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Tilray Brands Reports Second Quarter Fiscal Year 2023 Financial Results

January 9, 2023 7:00 AM

Achieved $29.2 Million of Operating Cash Flow and $25.4 Million of Free Cash Flow

15th Consecutive Quarter of Positive Adjusted EBITDA

Maintains Leading Market Share Position in Recreational Cannabis in Canada and Medical Cannabis Across Europe

Net Revenue of $144.1 Million, On a Constant Currency Basis $157.6 million

EPS of -$0.11 and Adjusted EPS of -$0.06

Strategy in Place to Build the World’s Leading and Most Diversified Cannabis Lifestyle Consumer Packaged Goods Company

Completes Acquisition of Montauk Brewing Company, #1 Craft Beer in Metro New York

LEAMINGTON, Ontario and NEW YORK, Jan. 09, 2023 (GLOBE NEWSWIRE) -- Tilray Brands, Inc. (“Tilray” or the “Company”) (Nasdaq: TLRY; TSX: TLRY), a leading global cannabis-lifestyle and consumer packaged goods company inspiring and empowering the worldwide community to live their very best life, today reported financial results for the second fiscal quarter ended November 30, 2022. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

Financial Highlights

Irwin D. Simon, Tilray Brands’ Chairman and Chief Executive Officer, stated, “During the second quarter, Tilray Brands took decisive, effective actions to manage operating cash flow and focus the business on accretive acquisitions and a path to long term profitability. And we have certainly done so – even amid an evolving retail environment - by removing costs and driving efficiencies across the platform in supply chain, procurement, packaging, and labor. We are close to achieving our increased annualized cost savings target of $130 million, consistent with our commitment to building a lean, efficient, and dynamic business that will realize tangible and immediate benefits as the market improves.”

Mr. Simon continued, “Tilray Brands’ re-positioning as a global diversified portfolio of brands will drive our ability to seize top-line opportunities across geographies and business lines. In the U.S., this includes investing in, acquiring or building compelling and profitable lifestyle CPG brands across craft beverage-alcohol and wellness consumer products that are cannabis adjacent, resonate powerfully with consumers, and are strongly positioned in key markets. In Europe, we believe that we are extremely well-positioned overall in a cannabis market. And, in Canada, we will be patient and strategic in building our competitive positioning amid the price compression and difficult operating conditions that we expect will, inevitably, consolidate the oversupply of licensed producers. These efforts will be supported and enhanced by one of the strongest balance sheets in the industry with close to $433.5 million in cash and marketable securities on-hand.”

Operating Highlights

Maintained #1 Market Share Leadership in Canada; Positioned for Long-Term Growth in the Market – Against the backdrop of challenging cannabis market operating conditions, Tilray was able to maintain its top market share position due to the strength of its sought-after brands and products. This reflects the strength of the Company’s product innovation, including with respect to both strains and potencies. Looking ahead, Tilray’s focus on using data and consumer insights coupled with ongoing budtender and consumer education is expected to enable the acceleration of both sales and market share growth.

Well-Positioned to Capitalize on Growing Acceptance and Legalization of Cannabis across Europe – Even as Europe contends with a difficult economic climate that has negatively impacted the cannabis industry, the positive trends towards greater acceptance of medical cannabis and legalization of adult-use continue. We believe we are exceptionally well situated to benefit from the meaningful economic growth that will come to our industry as a result of these positive changes, given our ability to provide the most sought-after, consistent and sustainable cannabis products for the medical and adult-use markets. In Germany, we are in a win-win position regardless of whether in-country cultivation is exclusively permitted or whether imports are also allowed given our domestic footprint with our Aphria RX facility located in Germany along with our facility in Portugal. In addition to our supply-chain footprint, we are also uniquely positioned to take advantage of the insights and learnings we have developed through our participation in the Canadian adult-use market. This experience, paired with our competitively advantaged supply-chain footprint, gives us great confidence in our ability to lead the European medical market and German adult-use market in the future.

Continuing to Expand U.S. CPG and Craft-Beverage Portfolio, with Accretive Acquisition of Montauk Brewing Company – In the U.S., Tilray’s businesses include SweetWater Brewing Company, the 10th largest craft brewer in the nation; Breckenridge Distillery; and Manitoba Harvest, a pioneer in hemp, CBD and wellness products; as well as Montauk Brewing Company, the fastest growing craft beer brand and #1 craft brewer in Metro New York, which Tilray Brands acquired in the second quarter of fiscal 2023. The Montauk Brewing transaction was immediately accretive to EBITDA and the Company expects it will deliver strong revenue and adjusted EBITDA on a go-forward basis. This will be accomplished as a result of Tilray’s ability to leverage SweetWater’s excess capacity as well as its nationwide infrastructure to significantly expand Montauk Brewing’s distribution network beyond its concentrated presence in the Northeast, making it a true national brand.

The Company is focused on driving revenue gains across its diverse portfolio of businesses, which we believe will ultimately create a strong channel for additional revenue in adult-use cannabis, pending federal legalization.

Strategic Growth Actions

Live Conference Call and Audio WebcastTilray Brands will host a webcast to discuss these results today at 8:30 a.m. ET. Investors may join the live webcast available on the Investors section of the Company’s website at www.tilray.com. The webcast will also be archived after the call concludes.

About Tilray BrandsTilray Brands, Inc. (Nasdaq: TLRY; TSX: TLRY), is a leading global cannabis-lifestyle and consumer packaged goods company with operations in Canada, the United States, Europe, Australia, and Latin America that is changing people's lives for the better – one person at a time. Tilray Brands delivers on this mission by inspiring and empowering the worldwide community to live their very best life, enhanced by moments of connection and wellbeing. Patients and consumers trust Tilray Brands to be the most responsible, trusted and market leading cannabis consumer products company in the world with a portfolio of innovative, high-quality and beloved brands that address the needs of the consumers, customers and patients we serve. A pioneer in cannabis research, cultivation, and distribution, Tilray Brands’ unprecedented production platform supports over 20 brands in over 20 countries, including comprehensive cannabis offerings, hemp-based foods, and craft beverages.

For more information on Tilray Brands, visit www.Tilray.com and follow @Tilray

Cautionary Statement Concerning Forward-Looking Statements

Certain statements in this press release constitute forward-looking information or forward-looking statements (together, “forward-looking statements”) under Canadian securities laws and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be subject to the “safe harbor” created by those sections and other applicable laws. Forward-looking statements can be identified by words such as “forecast,” “future,” “should,” “could,” “enable,” “potential,” “contemplate,” “believe,” “anticipate,” “estimate,” “plan,” “expect,” “intend,” “may,” “project,” “will,” “would” and the negative of these terms or similar expressions, although not all forward-looking statements contain these identifying words. Certain material factors, estimates, goals, projections or assumptions were used in drawing the conclusions contained in the forward-looking statements throughout this communication.

Forward-looking statements include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things: the Company’s ability to become the world's leading cannabis-focused consumer branded company; the Company’s ability to achieve annualized cost savings of $130 million; the Company’s ability to generate $70-$80 million of Adjusted EBITDA; the Company’s expectation to be free-cash flow positive in its operating business units; the Company’s ability to achieve long term profitability; the Company’s ability to achieve operational scale, market share, distribution, profitability and revenue growth in particular business lines and markets; the Company’s ability to successfully achieve production and supply chain efficiencies, synergies and cost savings; expansion of medical and recreational sales legalization across the global cannabis industry, including in Europe; and the Company’s anticipated investments and acquisitions, including in organic and strategic growth, partnership efforts, product offerings and other initiatives.

Many factors could cause actual results, performance or achievement to be materially different from any forward-looking statements, and other risks and uncertainties not presently known to the Company or that the Company deems immaterial could also cause actual results or events to differ materially from those expressed in the forward-looking statements contained herein. For a more detailed discussion of these risks and other factors, see the most recently filed annual information form of the Company and the Annual Report on Form 10-K (and other periodic reports filed with the SEC) of the Company made with the SEC and available on EDGAR. The forward-looking statements included in this communication are made as of the date of this communication and the Company does not undertake any obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless required by applicable securities laws.

Use of Non-U.S. GAAP Financial MeasuresThis press release and the accompanying tables include non-GAAP financial measures, including adjusted gross margin, Adjusted gross profit, Adjusted EBITDA, Adjusted net income and free cash flow. Management believes that the non-GAAP financial measures presented provide useful additional information to investors about current trends in the Company's operations and are useful for period-over-period comparisons of operations. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP measures may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded. They should be read only in connection with the Company's Consolidated Statements of Operations and Cash Flows presented in accordance with GAAP.

Certain forward-looking non-GAAP financial measures included in this press release are not reconciled to the comparable forward-looking GAAP financial measures. The Company is not able to reconcile these forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures without unreasonable efforts because the Company is unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact GAAP measures but would not impact the non-GAAP measures. Such items may include litigation and related expenses, transaction costs, impairments, foreign exchange movements and other items. The unavailable information could have a significant impact on the Company's GAAP financial results.

The Company believes presenting net sales at constant currency provides useful information to investors because it provides transparency to underlying performance in the Company's consolidated net sales by excluding the effect that foreign currency exchange rate fluctuations have on period-to-period comparability given the volatility in foreign currency exchange markets. To present this information for historical periods, current period net sales for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average monthly exchange rates in effect during the corresponding period of the prior fiscal year, rather than at the actual average monthly exchange rate in effect during the current period of the current fiscal year. As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.

Adjusted EBITDA is calculated as net income (loss) before income tax expense (recovery); interest expense, net; non-operating income (expense), net; amortization; stock-based compensation; change in fair value of contingent consideration; purchase price accounting step-up; facility start-up and closure costs; lease expense; litigation costs; and transaction costs. A reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP measure, has been provided in the financial statement tables included below in this press release. Adjusted gross profit, is calculated as gross profit adjusted to exclude the impact of inventory valuation adjustment and purchase price accounting valuation step-up. A reconciliation of Adjusted gross profit, excluding inventory valuation adjustments and purchase price accounting valuation step-up, to gross profit, the most directly comparable GAAP measure, has been provided in the financial statement tables included below in this press release. Adjusted gross margin, excluding inventory valuation adjustments and purchase price accounting valuation step-up, is calculated as revenue less cost of sales adjusted to add back inventory valuation adjustments and amortization of inventory step-up, divided by revenue. A reconciliation of Adjusted gross margin, excluding inventory valuation adjustments and purchase price accounting valuation step-up, to gross margin, the most directly comparable GAAP measure, has been provided in the financial statement tables included below in this press release. Adjusted net income is calculated as net (loss) income plus (minus) non-operating income (expense), net, change in fair value of contingent consideration, inventory write down, litigation costs, and transaction (income) costs. A reconciliation of Adjusted net income, the most directly comparable GAAP measure, has been provided in the financial statement tables included below in this press release. Free cash flow is comprised of two GAAP measures deducted from each other which are net cash flow provided by (used in) operating activities less investments in capital and intangible assets. A reconciliation of net cash flow provided by (used in) operating activities to free cash flow, the most directly comparable GAAP measure, has been provided in the financial statement tables included below in this press release.

For further information:

Media: Berrin Noorata, [email protected] Investors: Raphael Gross, +1-203-682-8253, [email protected]

Consolidated Statements of Financial Position
November 30, May 31,
(in thousands of US dollars) 2022 2022
Assets
Current assets
Cash and cash equivalents $190,218 $415,909
Marketable Securities 243,286 -
Accounts receivable, net 89,705 95,279
Inventory 240,946 245,529
Prepaids and other current assets 50,550 46,786
Total current assets 814,705 803,503
Capital assets 539,124 587,499
Right-of-use assets 11,351 12,996
Intangible assets 1,214,842 1,277,875
Goodwill 2,621,401 2,641,305
Interest in equity investees 4,638 4,952
Long-term investments 8,211 10,050
Convertible notes receivable 255,310 111,200
Other assets 4,797 314
Total assets $5,474,379 $5,449,694
Liabilities
Current liabilities
Bank indebtedness $15,304 $18,123
Accounts payable and accrued liabilities 162,900 157,431
Contingent consideration 26,463 16,007
Warrant liability 12,670 14,255
Current portion of lease liabilities 6,976 6,703
Current portion of long-term debt 20,681 67,823
Current portion of convertible debentures payable 181,511 -
Total current liabilities 426,505 280,342
Long - term liabilities
Lease liabilities 8,999 11,329
Long-term debt 152,150 117,879
Convertible debentures payable 223,295 401,949
Deferred tax liabilities 180,099 196,638
Other liabilities 185 191
Total liabilities 991,233 1,008,328
Commitments and contingencies (refer to Note 18)
Stockholders' equity
Common stock ($0.0001 par value; 990,000,000 shares authorized; 613,181,559 and 532,674,887 shares issued and outstanding, respectively) 61 53
Additional paid-in capital 5,697,466 5,382,367
Accumulated other comprehensive loss (121,455) (20,764)
Accumulated Deficit (1,105,796) (962,851)
Total Tilray Brands, Inc. stockholders' equity 4,470,276 4,398,805
Non-controlling interests 12,870 42,561
Total stockholders' equity 4,483,146 4,441,366
Total liabilities and stockholders' equity $5,474,379 $5,449,694

Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)
For the three months For the six months
ended November 30, Change % Change ended November 30, Change % Change
(in thousands of U.S. dollars, except for per share data) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Net revenue $144,136 $155,153 $(11,017) (7)% $297,347 $323,176 $(25,829) (8)%
Cost of goods sold 104,012 122,387 (18,375) (15)% 208,609 239,455 (30,846) (13)%
Gross profit 40,124 32,766 7,358 22% 88,738 83,721 5,017 6%
Operating expenses:
General and administrative 41,672 33,469 8,203 25% 82,180 82,956 (776) (1)%
Selling 9,669 9,210 459 5% 19,340 16,642 2,698 16%
Amortization 23,995 29,016 (5,021) (17)% 48,354 59,755 (11,401) (19)%
Marketing and promotion 8,535 7,120 1,415 20% 15,783 12,585 3,198 25%
Research and development 165 515 (350) (68)% 331 1,300 (969) (75)%
Change in fair value of contingent consideration — 845 (845) (100)% 211 1,682 (1,471) (87)%
Litigation costs 2,815 1,080 1,735 161% 3,260 2,274 986 43%
Transaction (income) costs 5,064 7,040 (1,976) (28)% (7,752) 31,425 (39,177) (125)%
Total operating expenses 91,915 88,295 3,620 4% 161,707 208,619 (46,912) (22)%
Operating loss (51,791) (55,529) 3,738 (7)% (72,969) (124,898) 51,929 (42)%
Interest expense, net (3,107) (9,940) 6,833 (69)% (7,520) (20,110) 12,590 (63)%
Non-operating income (expense), net (18,450) 65,595 (84,045) (128)% (51,442) 115,292 (166,734) (145)%
(Loss) income before income taxes (73,348) 126 (73,474) (58,313)% (131,931) (29,716) (102,215) 344%
Income taxes (benefit) expense (11,713) (5,671) (6,042) 107% (4,502) (909) (3,593) 395%
Net (loss) income $(61,635) $5,797 $(67,432) (1,163)% (127,429) (28,807) (98,622) 342%
Net loss per share - basic and diluted $(0.11) $0.00 $(0.11) (11,456)% $(0.24) $(0.09) $(0.15) 164%

Condensed Consolidated Statements of Cash Flows
For the six months
ended November 30, Change % Change
(in thousands of US dollars) 2022 2021 2022 vs. 2021
Cash used in operating activities:
Net loss $(127,429) $(28,807) $(98,622) 342%
Adjustments for:
Deferred income tax recovery (12,941) (11,228) (1,713) 15%
Unrealized foreign exchange loss 2,261 (6,530) 8,791 (135)%
Amortization 67,387 76,804 (9,417) (12)%
Loss on sale of capital assets 2,208 230 1,978 860%
Inventory valuation write down - 12,000 (12,000) (100)%
Other non-cash items 8,177 3,739 4,438 119%
Stock-based compensation 20,136 17,670 2,466 14%
Loss on long-term investments & equity investments 1,918 2,197 (279) (13)%
Loss (gain) on derivative instruments 18,997 (133,436) 152,433 (114)%
Change in fair value of contingent consideration 211 1,682 (1,471) (87)%
Change in non-cash working capital:
Accounts receivable 6,690 2,734 3,956 145%
Prepaids and other current assets (7,780) (6,299) (1,481) 24%
Inventory 5,046 3,409 1,637 48%
Accounts payable and accrued liabilities (1,941) (44,513) 42,572 (96)%
Net cash used in operating activities (17,060) (110,348) 93,288 (85)%
Cash used in investing activities:
Investment in capital and intangible assets (7,537) (23,856) 16,319 (68)%
Proceeds from disposal of capital and intangible assets 2,160 8,264 (6,104) (74)%
Purchase of marketable securities (243,186) - (243,186) 0%
Net cash paid for business acquisition (24,372) - (24,372) 0%
Net cash used in investing activities (272,935) (15,592) (257,343) 1650%
Cash provided by (used in) financing activities:
Share capital issued, net of cash issuance costs 129,593 - 129,593 0%
Shares effectively repurchased for employee withholding tax (1,189) (3,927) 2,738 (70)%
Proceeds from long-term debt 1,288 - 1,288 0%
Repayment of long-term debt and convertible debt (59,395) (20,779) (38,616) 186%
Repayment of lease liabilities (1,114) (3,360) 2,246 (67)%
Net (decrease) increase in bank indebtedness (2,819) 19 (2,838) (14937)%
Net cash provided by (used in) financing activities 66,364 (28,047) 94,411 (337)%
Effect of foreign exchange on cash and cash equivalents (2,060) (2,696) 636 (24)%
Net increase (decrease) in cash and cash equivalents (225,691) (156,683) (69,008) 44%
Cash and cash equivalents, beginning of period 415,909 488,466 (72,557) (15)%
Cash and cash equivalents, end of period $190,218 $331,783 $(141,565) (43)%

Net Revenue by Operating Segment
For the three months % of Total Revenue For the three months % of Total Revenue For the six months % of Total Revenue For the six months % of Total Revenue
(In thousands of U.S. dollars) November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021
Cannabis business $49,898 34% $58,775 38% $108,468 36% $129,224 40%
Distribution business 60,188 42% 68,869 44% 120,773 41% 136,055 42%
Beverage alcohol business 21,395 15% 13,707 9% 42,049 14% 29,168 9%
Wellness business 12,655 9% 13,802 9% 26,057 9% 28,729 9%
Total net revenue $144,136 100% $155,153 100% $297,347 100% $323,176 100%
Net Revenue by Operating Segment in Constant Currency
For the three months For the three months For the six months For the six months
November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021
(In thousands of U.S. dollars) as reported in constant currency % of Total Revenue as reported in constant currency % of Total Revenue as reported in constant currency % of Total Revenue as reported in constant currency % of Total Revenue
Cannabis business $52,160 33% $58,775 38% $113,739 35% $129,224 40%
Distribution business 70,952 45% 68,869 44% 141,532 44% 136,055 42%
Beverage alcohol business 21,395 14% 13,707 9% 42,049 13% 29,168 9%
Wellness business 13,074 8% 13,802 9% 26,759 8% 28,729 9%
Total net revenue $157,581 100% $155,153 100% $324,079 100% $323,176 100%
Net Cannabis Revenue by Market Channel
For the three months % of Total Revenue For the three months % of Total Revenue For the six months % of Total Revenue For the six months % of Total Revenue
(In thousands of U.S. dollars) November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021
Revenue from Canadian medical cannabis products $6,365 13% $7,929 13% $12,885 12% $16,303 13%
Revenue from Canadian adult-use cannabis products 52,390 106% 49,535 85% 110,745 101% 119,128 91%
Revenue from wholesale cannabis products 236 0% 2,259 4% 628 1% 3,959 3%
Revenue from international cannabis products 7,705 15% 13,706 23% 18,127 17% 23,972 19%
Less excise taxes (16,798) -34% (14,654) -25% (33,917) -31% (34,138) -26%
Total $49,898 100% $58,775 100% $108,468 100% $129,224 100%
Net Cannabis Revenue by Market Channel in Constant Currency
For the three months For the three months For the six months For the six months
November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021
(In thousands of U.S. dollars) as reported in constant currency % of Total Revenue as reported in constant currency % of Total Revenue as reported in constant currency % of Total Revenue as reported in constant currency % of Total Revenue
Revenue from Canadian medical cannabis products $6,820 13% $7,929 13% $13,651 12% $16,303 13%
Revenue from Canadian adult-use cannabis products 53,635 103% 49,535 85% 114,056 100% 119,128 91%
Revenue from wholesale cannabis products 252 0% 2,259 4% 664 1% 3,959 3%
Revenue from international cannabis products 9,489 18% 13,706 23% 21,358 19% 23,972 19%
Less excise taxes (18,036) -35% (14,654) -25% (35,990) -32% (34,138) -26%
Total $52,160 100% $58,775 100% $113,739 100% $129,224 100%

Other Financial Information: Key Operating Metrics
For the three months For the six months
ended November 30, ended November 30,
(in thousands of U.S. dollars) 2022 2021 2022 2021
Net cannabis revenue $49,898 $58,775 $108,468 $129,224
Distribution revenue 60,188 68,869 120,773 136,055
Net beverage alcohol revenue 21,395 13,707 42,049 29,168
Wellness revenue 12,655 13,802 26,057 28,729
Cannabis costs 31,335 45,259 60,196 85,450
Beverage alcohol costs 11,420 5,921 22,269 12,583
Distribution costs 52,495 61,237 107,479 120,527
Wellness costs 8,762 9,970 18,665 20,895
Adjusted gross profit (excluding PPA step-up and inventory valuation adjustments) (1) 41,231 44,766 90,952 95,721
Cannabis adjusted gross margin (excluding inventory valuation adjustments) (1) 37% 43% 45% 43%
Beverage alcohol adjusted gross margin (excluding PPA step-up) (1) 52% 57% 52% 57%
Distribution gross margin 13% 11% 11% 11%
Wellness gross margin 31% 28% 28% 27%
Adjusted EBITDA (1) 11,708 13,760 25,239 26,457
Cash and cash equivalents and marketable securities 433,504 331,783 433,504 331,783
Working capital 388,200 393,350 388,200 393,350

Other Financial Information: Gross Margin and Adjusted Gross Margin
For the three months ended November 30, 2022
(In thousands of U.S. dollars) Cannabis Beverage Distribution Wellness Total
Net revenue $49,898 $21,395 $60,188 $12,655 $144,136
Cost of goods sold 31,335 11,420 52,495 8,762 104,012
Gross profit 18,563 9,975 7,693 3,893 40,124
Gross margin 37% 47% 13% 31% 28%
Adjustments:
Purchase price accounting step-up - 1,107 - - 1,107
Adjusted gross profit 18,563 11,082 7,693 3,893 41,231
Adjusted gross margin 37% 52% 13% 31% 29%
For the three months ended November 30, 2021
(In thousands of U.S. dollars) Cannabis Beverage Distribution Wellness Total
Net revenue $58,775 $13,707 $68,869 $13,802 $155,153
Cost of goods sold 45,259 5,921 61,237 9,970 122,387
Gross profit 13,516 7,786 7,632 3,832 32,766
Gross margin 23% 57% 11% 28% 21%
Adjustments:
Inventory valuation adjustments 12,000 - - - 12,000
Purchase price accounting step-up - - - - -
Adjusted gross profit 25,516 7,786 7,632 3,832 44,766
Adjusted gross margin 43% 57% 11% 28% 29%
For the six months ended November 30, 2022
(In thousands of U.S. dollars) Cannabis Beverage Distribution Wellness Total
Net revenue $108,468 $42,049 $120,773 $26,057 $297,347
Cost of goods sold 60,196 22,269 107,479 18,665 208,609
Gross profit 48,272 19,780 13,294 7,392 88,738
Gross margin 45% 47% 11% 28% 30%
Adjustments:
Purchase price accounting step-up - 2,214 - - 2,214
Adjusted gross profit 48,272 21,994 13,294 7,392 90,952
Adjusted gross margin 45% 52% 11% 28% 31%
For the six months ended November 30, 2021
(In thousands of U.S. dollars) Cannabis Beverage Distribution Wellness Total
Net revenue $129,224 $29,168 $136,055 $28,729 $323,176
Cost of goods sold 85,450 12,583 120,527 20,895 239,455
Gross profit 43,774 16,585 15,528 7,834 83,721
Gross margin 34% 57% 11% 27% 26%
Adjustments:
Inventory valuation adjustments 12,000 - - - 12,000
Adjusted gross profit 55,774 16,585 15,528 7,834 95,721
Adjusted gross margin 43% 57% 11% 27% 30%

Other Financial Information: Adjusted Earnings Before Interest, Taxes and Amortization
For the three months For the six months
ended November 30, Change % Change ended November 30, Change % Change
(In thousands of U.S. dollars) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Net (loss) income $(61,635) $5,797 $(67,432) (1,163)% $(127,429) $(28,807) $(98,622) 342%
Income taxes (benefit) expense (11,713) (5,671) (6,042) 107% (4,502) (909) (3,593) 395%
Interest expense, net 3,107 9,940 (6,833) (69)% 7,520 20,110 (12,590) (63)%
Non-operating income (expense), net 18,450 (65,595) 84,045 (128)% 51,442 (115,292) 166,734 (145)%
Amortization 33,318 37,471 (4,153) (11)% 67,387 76,804 (9,417) (12)%
Stock-based compensation 10,943 8,253 2,690 33% 20,136 17,670 2,466 14%
Change in fair value of contingent consideration - 845 (845) (100)% 211 1,682 (1,471) (87)%
Purchase price accounting step-up 1,107 - 1,107 NM 2,214 - 2,214 NM
Facility start-up costs 3,000 1,700 1,300 76% 4,800 2,900 1,900 66%
Facility closure and exit costs 6,552 - 6,552 NM 6,552 5,000 1,552 31%
Lease expense 700 900 (200) (22)% 1,400 1,600 (200) (13)%
Litigation costs 2,815 1,080 1,735 161% 3,260 2,274 986 43%
Inventory write down - 12,000 (12,000) (100)% - 12,000 (12,000) (100)%
Transaction (income) costs 5,064 7,040 (1,976) (28)% (7,752) 31,425 (39,177) (125)%
Adjusted EBITDA $11,708 $13,760 $(2,052) (15)% $25,239 $26,457 $(1,218) (5)%
Other Financial Information: Adjusted Net Loss
For the three months For the six months
ended November 30, Change % Change ended November 30, Change % Change
(In thousands of U.S. dollars) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Net (loss) income $(61,635) $5,797 $(67,432) (1,163)% $(127,429) $(28,807) $(98,622) 342%
Non-operating income (expense), net 18,450 (65,595) 84,045 (128)% 51,442 (115,292) 166,734 (145)%
Change in fair value of contingent consideration - 845 (845) (100)% 211 1,682 (1,471) (87)%
Inventory write down - 12,000 (12,000) (100)% - 12,000 (12,000) (100)%
Litigation costs 2,815 1,080 1,735 161% 3,260 2,274 986 43%
Transaction (income) costs 5,064 7,040 (1,976) (28)% (7,752) 31,425 (39,177) (125)%
Adjusted net loss $(35,306) $(38,833) $3,527 (9)% $(80,268) $(96,718) $16,450 (17)%
Adjusted net loss per share - basic and diluted $(0.06) $(0.08) $0.03 (32)% $(0.14) $(0.21) $0.08 (36)%
Other Financial Information: Free Cash Flow
For the three months For the six months
ended November 30, Change % Change ended November 30, Change % Change
(In thousands of U.S. dollars) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Net cash provided by (used in) operating activities $29,209 $(17,121) $46,330 (0,271)% $(17,060) $(110,348) $93,288 -85%
Less: investments in capital and intangible assets, net (3,840) (6,972) 3,132 (45)% (5,377) (15,592) 10,215 (66)%
Free cash flow $25,369 $(24,093) $49,462 (205)% $(22,437) $(125,940) $103,503 (82)%

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Source: Tilray Brands, Inc.

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