create.

Prime Minister Carney, I hope you're listening to this call, the Canadian cannabis industry has generated a significant amount of jobs, contribute billions of dollars in tax revenues of both federal and provincial governments. However, the lack of regulatory reform is resulting in Canadian producers redirecting their investments and attention towards international markets where excise tax can be circumvented. Given the declining [indiscernible] industry in Canada, excise tax should be reduced, cannabis drinks should be permitted in liquor stores and on-premise location, medical cannabis sales in drug stores with lower excise tax burden while boosting overall tax revenues as the industry grows.

Turning to our beverage business in Q2. Beverage revenue totaled $50 million. We continue to make progress executing our integration and optimization strategy. We delivered $27 million in annualized cost savings in the first half of the year and remain on track towards our $33 million target. We're making meaningful progress in improving performance. However, there is more to be done as we continue to integrate our brands, streamline operations and optimize processes. We acquired brands with the understanding that significant improvements and comprehensive turnaround would be necessary. A process that is currently underway through our integration plan, we recognize this transformation will take time. And while we have not achieved all our objectives. We are on track and encouraged by the positive momentum gained so far. We look forward to the up-and-coming spring product resets with our retail partners and the introduction of some of the new innovations in the market. These changes are anticipated to have a positive impact on revenue in the fourth quarter. Our outlook may seem bullish but conviction is essential for success, which remains our primary focus revitalizing the craft beer category, making beer fun again, bringing people together, fostering meaningful connections and generating long-term value for our shareholders.

We've established brands, breweries, a major distribution system. Tilray is here to stay and not going anywhere. Tilray aims to expand its regional national and global presence through strategic partnerships with leading U.S. and international brands. We expect to share more about this in the future, but we believe these partnerships validate the strength of our platform and our strategic vision. This approach also position us for future opportunities, should cannabis THC drinks become federally legal in the U.S. We're ready to produce and sell as we're currently operating a leading THC beverage operation across Canada with over 45% of the THC beverage market share.

Regarding our U.S. hemp-derived THC business, we continue to offer [indiscernible] flower hemp-derived THC beverages with 5-milligram and 10-milligram format through nationwide retailer partnership. Distribution foods, nature wine, liquor grocery outlets across the country. While regulatory changes may affect [indiscernible] products after 2026, we anticipate compliant participation under new federal laws, if it happens. We're also pursuing international growth by expanding our beverage business into new markets worldwide, we're expect to leverage our future strategic partnerships. Our strategy for beverage abroad is evolving with an emphasis on craft beer and nonalcoholic drinks, including energy beverages that meet the demands of consumers in this expanding sector where brands such as Hi*Ball, our clean energy drink, Liquid Love our sparkling water brand. Hi*Ball has set the launch in the U.K. in Q4 for the expansion plans also underway for the Middle East and Africa.

Beyond nonalcoholic beverages and the energy drinks, we continue to explore opportunities to build on our global craft beer segment. Tilray recently participated in the American Craft Beer Expo in Japan and gain valuable insight which the team will pursue in the future.

Rounding out our beverage strategy, we're also focused on expanding our nonalcoholic beverages in the U.S. and across international markets. our recent innovations, including non-Alc under Montauk, 10 Barrel and our non-Alc ready-to-drink canned beverages and distilled spirits, including [indiscernible]. Within the spirits category, despite market challenges in Q2, we focus on enhancing our commercial strategy, resulting in a 9.2% increase in depletions across Vodka, bourbon and gin with Vodka leading by double digit for the quarter. While the Bronco seasonal release sold out rapidly, our ongoing efforts to remain focused on expanding product distribution to additional states and beyond. With 5 years experience in the beverage alcohol industry, we remain confident in our future trajectory as we continue to enhance operational efficiency.

Now turning to our wellness business. We generated revenue of $14.6 million, driven by a strategic focus on value-added innovation including high-protein, super seats, better-for-you breakfast products, better-for-you snacking and the continued success of our Hi*Ball clean energy drinks. Within our ingredient sales business, we've expanded our range of offerings in hemp protein and [ oil ], helping us further develop our business in North America and Asia. Our hemp food business remains fully insulated from proposed HAM THC regulation as these products contain zero THC and are broadly distributed across mainstream retail.

In closing, we are confident in Tilray's trajectories for the second half of fiscal 2026 and beyond with a diversified, scalable platform, improving fundamentals strong liquidity, regulatory tailwinds developing globally, Tilray is well positioned to capitalize on the next phase of growth across cannabis, beverage and wellness products. Thank you to our shareholders for your continued support and confidence in Tilray's long-term strategy.

I will now turn the call over to Carl to walk through our financial results in more detail. Carl, are you ready?

Thank you, Irwin. Before I begin, please note that we present our financials in accordance with U.S. GAAP and in U.S. dollars. Throughout our discussions, we will be referring to both GAAP and non-GAAP adjusted results and we encourage you to review the reconciliation contained within the press release of our reported results under GAAP with the corresponding non-GAAP measures. This quarter, we are reporting record second quarter net revenue and strong year-over-year improvements in profitability, and we are reaffirming our full year 2026 adjusted EBITDA guidance. Net revenue for the quarter was a record $217.5 million. Revenue growth was primarily driven by strong results in our international operations, both international cannabis and Tilray Pharma. Additionally, Canadian adult-use revenue grew year-over-year. Cannabis net revenue increased year-over-year to $67.5 million during the quarter driven by a strong 36% increase in revenue from international cannabis and a 6% increase in Canadian adult-use cannabis. The continued year-over-year growth in our international cannabis business reinforces our view that Q1 results were temporarily affected by the timing of import and export permits. As a result, Q4 2025 and Q2 of this year provide a more accurate reflection of our ongoing performance expectations for the duration of the fiscal year.

With the continued growth of international cannabis, we deliberately chose to scale back supply into the Canadian wholesale market in the quarter and redeploy that supply, along with new growth into the higher-margin international cannabis markets over the remainder of the year.

Beverage net revenue for the quarter was $50.1 million. Beverage revenue was impacted by category-wide headwinds in the craft beer segment and our own portfolio optimization efforts under Project 420 where SKU rationalization and margin-focused initiatives continue to impact revenue. However, we expect spring retailer product resets to help mitigate industry trends. These upcoming changes should improve brand visibility and align product mix with consumer preferences, which we expect to benefit better revenue and gross margins in the fourth fiscal quarter.

Wellness net revenue was flat year-over-year at $14.6 million based on our strategic focus on value-added innovation and continued growth in Hi*Ball and the ingredient channel. Results were offset by challenges in the club retail channel, which we are addressing through targeted initiatives.

Distribution net revenue increased 26% year-over-year to $85.3 million based on our focus on competitive pricing, the prioritization of high-margin SKUs and favorable impacts from foreign exchange. We believe our distribution business will continue to complement and strengthen our international cannabis segment as we grow both in tandem.

In terms of contribution, cannabis revenue accounted for 31% of revenue. Beverage revenue was 23%, distribution was 39% and wellness accounted for the final 7%. Gross profit during the quarter was $57.5 million, and gross margin for the quarter was 26%, while margins increased in cannabis, distribution and wellness. Margin construction in the beverage segment negatively impacted the gross margin for the quarter. By segment, beverage gross margin reached 31% this quarter. While this represents a temporary decrease from last year, we are confident that the ongoing implementation of Project 420 will deliver significant improvements while also actively working on additional cost savings to improve overhead utilization as well as SG&A.

As these initiatives progress and sales volumes recover, we anticipate stronger overhead utilization and a return to higher margins. Importantly, we remain on track to achieve $33 million in annualized cost savings from Project 420 by the fourth quarter of 2026, positioning our beverage segment for long-term success. Cannabis gross margin increased to 39% compared to 35% last year. The increase was due to a greater proportion of sales being generated in the higher-margin international markets but was offset by increased sales in lower margin price competitive categories in the Canadian adult-use market like vapes and [indiscernible].

Distribution gross margin increased to 13%, up from 12% last year, while continuing to grow top line revenue. In wellness, gross margin rose to 32% from 31% as we successfully managed input costs and enhanced operational efficiencies. Our adjusted cash operating income for the quarter was positive $6 million, which excludes the noncash impacts of amortization and stock-based compensation. Net loss for the quarter was $43.5 million, a 49% improvement year-over-year compared to $85.3 million or $0.41 per share compared to $0.99 per share. It should be noted that EPS was impacted tenfold by the reverse stock split and has been reflected in both periods. Adjusted EBITDA for the quarter was $8.4 million compared to $9 million last year. Cash flow used in operations was down to $8.5 million compared to $40.7 million last year. The $32.2 million improvement in cash used in operations was almost entirely related to reductions in working capital. We ended the quarter with cash and cash equivalents and marketable securities of $291.6 million, $0.8 million in digital assets and improved from a net debt position of approximately $4 million in the prior quarter to a net cash position of almost $30 million at the end of the period. Additionally, during the quarter, we also completed our ATM program in the market. Our strong cash position provides us with the flexibility we need to execute on strategic opportunities and take advantage of it's changing regulatory landscape and we intend to work to further strengthen our balance sheet throughout the remainder of the year.

Finally, we remain confident in our business, our strategy, and our opportunity, and we are reaffirming our 2026 adjusted EBITDA guidance of $62 million to $72 million. We can now open the call for Q&A.

[Operator Instructions] The first question comes from the line of Bill Kirk with ROTH Capital Partners.

On the intoxicating hemp bands for November implementation, is there anything Irwin that the industry can do to try to help improve the regulatory outcome? Is there any way to kind of extend the grace period, reverse the band, carve-out particular categories? Like what can you do or what can the industry do to get a better outcome there?

Thank you, Bill. Great question. As you know, this, for us, was a growing business and there is a lot of demand for these products. And we are working with some congressmen, senators, lobbyists to either extend the deadline or to change some of the regulatory that would have a regulated amount of milligrams, whether it's 5 or 10 milligrams and to be sold on a national basis. And I'll tell you, so far, I have a really good feeling because we're talking to the different associations other than Senator McConnell and whoever backed to him, there's no one out here against this and thinks this is something that should be banned.

The other thing, Bill, just the other thing, I mean, there's a lot of jobs that will be lost if this happens, which is something very important too.

For sure. Carl, you had some comments about holding back supply and shifting it into international markets. Am I hearing that right that, that would mean sales that could have been in this quarter simply come later? And is there a way to quantify how much was held back?

So what I said was that we held back from the Canadian wholesale market at lower pricing than what we did in the prior year. And so last year, we did about $5 million. We obviously have the inventory levels that we have that are on the balance sheet that we could have -- that we can redeploy into European markets over the next 6 months of this year.

So it's just redeploying better margin sales, Bill, where we can sell it into Europe and get much higher margin for it than selling it into the wholesale market where we don't get the margins and in some cases, we're even selling to a competitor. So that's what it is.

Our next question comes from the line of Robert Moskow with TD Securities.

This is Victor on for Rob Moskow. Two for me, please. First, I wanted to ask about Canadian adult-use cannabis. Growth in the quarter was about 6%. How much of that was volume growth versus price mix? Did you gain market share in the quarter? And then second, can you give a little more color on what drove the substantial increase in distribution sales? Was there any timing benefit that was realized in the quarter?

So number one, absolutely, there was not price. Some of it came from new distribution of anything. It was a strike in British Columbia that ultimately hurt us. And we did gain a little bit of share, not a lot in the quarter. So it's demand. I think there's a lot we did in different markets. A lot of our new products started to roll out. And -- so that was the big reason from our growth, having supply. And I think just the team has done a great job. This is the highest quarter in us in selling the units 5.5 million units that we sold in the quarter. So again, if anything, throughout the rest of the prior years, we saw lots of price compression. I think the good news is we're not seeing that price compression right now. But we're seeing demand continuously growing and we're seeing all the Tilray different brands growing in the marketplace. And again, what I'm talking about is all our products, it's our flowers, our pre-rolls, our edibles, our vapes, our infused vapes and our drinks.

Sorry, in regards to CC Pharma, listen, I think CC Pharma has been part of Tilray since 2019. and trying to figure out what is the right position is one of our largest business. And we have the [ Euro ] team and with the growth and the opportunities in Germany have realized a couple of things. Number one, they're selling into pharmacies today. We're using the CC Pharma team to sell cannabis also into the pharmacy and also to deliver.

The other thing is this year, we're able, from our buying power and get better margins and demand for regular medicines, and we're seeing some great growth. It's the biggest quarter we've ever had with CC Pharma and some of the most profitable quarters we've ever had. So we're looking at how we really take this business for online. We're looking at how we're going to expand this business and take this model into other countries. And again, it's how we utilize the sales organization of CC Pharma or now named tilray Pharma and using that organization to sell more and more cannabis into the drugstores that it sells into.

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

First one for me. You mentioned the expectation for Tilray Global Medical to approach $150 million, I believe. So just any color you could provide maybe on the timing of that expectation. And then you also mentioned some commentary briefly regarding potential regulatory changes in Germany as well as pricing pressure. So could you help to maybe quantify how big a risk you're seeing from each of those potentially for 2026?

So in regards to -- listen, I think from an annualized basis, right now, we're on a run rate for that $150 million, and that is both Canada in international markets, okay? And the majority of that is coming from international markets. In regards to regulatory change, I'm not seeing and not concerned with regulatory changes in Europe and Germany. And I think if anything, we like what has ultimately come out of the German government. And in regards to demand, we see more and more demand. As far as price compression, and you heard what I said before. And this is where Canada better watch out. When you look at a lot of the Canadian LPs, there's a lot more the Canadian LPs, there's Israeli companies. There's a lot more companies selling product today into Germany. But Tilray has been in Germany since 2019, 2020 with Tilray Medical. We are the only one or one of the only ones with a grow facility there. And we work very, very closely with the doctors in Germany. You heard what I said before about having Tilray Pharma, where we are vertically integrated from our grow with our salespeople and have our own distribution piece there. So yes, a lot of product coming into Germany, which forces price compression. But what they're going to realize is the quality of product, you get what you paid for. And I think that's what important is they recognize that the Tilray medical products stand for quality.

I appreciate that. Second question for me, just turning back to the Canadian market, we had some commentary. More broadly, I just wanted -- to give some color in terms of what are your expectations for growth within the Canadian market? Looks like we finished about mid-single-digit growth for 2025. So what's your expectation now for 2026? You talked about some of the strong volumes there. But it does seem like volume growth has tempered a bit despite pricing pressure stabilizing for the Canadian market. So I wanted to hear more about your expirations for growth in the Canadian market and if a slowdown in growth also led to your decision to shift some of that product international?

Well, first of all, this slowdown of growth. I had a 6% growth, and I had the highest quarter ever in selling units, okay? I think one of the things we're looking -- continuously looking at is how we grow this to more and more profitable business, and we can sell tons of wholesale product, that's considered growth, but we're not going to do that. But what we're looking continuously at is how we're coming out with added value products and premium products. And today, we have a 50% share on our drinks, which continuously is growing and the demand in that marketplace. We also have the highest share of flower in the marketplace. We sell over 80 million pre-rolls. We sort of backed away from the vape category because of the margins and we're not making money on it. So I see the categories from us, if I get mid- to high single-digit growth, I'll be very, very happy in the Canadian market. Now with that, I got to tell you, Blair is on the phone, and he can jump in here any time. I have seen some of the best lineup of new products coming out that this company has ever had. And I think that's going to help new products are key. The other thing is, listen, the quarter and that pretty strong -- they had a strike and I think if other Canadian LPs decide they want to sell product in Europe is just going to be supply. Tilray today has close to 7 million square feet of grow in Canada and has the ability to grow 270 metric tons. I think the number in the quarter as we grew close to 200 metric tons. So we have plenty of supply. And not only that is we have supply an ample product available to ship internationally which is -- we're not paying excise tax and much higher margins for us. So the opportunities are there for us. Canada is a small country, but it's a country where cannabis is legal from a recreational, from a federal standpoint, is the only country in the world. And there's more and more users are seeing the benefit of buying cannabis by going into federally legal cannabis stores.

Our next question comes from the line of Pablo Zuanic with Zuanic & Associates.

Thank you, and good afternoon, everyone. Look, let me start with CC Pharma. Maybe you can give more color on that business. I think in the past, you said that you reached 13,000 pharmacies. Now you're talking about tripling your distribution reach. I'm trying to understand that better. And also, if the new regulations in Germany, top delivery your CC Pharma reach could be a big asset in terms of pharmacy reach? Would you be willing to also sell other people's products besides Tilray Brands through CC Pharma.

So number one, as I said, we've owned CC Pharma for since 2019, Pablo, and it was finding the right way to operate this business. And originally, we acquired it as part of tenders for Germany. And we've been a part of the German drugstore business in Germany since then. We have now changed a lot within CC Pharma where we ultimately modernized, we put money into technology there. We've taken labor costs out of there. We've been able to buy medicines and regular medicines from some of the pharmaceutical companies at much better prices and made some big investments. And that is a big -- is where they're buying medicines and making sure we're buying them at the right price and selling them at less higher margins. So we have focused on that business. But back to your point, is today, we have the ability to win to more and more pharmacies. The CC Pharma or Tilray Pharma has its old sales organization. And you don't see today cannabis, medical cannabis sales go through CC Pharma, it goes through our medical cannabis business internationally. So there is a big focus to use that sales organization to sell more and more cannabis, medical cannabis in Germany. And with that, with the regulations and everybody has to go direct to a pharmacy, it can't buy online, there's bigger opportunities for us because more patients have to visit the pharmacy.

The second question is would I sell other company's product? Great question. We're in the business to sell and make profit. But again, why would we want to sell someone else's products that we can deliver what the needs are for patients. But again, some patients may want some other competitors' products, and it's something we should look at from a standpoint, does it make sense for us to carry some other products, I don't know. And that's not something we've looked at, but it's something we definitely should look at.

Okay. And then just a follow-up in terms of beverages. Obviously, this quarter, you had very strong performance in cannabis but a steep decline in sales in beer and profit margins. Maybe just give more color in terms of what is it that has not worked there? You talked about positive momentum, but the numbers don't show that momentum and why put so much hope on just the spring resets. I mean is it just about that? I mean more color would help. And then just long term, a reminder about your confidence that the beer business really fits your cannabis strategy longer term or they just play together, and we should think of them as a diversified portfolio anyway.

So number one, there's many, many companies out there that have diversified business portfolios. And if you look at most companies, some have food, some have personal care, some have beverages. You look at Pepsi, they have snacks, they have food, they have drinks. If you look at other companies, they have personal care, they have food. So I think it's important to be a diversified consumer packaged goods company, which we are, and we're -- Tilray brands. I come back and look at -- we got in the beer business in late 2020, COVID came along where our first acquisition of SweetWater and then multiple acquisitions. It's taken us time to integrate these businesses. We went from only 1 plant to 10 plants now we're down to 8. We went from only 1 brand to 18 brands. We went from probably being the tenth or 11th largest [indiscernible] now down to the fourth largest [indiscernible]. So there's a lot that's happened over the last 4 to 5 years. And with that, there's been a lot of integrations. And these brands that we bought from ABI and from Molsons, they were not some of the best-performing brands at the time, and it took some time to turn them around. So yes, I have a lot of confidence.

Listen, beer is not going away. Beverages is not going away. And just like CC Pharma, here we are from a vertically integrated business, we have manufacturing, we have brands, we have a distribution. We have an infrastructure, salespeople. And it is taking probably some more time. And the other thing is at the same time, the industry has had its decline. But I'll tell you what, as you come back and see a lot potentially will happen in regards to [indiscernible] and Hemp infused drinks, and who are they looking at to be the leader in that is Tilray because of our beverage business and our cannabis business. I say this, and I'm not making projections, but if I could sell cannabis infused drinks, in the U.S. tomorrow. If I look what I have a 50% share in Canada, and I multiply that from a 10x what I would have here it's $0.5 billion business for us here. And someday, we're going to be able to sell drinks in the U.S. infused with something and whether it's CBD and cannabis, in regards to President Trump new rescheduling in regards to drinks that will get approved by the FDA for -- whether it's for anxiety, for pain, for sleep et cetera. So the infrastructure is there for future opportunities, which is important. But to the point, we're in the beverage business today. We're in the beer business. We're in the energy drink business. We're in the water business, we're in vodka Seltzers business. And I'll tell you what. The other thing is this here, there's a lot of companies talking to us involved and to get us involved with different aspects of beverages because of what we have and how we're vertically integrated. So yes, am I totally doing the dance with our results today, coming out of there, No. But do I feel good about what we will do with this business? And what we'll do with these brands, absolutely on what our strategy is. Unfortunately, it just is taking a little more time. And if you go back and look at the big companies, Molsons, ABI, Constellation Brands. They weren't created within 5 years. And it's basically 5 years and we're #4 within the craft beer business. A lot of brands have gone away in the craft beer business which gives more and more opportunities. So I am really bullish on the beverage business. And if you look at the supermarkets today and you look elsewhere, Beverages is the biggest category out there. And I think probably the big thing, we are not just depending upon the resets that are happening in the next 2 months, gaining share in C-stores gaining share on premise, gaining share in general. And that's what I'm excited about.

That's great color. Look, if I may, I want to squeeze one more if you don't mind. In your -- and just a short answer. In your press release, you talk about U.S. federally rescheduling cannabis. But I think my understanding and most people's understanding would be that if they reschedule, it will still be a state-by-state program. It will not be federally rescheduled. But I guess your interpretation that it will be fairly rescheduled. And I think that's a big distinction. Do you want to just share some color on that, but just briefly?

Our plan is what I've said, if a reschedule -- what we're focused on, and I think a lot of other companies are focused on recreation, we are focused on medical cannabis. And our plan is to leverage the infrastructure and expertise and know-how that we've developed that we got a $150 million business in Tilray today. And with that, our $300 million distribution platform is something that we utilize in Europe and how do we ultimately do that here. And again, engage with the outreach of the government with the FDA and with our -- working with hospitals, working with research, doing clinical studies. And that's what we're looking to do there in regards to our U.S. entry into Tilray U.S. not looking at it today of how we do state-by-state from a recreational standpoint. And ultimately, what are we going to do? And we have so much research in pain, anxiety, cancer-related drugs, cancer anti-vomiting drugs and taking that science and taking those and taking our genetics and strains and working with hospitals and potentially strategically aligning with a pharma company to execute that within the U.S. is what we're looking to do.

The last question comes from Frederico Gomes with ATB Capital Markets.

Just the first question, just going back to the rescheduling comment there with potential rescheduling in the U.S. I'm just curious, does that change the way you see potential investments in the state legal cannabis businesses like you've done in the past with [indiscernible].

Yes. It doesn't [indiscernible] with the state. But again, as I said, Tilray is committed to invest in research. Tilray is committed to invest in clinical Tilray is committed to working with the FDA, the DEA, is coming up with approved cannabis drugs that can be used and sold for some of the conditions that I mentioned before. But it's not state-by-state where we're looking at recreational. We are totally looking at this from a total medical standpoint.

Got it. And then second question, international cannabis. Could you help us understand outside of Germany, what are the main international markets you have right now? And do you anticipate any other international markets where we could see some sort of regulatory change near term this year that could lead to growth like we saw in Germany since April 2024.

So listen, whether it's Poland, there's today Italy markets. There's the U.K. markets. We're looking at oils for France and Spain. And I will tell you this here, without going into names, and countries, there's a lot of stuff happening in the Middle East in regards to working with CBD and THC from a Middle East standpoint, there are some stuff and testing going on in India in regards to hemp and fused THC products. So again, and I will say this here, and that's why I take President Trump from a rescheduling standpoint. Rescheduling cannabis from the Schedule I to a Schedule III has opened up the eyes and the legality a lot of other countries here. And I think that's what was important, too. Once the U.S. did it, there's a lot of other companies now are saying this stuff is not taboo. It's something that's really benefit and this can be really helpful in a lot of different diseases, and it can be very helpful as a medicine.

Thank you. I'd like to pass the call back over to management for any closing remarks.

Thank you very much, operator, and thank you very much for everybody joining us today. As you can see, there is a lot happening at Tilray. And as a diversified consumer packaged goods company that today sells products into the recreational cannabis market in Canada, sells medical cannabis in Canada, sells drinks in Canada, sells beverages in the U.S. spirits and our hemp-infused -- our hemp foods, our wellness products and then our international products with international medical products and our Tilray Pharma. So there's a lot within Tilray today. there's a lot of science. There's a lot of research, there's a lot of genetics that we're doing. And as a 5-, 6-year-old company today that's really pulling this all together, and there's no one out there today that is diversified like us. One of our strengths is our balance sheet. It's -- where in the net cash position. So we're able to invest in research. We're able to invest in trial. We're able to invest in clinicals today.

So you can't look at us today as a recreational cannabis company. You can't look at us as just a beer company. And you've got to look at us today as a consumer company that looks at products and looks at different ways to help bring consumers together, help bring people together. And that is some of the stuff we're doing. At the end of the day, as you can see what we've done this quarter in regards to our profitability for our shareholders. And again, it's been 5 years and putting this together piece by piece, and there's a lot to do. The question asked by Pablo in regards to our beverage business. Yes, there's a lot to do in the acquisitions that we've done. And one of the proof is in here, look at the acquisitions we've done on cannabis as we put these cannabis facilities and brands together took out costs, integrated the businesses, and we're seeing the performance of that today. It's no different. We've really only got into the international cannabis business over the last year or so, and that's on the run rate to be a $100 million business.

So there's a lot to do within Tilray. There's a lot of great assets within Tilray, whether it's facilities, whether it's brands, whether it's distribution, whether it's know-how. And there's a lot of AI coming into Tilray today to help us implement a lot of what's happening. I appreciate those that have stayed with us as shareholders I know there's times you're frustrated and there's times probably I'm frustrated more than you are. But I do see a good path with a lot that's happening coming together. I got to tell you, we deal with a tough regulatory environment out there. We pay some of the highest excise tax in Canada and I hope Prime Minister Carney heard me how important this industry is for the Canadian market, the jobs that created the tax dollars, and we don't want to see this run away from Canada. I commend President Trump for rescheduling. He was the first President that really took this on. Everybody else sort of ran away from it. And it's up to us now to show what this really can do. So thank you very much for getting on our call today, and happy New Year to everybody.

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

Thank you for joining today's conference call to discuss Tilray Brands' financial results for the first quarter fiscal year 2026 ended August 31, 2025. I'll now turn the call over to Ms. Berrin Noorata, Tilray Brands' Chief Corporate Officer. Thank you. You may now begin.

Thank you, operator, and good morning, everyone. By now, you should have access to the earnings press release, which is available on the Investors section of the Tilray Brands website at tilray.com and has been filed with the SEC and SEDAR.

Please note that during today's call, we will be referring to various non-GAAP financial measures that 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. The 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 response to 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 those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements.

Today, we will be hearing from key members of our senior leadership team, beginning with Irwin Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary, followed by Carl Merton, Chief Financial Officer, who will review our financial results for the first quarter of fiscal year 2026. And now I'd like to turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon.

Thank you, Baron, and good morning, everyone, and thank you for being here for our Q1 results. Q1 of fiscal 2026 was a testament to the significant momentum Tilray has built across our businesses over the years. I'm proud to report that our strategic focus is continuing to strengthen our profitability, our balance sheet and leveraging our global platform to drive innovation in cannabis, beverage and wellness and continue to deliver solid results for our shareholders.

I want to extend my sincere gratitude to our shareholders for their ongoing support and belief in Tilray's vision. It is encouraging to see our stock regain strength this quarter and return to full NASDAQ compliance. Notably, in the months of August and September, Tilray traded well over 1 billion shares each month, highlighting the tremendous interest in our company and not a lot of companies have 1 billion shares trading on a monthly basis. We sincerely thank our shareholders for their continued confidence in our strategy and their commitment to investing in our company, your belief in our long-term vision and what drives us forward. Now go out there and buy some of our products.

Notably, during the quarter, we achieved net income of $1.5 million and earnings per share of 0, highlighting our commitment to sustainable growth and operational efficiency. We achieved revenue growth across all our business segments with the exception of the Beverage segment, which we remain flat because of deliberate decisions to optimize our craft beer SKU portfolio under Project 420. Overall, total revenue increased by 5% year-over-year to a Q1 record net revenue of $210 million, fueled by double-digit growth in our Canadian adult-use and our international cannabis business, which delivered 12% and 10% growth, respectively. We also continue to strengthen our balance sheet by reducing our outstanding debt by $7.7 million this quarter. bringing our net debt-to-EBITDA ratio of 0.7x cash to and our cash equivalent to $265 million.

Our results are underpinned by our deep understanding of product innovation and evolving what consumers prefer. This expertise allows us to shape innovative offerings and not only meet current demand, but anticipate future needs, keeping Tilray at the forefront of the cannabis, beverage and wellness markets. Today, Tilray owns and operates more than 40 unique brands in over 20 countries, and we are the predominant global cannabis leader trusted by patients, medical professionals and governments in over 20 countries and #1 Canadian cannabis producer by revenue. the fourth largest craft beer producer in the United States and a market leader in branded hemp products across North America with our portfolio of high-protein hemp snacks and better-for-you products, holding nearly a 60% market share and now a leader in the new exciting hemp-derived Delta 9 THC beverages across the U.S. We have built a diversified global platform that is a leader in every industry which we compete.

Let me briefly review each business. Our cannabis business, as I said, grew 5% year-over-year to $65 million. Globally, the cannabis industry continues to evolve, and Tilray has the cultivation and manufacturing agility at the right cost to compete and lead in any commercial markets around the world. Recent developments in the U.S. have strengthened our optimism around rescheduling of medical cannabis, and we've seen in other countries as we've seen in other countries around the world. We believe rescheduling would enhance our patient access and improve the quality of patient care, promote scientific research and support responsible regulatory framework. The medical cannabis industry in the U.S. currently estimated to be at least a $10 billion market, which would create a potential opportunity for Tilray to capture at least a 3% to 5% market share, representing a significant $300 million to $500 million business opportunity.

We've identified multiple pathways to participate in the U.S. medical cannabis industry, positioning ourselves to take advantage of the substantial growth potential when it happens. In Q1, our Canadian cannabis business delivered strong results. Tilray reinforced its position as Canada's largest legal cannabis company by revenue with Q1 revenue up 4% year-over-year to $51 million. In the adult-use channel, Tilray was the top 5 licensed producer. We grew in market share, closing the gap to the #1 LP in market share by 53 basis points. We held the #1 position in key categories such as pre-rolls, beverages, oils, chocolate edibles. And by the end of the quarter, we also reached the #1 spot in flower while maintaining our top 10 positions across all categories.

Congratulations to Blair and his team. We believe our extensive scale represents a significant competitive advantage within the Canadian market, where we manage approximately 5 million square feet of cultivation space and currently maintain 210 metric tons of cannabis in production with additional capacity readily available. This position us to effectively meet future demand. Furthermore, Tilray is well prepared to supply both European and U.S. markets as regulatory framework develops these markets and it continues to expand. In Canada, we also foresee substantial potential as regulatory reforms may lead to transformative developments such as expanding cannabis in health care, unlocking new opportunities through proposed cannabis health products and broader insurance coverage, making medical cannabis more accessible to patients. on-premise consumption for THC beverages, which I believe is big, a rollout of on-site consumption to drive responsible use and create a vibrant experimental cannabis beverage market. And of course, regulatory modernization, which we've been talking about, updating the outdated policies that restrict competitiveness and paving the way for innovation and growth in Canadian cannabis industry.

Turning to our International business. Our international cannabis revenue grew 10% year-over-year to $13.4 million. And this is with not being able to obtain permits in Portugal to allow us to ship around the rest of the countries. And we remain uniquely positioned to gain market share as the global consumer preferences and the regulations evolve. In Germany, we continue to expand our commercial medical cannabis portfolio and are actively leveraging our Tilray Medical and CC Pharma distribution network across pharmacies throughout the country to drive further growth. Looking ahead, we expect to increase our medical cannabis distribution footprint by threefold in fiscal 2026, significantly enhancing our reach and impact within the German pharmaceutical market, and we have that access through CC Pharma. In Italy, our Italian subsidiary, FL Group received the first license from the Italian Ministry of Health to distribute medical cannabis flower for therapeutic use.

We also partnered with [indiscernible], a leading Italian pharmaceutical company to expand access to medical cannabis extracts and provide targeted education through their national network of medical and scientific professionals. We continue to expand our growing capabilities in both Portugal and Germany, strengthening our EU GMP certified cultivation infrastructure and to meet evolving global demand. Currently, we produce 21 metric tons of medical cannabis flower in Europe and have the capacity to significantly increase the amount as demand continues to grow. Our expanded growing operations not only supports our leadership in established markets, but also positions us to rapidly respond to the regulatory environments open across Europe and way beyond.

European cannabis reform continues to progress, and we're seeing that. And we're excited to witness important developments like the European Union Canapult project and Spain's recent approval of medical cannabis. Tilray is proud already to be involved in medical cannabis research in Spain through a partnership with the University of Madrid, supporting advancements in patient care and responsible regulations across Europe. Now on to our distribution. Our European medical distribution business, CC Pharma continues to grow with revenue increasing 9% year-over-year to $74 million. This segment remains a significant driver of our European cannabis operations. and our infrastructure provides a strategic advantage that enable us to capture increased market share as both the regulatory environment and industry landscape evolves across Europe. And as I said before, we have access to over 13,000 drug stores within the German market.

We remain confident in our global expansion strategy with Tilray well positioned to drive international growth and leveraging emerging opportunities across cannabis beverage and our wellness business. International beverage, which is a new business for us, building on our international footprint, our infrastructure, our growth strategy, we will be accelerating the expansion of our nonalcoholic beverages portfolio across multiple international markets. We expect our brands, HighBol, Liquid Love, Runners High to gain traction with consumer opportunities. We built a dedicated team focused exclusively on servicing our international customers. This specialized team will ensure that our portfolio of leading craft brands is tailored to the taste and expectations of our global consumers while also supporting our long-term growth in high potential markets worldwide. By leveraging our established distribution networks and brand-building expertise, we are well positioned to capture growth opportunities in this fast emerging category and delivering exciting new products to the international markets, and the demand for them is high. Notably, we've already secured a distribution partner in the U.K. for HighBol, ensuring rapid market entry and strong support for the brand in this key region.

Additionally, on the beer side, we recognize the growing demand for American craft beers in the international market. To further capitalize on this momentum, we're actively exploring all opportunities to grow this business, including international manufacturing opportunities, potential acquisitions to expand our reach and better serve our global customers. In our U.S. beverage business, we continue to make progress against our beer integration, optimizing our strategy and our Project 420. We see long-term potential for the beverage category based on the diversification of our offerings and the superior products we produce. We've improved operations, leveraged acquired brands, supporting positive performance. Notably, many of these brands Tilray acquired were previously in decline and are now showing promising results with healthier growth trends and improved overall performance as we move to regain sales authorizations at retail that were lost. This turnaround underscores the success of our focused strategy and our commitment to revitalizing and growing our beverage beer portfolio.

Through Project 420, we've realized $25 million in annual savings, moving closer to our goal of $33 million. We continue to work closely with our distributors to concentrate on promoting strong brands in each of our markets. In the quarter, we experienced growth across key brands and regions. Shotop, the company's third largest brand, was among the fastest-growing craft brand with notable increase in both dollar sales and market share, driven in part by the successful launch of its Ridy pack, which has grown to be the #8 most popular new craft beer nationally. Trends continue to improve for Shotop with a 30-point dollar trend improvement since Tilray acquired the brand in 2023. In the Southeast, Shot Top excelled with a 49% jump in dollar sales. SweetWater Day Trip IPA stood out as one of the top new items in the region.

In Northeast, Montauk maintained its leading position in Metro New York and gained market share nationally with continued demand for its Wave Chaser IPA. Breckenridge Brewery led craft share gains in Colorado with its top Avalanche seasonal and juice drop and brands positioning double-digit growth. And last but not least, Redhook outperformed regional craft beer brands propelled by Big Ballard Imperial IPA strong volumes and our velocity gains, while 10-barrel pub beer 18-packs dominated craft sales in Oregon and 5% of all craft volumes. We also expanded our partnerships, including co-brand craft beer with the Oregon Ducks -- perfect for college football season and a new partnership with INT -- as for the launch of Shock Top Twisted Pretzel Wheat beer, -- you got to try it. It's great. We are making beer fun again, and these partnerships and co-branding opportunities offer significant runway for us to widen our markets. In spirits category, which has been tough, we have introduced several world-class innovation, including Mach 1, our new line of nonalcohol spirits and Casarec in the tequila space.

We've also introduced Mountain Shop, a unique beverage blend, which may take mushrooms available in pouches, which is a unique packaging format to enhance the shot experience and capture the free spirit essence of the Rocky Mountains just in time for ski season. We also kicked off our fifth year partnership with the Denver Broncos with a new line of spirits, including limited editions, Bronco's Honey Whiskey and Bronco's Orange Creamsco ready-to-drink cocktail. In the non-alc category, we're proud that our non-outut beer brand, Runners High, which we only launched in fiscal 2025 is now recognized as one of the top 15 brands in non-out beer and ranks the fourth fastest-growing non-al beer in a hot category in the Southeast, selling across 4,500 distribution points. Following the success of our hemp-derived Delta 9 THC beverages, we've expanded PhizzyJane and Happy Flower product lines to include 10-milligram formats, complementing the existing 5-milligram offerings and the consumers want these products. The innovative HD9 category, leveraging our craft beer infrastructure and distribution networks, enabling us to deliver high-quality products to consumers across 14 states. whether they're new to the category or seeking enhanced experience. We have established partnership with retailers nationwide for HDD 9 brands and now offer distribution to prominent wine, liquor outlets such as Total Wine and more, ABC Fine Wine and Spirits. In addition, in Q1, we saw further growth in regional grocery channels, including Shoprite, Stew Leonards and Winn-Dixie.

We continue on building on this positive trajectory as we move into Q2 and the rest of the year. Today, our beverage business operates more than 20 brands, including 15 American craft beer brands across 7 network manufacturing facilities and 16 brew hubs. We're well diversified across craft beer, spirits, non-alchol and now HD9. -- and energy drinks, we know that there is plenty of opportunity for growth in the beverage category. We have the right leadership, and we're pursuing the right growth strategy, and I'm tremendously excited about the future and the opportunities in the large beverage category. Last but not least, now turning to our wellness business, which is near and dear to my heart. Our Wellness business had a strong quarter, growing revenues to over $15 million. We continue to expand our wellness portfolio with many launches of new offerings, new crackers, new hemp portfolio, new other products that are available at Whole Foods and other retailers. We are now in over 17,000 retailers across the U.S.

These offerings are also launched in Amazon and many other online retailers. I'm highly confident in Tilray's outlook for the remainder of 2026 and beyond with regulatory environments in our industry poised for meaningful evolution. I fully expect positive change ahead, and I'm certain in our ability to adapt swiftly and we will strategically.

Our proven approach, robust product portfolio and exceptional team position us to seize every single opportunity, especially in wellness, where we see us with significant expansive opportunities, and we're committed to unlocking new possibilities through continuous innovation, portfolio expansion, targeted investments, including the opportunities when strategic acquisitions happen. While we've made considerable progress, we recognize we have not yet reached our full potential, and we're far from it in the wellness space. And that is the same with our cannabis business and our beverage business. There's lots of room and lots of white space for us. With that, I will now turn the call over to Carl for an in-depth look at our financials. Carl?

Thank you, Erin. Please note that we present our financials in accordance with U.S. GAAP and in U.S. dollars. Throughout our discussions, we will be referring to both GAAP and non-GAAP adjusted results, and we encourage you to review the reconciliation contained within the press release of our reported results under GAAP with the corresponding non-GAAP measures. Now looking at our results, we are reporting record first quarter net revenue, net income and a significantly improved adjusted free cash flow for the period. Further, we are reaffirming our 2026 guidance for adjusted EBITDA.

Net revenue for the first quarter was a record $210 million, a 5% increase year-over-year. This growth was driven primarily by increased cannabis sales in both Canada and our international markets and increased revenue in our distribution segment. Cannabis revenue increased 5% year-over-year to $64.5 million, driven by 12% growth of adult-use gross revenue and 10% growth in international cannabis. Higher excise taxes and declines in wholesale cannabis offset those double-digit results.

We see material potential for the International segment and expect continued growth once we receive several permits that are currently backlogged in a few European countries. Beverage revenue reached $55.7 million, driven by innovation and impacted by continued SKU rationalization. We advanced Project 420 and integrated acquired brands. Although craft brands and spirits faced challenges, new products contributed 2% to Q1 revenue, supporting our belief in the beverage category's long-term growth. Wellness revenue increased 3% year-over-year to $15.2 million because of our strategic focus on continued innovations with high ball energy, our natural energy drink, high-protein super seeds and better-for-you breakfast and snacking, including the launch of 2 new offerings from Manitoba Harvest at Whole Foods. Distribution revenue increased 9% year-over-year to $74 million in the quarter, primarily as a result of the stronger euro.

From a contribution perspective, 31% of net revenue was generated by our cannabis business, 27% was generated by our beverage business, 7% was generated by our wellness business and 35% was generated by our distribution business. This compares to contributions of approximately 31% for cannabis, 28% for beverage, 7% for wellness and 34% for distribution in the last fiscal quarter. As our international cannabis business continues to expand, we expect to see higher contributions from our cannabis segment over the remainder of the year. Gross profit for the quarter was $57.5 million compared to $59.7 million in the prior year period. Gross margin was 27% as compared to 30% last year. This decline was driven by lower margins in our beverage and cannabis businesses. Looking at gross margin by segment.

Cannabis gross margin was 36% compared to 40% last year as a result of a higher mix of sales in lower-margin categories such as infused pre-rolls and vapes, where we reentered some previously marginprohibitive categories. We believe the decline this quarter is temporary and the actions we have taken to drive profitability and improve margins will be effective in the long term. Beverage gross margin was 38% compared to 41% last year. The decrease in gross margin is due to the inclusion of Craft acquisition 2 sales, which have generally been lower margin. Wellness gross margin was flat year-over-year at 32%. Distribution gross margin was 11% compared to 12% last year based on changes in product mix. Net income was $1.5 million or $0.00 per share compared to a net loss of $34.7 million or negative 4% per share in the prior year period. Adjusted net income improved to $3.9 million or $0.00 per share compared to an adjusted net loss of $6 million or negative $0.01 per share in the prior year.

Improvements in both metrics were a function of reduced SG&A costs, including amortization. Adjusted EBITDA for the quarter was $10.2 million compared to $9.3 million last year. Cash flow used in operations improved significantly to negative $1.3 million for the quarter from negative $35.3 million last year, representing a positive change of almost $35 million. We continue to strengthen our balance sheet this quarter in terms of debt and cash positions. During the quarter, we raised $22.5 million under our ATM program, primarily after our stock increased to over $1 per share.

Further, we exchanged $5 million of our convertible notes for equity early in the quarter, as we already discussed during our last earnings call. During the quarter, we reduced our outstanding debt by $7.7 million, bringing our net debt position down to $3.9 million and our net debt to trailing 12 months adjusted EBITDA ratio to 0.07x, all while ending the quarter with $265 million in cash plus another $1 million in digital assets.

These stronger debt and cash positions provide Tilray with greater flexibility for strategic opportunities, and we intend to continue reducing our debt and further strengthening our balance sheet as the year progresses. As already discussed, our confidence in our business, our strategy and our team has never been higher, and we are pleased to reaffirm our 2026 guidance, anticipating adjusted EBITDA between $62 million and $72 million. We can now open the line for Q&A.

[Operator Instructions] Our first question comes from the line of Aaron Grey with Alliance Global Partners.

First question for me. I just want to talk a little bit about international growth opportunities in the near term. You offered some commentary in your prepared remarks. I just want to make sure I was understanding them correctly. So first of all, just further understanding in terms of where we stand today in terms of the impact on some of the permit delays that you've been having. And then some commentary you provided in terms of the growth, specifically, I think you're referring to medical cannabis business up 3x in fiscal year 2026 and talked about leveraging CC Pharma potential.

I just want to make sure I was understanding that correctly. Were there some things that you're looking to leverage with CC Pharma business that you were not historically -- so just any additional commentary on that would be helpful.

Great. So a couple of your questions. Number one, in regards to permits, we spent a lot of time with the Portuguese government. We've spent a lot of time in Portugal. We're finally seeing permits coming through. And I feel good about that. Where the next big issue that we run into is the quota in Germany and just Germany opening up and increasing more imports into the German market, which we think ultimately, that will happen. But it's not business going away. It just may shift from second quarter into third quarter, as the new quotas move into place in 2026.

So with that, I feel we've made a lot of headway into the Portuguese permit situation. And we got more permits in the last 2 weeks than we've probably got in the last 2 months or so. In regards to a couple of things, the demand in Europe is there. And with that, it's the availability and the growth. And with the team, and now we have moved some of the Canadian team into international. We look to grow in our facility today in Portugal is running about 50%. We have the opportunity to double that at 40 metric tons, and that's something we're working on. The other thing is to really increase our growth to probably 6 or 8 metric tons in our German facility. And also where the opportunity is in regards to bringing product, EU GMP product in from the Canadian market.

In regards to Germany, what I've said and what I was working through CC Pharma, when we acquired it, it was a big part of our license and it was something that there was an opportunity. And what we're seeing is some great expansion with CC Pharma. CC Pharma delivers to 13,000 drug stores today, and that is regular medicines, and the good thing is we're also seeing some good price increase and some good opportunities on the CC Pharma Distribution business.

But more importantly, as we integrate these businesses, whether it is on the sales side and the Distribution side, we see CC Pharma being vertically integrated and distributing our medical cannabis, to a lot more of these drug stores in the German market, and that's a big opportunity for us.

That's helpful color there. Second question for me, just in terms of rescheduling opportunities in the U.S.. You offered some commentary talking about seeing a number of different avenues that you guys are evaluating. Just curious, could you provide some color there? If things were to open up and cannabis was rescheduled to Schedule III. Do you feel like you already have the infrastructure within the existing business to be able to capture some of the opportunity organically? Or do you like some things that might need to be done vis-a-vis acquisition, to capture on that opportunity? I know there's a lot in flux in terms of how that could actually look in a Schedule III scenario, but just any commentary on that would be greatly appreciated.

Well, listen, as I've said before, we have [indiscernible], we have today over 200-plus million metric tons of cannabis grown in Canada. We have a great Canadian medical infrastructure in Canada already servicing the Canadian market. Canadian market is 40 million people. So we service clinics up there. We have a group and an infrastructure that sells to the Canadian market today. Talking about Europe, as we look to sell and our objective is to sell those to $100 million of medical cannabis in Europe, which is all medical cannabis, and there's plenty of research that we're doing over there for anxiety, for sleep, for cancer, for epilepsy. So taking that know-how and transferring into the U.S. is something that's readily available.

And last but not least, if there was an opportunity to partner with pharma company or there was something opportunity for us to buy, we'd be ready and willing to enable to do that as we have the balance sheet potentially as we have the balance sheet to do that. So whether it's taking our current infrastructure, our current people, our current know-how, our current growth, our current research our current genetics for medicine or partnering with a pharma company or buying something is something we're open and ready to do.

Our next question comes from the line of Bill Kirk with ROTH Capital Partners.

On the balance sheet, I see the $1 million in digital assets. I guess, were those investments you made? Or was it crypto that came in from customer payments?

And then taking a step back on the topic, I guess, which coins tokens currencies do you prefer? And what are your cash allocation plans to the strategy given your cash generation and your equity issue in history?

So that is acquisition of a Bitcoin that we acquired 3, 4 months ago. And with that, I'm going to let [ Lloyd Brathright ] just take you through some of our strategies that we're looking at from Bitcoin today as we see relevance with our current investors. Our current users are also Bitcoin users, and we see opportunities, as I've said in previous , as I said in previous meetings and previous releases that we see opportunities with Bitcoin and purchasing our products and purchasing our beer products and we see opportunities with our current investors. Lloyd?

Hi, everyone. So yes, we actually invested in Bitcoin, and we're also looking at some other assets such as Ethereum and Solana. One of the things part of our strategy that's core is enabling our websites so that we can actually accept that coin. So that's going to be part of our strategy later this year. Additionally, we're looking at some investment opportunities from a margin perspective, as well as looking at tokenizing potentially some stock.

And with that, I just want to make sure, listen, we're we see the opportunities, we see the synergies with our products, with our investors, and we're not becoming the crypto company out there, but we see tremendous synergies as we expand Tilray into many new markets and many opportunities from that. And we're working with a lot of partners out there and make sure we have the right people that understand and how to do it.

And then going back to Germany and Europe. I guess when you're servicing those markets, how much of the product has grown today in Portugal? How much is coming from your Broken Coast GMP facility in Canada? And how much that ends up in being sold in Germany and Europe is coming from a non-GMP facility of yours in Canada?

And then I guess the bigger question, what are the risks that Germany changes the way they treat product conversion or product coming from Portugal?

So listen, number one, the majority of our product today is sold in Europe is coming from our facility in Europe, okay? And when product does come from Canada, it goes into Portugal, it then goes to an EU GMP certified facility. So everything sold there is EU GMP certified, okay. With that, again, there's lots of possibilities.

We do have a good-sized German facility that can grow cannabis. We're one of the few, and I'm not sure why in the EU, that Germany would not allow European products to be shipped into the German marketplace. So that ultimately is something we're continuously talking to the German government about. And if they did that, there's not enough grow in German market today to be able to supply the market. So it's something that it'd be very difficult if the German authorities change the market -- change the way products come into Germany.

Our next question comes from the line of Robert Moskow with TD Cowen.

This is Victor on for Rob Moskow. Two questions for me, please. First, can you give us a [indiscernible] for the Canadian adult-use market. Curious on your thoughts on market maturity and your pricing power in the context of the 10% growth you saw this quarter. How much of that maybe looks like volume versus price?

And Blair is on the line, Head of our Canadian market. Blair, do you want to jump in and take that and I can add to it?

Yes, absolutely. Thanks, everyone. Yes, so in the quarter, we saw overall market pricing down 1.3% and volume was up 6.5%. For us, our pricing was actually up 2%, and our volume was ahead of the market. So it was a really strong quarter for us, both on the pricing side and on the volume side. As you saw, we were the only LP in the top 5 to grow share in the quarter. So very, very strong results.

In terms of market maturity, what I would tell you is, in the current regulatory environment, yes, volume has slowed in terms of growth rate, but still very healthy growth rates in the market. And I think what you'll see is over the next few quarters is that -- and Irwin kind of referenced this, is that you will see the regulatory environment improve, and I think you'll see growth continue to go. Overall household penetration on cannabis in Canada is still at a very low number. So we see tremendous runway for growth in Canada within the regulatory framework.

I think I'll jump -- just jump on that for a second. The Canadian market was first. And as we go into our sixth year. With that, again, from a regulatory standpoint, and what are we still sitting with -- still sitting with a high excise tax. We're still sitting with lots of regulation. We've been through price compression. We've been through COVID. We've been through an illicit market. We've been through over 1,800 LPs that are out there, a lot of them have gone away, a lot of growth facilities. And we've gone through educating the Canadian consumer on the benefits of cannabis, and the legality of cannabis without an actuality being able to advertise.

And we have built our good supply today, Blair, which is at retail about a $250 million brand. And from that, that's what we've built over the last 5, 6 years. We have over 5 million square feet to grow. We have the largest growth facility in Canada with 237 metric tons and maybe even more. So the Canadian market has been a great pivotal point for us. Now what we're hoping for is on excise tax, there are some concessions. We're hoping that the Canadian provincial governments allow us to sell our drinks into other retail outlets -- like restaurants that need help or independent retailers or liquor stores. We're looking for changes in regards to where medical cannabis sold versus sold directly through drugstores. And that would change a lot for our Canadian market. So we [indiscernible] now for some big opportunities coming to the Canadian market, and Blair and his team have really put us in a good space there to really move beyond and a good role in regards to our products.

And then my second question is, so leverage gross margin was about 50 bps later than kind of we expected. Can you remind us of your plan on improving profitability in that segment? And also, where are you on that path that 420 path? And what still needs to be done?

So as you saw, we've taken $25 million of cost out, I mean, there's more to go. We've gone through and I think SKU rationalization, $20 million of SKU rationalization and there's more to go. We've closed three facilities so far. So come back in acquisitions, we have acquired close to 12 brands. We have closed -- we had 10 facilities. We've had 18 brew pubs, and also, we have over 900-plus distributors out there. So bringing this all together under one management, one infrastructure, and we're seeing progress, but there's a lot of wood to chop there yet to get those margins to where we need to do.

And whether it's the procurement of cans, the procurement of hops, and one of the biggest things, which you heard me mention in my remarks, a lot of these brands, as we were buying them and decisions were made by the previous owners, we were delisted in a lot of retailers out there. So with that, you saw major declines in these businesses, and we missed the windows of getting these products in the stores. Now these windows have opened up, and getting these products now relisted in these retailers is something that we've been doing. And that's why whether it's Shock Top, whether it's Red Hook, whether it's some of our other brands you're seeing the growth there. And that's what's going to happen -- to get our gross margins up here.

And listen, let's all face it, the beer category is not one of the easiest categories out there right now. And we're fighting through it, both on growth side, innovation side. And I've said it from the beginning, how do I make beer, fun again. That's something we're trying to do. Along the way, make money with it too.

Ladies and gentlemen, our final question comes from the line of Frederico Gomes with ATB Capital Markets.

First question, just thinking about the issues in Portugal. I'm curious how do you see that in terms of managing future risk in terms of your international strategy, whether you're taking steps to diversify your supply chain there? And how would you go about doing that?

So number one, we've got 1.5 million square foot facility in Portugal. We're not picking up and moving it, okay? I mean over a couple of hundred million dollars, it was built and it's a state-of-the-art facility. So I'm in Portugal, I got to stay there. So I got to figure out how to work within those confinements.

And I must tell you, I've had some great meetings with two Ministers in Portugal at the highest levels, and they're very open. There's a new government in Portugal, and they want business. They don't want us leaving. They want to build upon our business there, and they've been very, very supportive of working with us. And since my meetings with our people, we've seen lots of changes and been getting our permits. So I feel a bit on the other hand, listen, we do have a facility in Germany, nowhere near what we have in Portugal. We do have the ability to ship from Canada, and where we would ship it directly into the U.K. and directly into other markets to ensure GMP. So we have options. But first and foremost, we are far from giving up on the Portuguese market.

And other question here, just on Germany. Could you talk about the proposed change there in legislation in terms of prescriptions and how the market works? How do you think that could impact that market? And whether you think that draft that's going there may be approved or not as is? Or you expect changes to that draft? And in terms of timing as well, when do you think the market there could change in terms of the legislation?

Listen, we're supportive of change. But again, I don't want to go there and speculate until I know what the change is, okay. And I think so far, the good news is what we're seeing is the continuous demand and online prescription has not been one of the biggest drivers here. So if there is change, I think patients will find other ways to go out there and purchase cannabis. And it's interesting because Germany has a strong independent drug chains out there. There's no CVSs, there's no wall greens. Individuals are allowed to own like 6 drug stores, are all independent. So like I said, there is multiple stores out there, it's not online. So I see even if it did change, if you can't buy it online, there's still the retail outlets that go to out there.

And I'd like to see some of the change. There's lots of changes -- as we continuously talked about that happening. And we, with our lobby groups are out there working with the German government on what's the right thing for the patients because -- this here is important, too. The difference in medical cannabis is like medicine. If you didn't give patients access to get medicine, that's a problem. If you could [indiscernible] your medicine and didn't have access or patients that sick are dependent on, that's an issue.

So this is being sold as medicine, from a medical standpoint, not from a recreational if you don't get your cannabis from a recreational standpoint that may not be as an issue, but you're not getting your medicine and the government has to take that into view when they're deciding what they're going to do here.

Great. Let me just say this here. I know a lot of have joined now. Unfortunately, not us, there was a technical problem with our provider. And those that were online, did not hear my comments. Sorry about that, guys. You missed some great comments and Carl's comments, okay? If you want to hear me again say it, you can go online and listen, and I encourage you to do that because there's some really good information that both Carl and I deliver today. And I apologize and the carrier they'll hear from us and definitely disappointed. I know you heard music. So we had a lot more to say than the music. But please, it has been recorded. It is online, and you'll get every bit of it. And for some reason, there's an issue, let Berrin know and we'll make sure you get it, and I'm really sorry about that.

In regards to the analyst questions, I think you heard most of those. So you'll be able to get those, the analysts that were here, we're able to hear Carl in our remarks. So I apologize profusely for that.

With that, thank you very much for your time today. I hope some of it wasn't wasted but not hearing our comment. But now you'll have to go online and listen to it. It's only Q1 in 2026. One of our smaller quarters. There's a lot to do. And as you can see, we have a lot of good things in place and trust me, there has been times like you look at and sort of say, what the heck are we doing here, when you look at your stock price, you'll get different things. But this team in over 5 years really have brought a lot together here, in rebuilding a Canadian cannabis business basically from scratch, building facilities, building brands, building products, building different strains, genetics, new innovation and some of the new innovation that's coming out of there, building infrastructure and sales and marketing teams. And again, going through price compression, going through COVID, going through the illicit market as one your biggest competitor out there, and I really want to commend in the Canadian team and what they've been able to do.

In regards to our International Cannabis business. Same thing. It has come together basically with the acquisition of Tilray, and it is really a business I see tremendous opportunities. And we now are getting requests in different countries, whether India, Middle East and places like that in regards to medical cannabis and the opportunities there, and there's a lot of countries and there are a lot of different countries out there that are realizing the benefits of that and also realizing the benefits of medical cannabis versus medicines and cost of drugs that are out there today, and what the benefits will be. So I see big opportunities for us today.

Rajnish Ohri has joined us as new Head of Europe, and is bringing the teams together. And we've done a lot with our Canadian teams to integrate these businesses to get synergies and savings and to get a lot of the know-how because one of the things -- cannabis is agriculture. It's growing, it's yield, it's the size of the flower, it's the potency, and that is something that's important out there. And this is not an industry that -- it's an industry that's spread around the illicit market for many, many years, but it's not an industry that's been around from a legalized market. It's not an industries that's been around from a growth, from a research and development that's all coming together. And countries are realizing the opportunities and what they're doing, not allowing their citizens and patients to be able to buy these products.

The other thing they're realizing is there's tax dollars, that they're missing. And if tax dollars are being sold through an illicit market. In regards to rescheduling, President Trump with his different tweets and his different comments, I think, realizes that has to happen here in rescheduling. Last week with his tweet or 2 weeks ago in regards to CBD in regards to senior citizens, and I can't tell you how many people tell me in using CBD and THC products in regards to pain and anxiety and that and the benefits. What we're seeing today on our Delta 9 products and being sold in limited states and the demand for it. Again, what Blair has seen in the Canadian market with building a $40-plus million business and today, just being sold within cannabis stores. And again, at prices that are not the cheapest prices out there. So we see tremendous opportunity in the Beverage business.

In regards to our Beverage business, it's work we got to do. And again, we got into it in 2020 with the acquisition of SweetWater, acquired [ Montag ], acquired other brands and the businesses from ABI and then the business from [ Molsons ]. We got some great brands, but bringing it all together is a lot of work, bringing the facilities together, getting the cost out, getting the margins up, getting the right facilities. And that's something that Tilray is doing and the team is doing out of Atlanta to bring all this together. And as I said before, not an easy business today with change happening, but we will be in the Beverage business, not just the beer business. And with that, there's a lot of interest in products we're working on.

In regards to our Spirits business. The team is working with our distributor, RNDC. And we've really put a plan in place with RNDC to be in our major markets. Yes, the Bourbon category is a tougher category today than it was, but Breckenridge Bourbon is a great tasting product out there, and there's great demand in certain markets. At the same time, our Vodka has great demand and our Gin and some of our new products that we've come out with are really, really good products and some of the first timer innovation.

And last but not least, you hear me talk about our Wellness business. What Jared and team have done on wellness where we acquired this, there was a negative EBITDA of about $5 million, $6 million and where it's turned around to today, and somebody that's been part of the Wellness category since 1992, '93 and see the growth. And it's all we talk about Wellness. Wellness and Food in regards to the Trump Administration and taking colorings out of food today, higher protein, protein, protein, protein and some of the highest protein is in hemp foods because it's a plant that's grown. So we're in a lot of different categories. We're in a lot of unique places. You look at our balance sheet in regards to our debt-to-equity. It's in a great place. We ended the quarter with $260 million of cash. So there's a lot of good things happening, but there's a lot of work to do.

I really want to thank our team that really makes this happen and roll up our sleeves. Even though there's 2,500 employees around the world here, not a lot for a lot, we got to get done. So with that, I want to thank everybody for listening. Please go back and re-listen to our comments. There's a lot of good comments that come out of today. Thank you to our shareholders for your support and get out there and vote as we have our AGM coming up. With that, have a great Thursday, and look forward to speaking to you in the new year with our Q2 results. Thank you.

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