Docoh
Loading...

TLRY Tilray

Participants
Raphael Gross ICR
Brendan Kennedy Chairman & CEO
Michael Kruteck CFO
Vivien Azer Cowen and Company
Rupesh Parikh Oppenheimer
Pablo Zuanic Cantor Fitzgerald & Co.
Aaron Grey Alliance Global Partners
Michael Lavery Piper Sandler & Co.
Graeme Kreindler Eight Capital
Tamy Chen BMO Capital Markets
Call transcript
Due to licensing restrictions, you must log in to view earnings call transcripts.
Operator

Greetings, and welcome to the Tilray Second Quarter 2020 Earnings Call. [Operator Instructions]. It is now my pleasure to introduce your host, Raphael Gross. Please go ahead.

Raphael Gross

Good afternoon, and thank you for joining us on Tilray's Second Quarter 2020 Earnings Conference Call and Webcast. are Financial Chief Officer. today Michael Officer; me Chief Kruteck, with Brendan Executive Kennedy, and On

these described and statements. Tilray's statements regulators, events of Before materially in from risks and the Act filed based discussion, differ and forward-looking on actual course forward-looking could begin, discussion press of refer Please and reports of the or detailed the any and we expressed please the forward-looking those securities These statements. from in expectations a materially our earnings of uncertainties from to cause management remember XXXX as management's may with that statements Litigation results time risks release to current Private United time involve Securities for could implied issued the that along those amended. during within actual Canadian Exchange differ Reform to meaning are make with beliefs the States today Securities Commission, that and

Finally, are on margin adjustments, EBITDA valuation adjusted excluding inventory will and which management please refer today's financial gross measures. note non-GAAP to call,

to for information the reconciliation considered not information that company with GAAP. measures this non-GAAP useful most intended a non-GAAP for accordance with measure for the in measure While presented comparable to investors, as of release presentation of to refer these information be a or today's in the financial prepared isolation provide in substitute believes is the financial Please accordance GAAP. each

call Brendan. over to I'd Now to turn the like

Brendan Kennedy

driven on second COVID, the financial accessible licensed key by followed various offerings, as industry. in becoming review maintain see on joining cannabis value-added demand the to have Then distribution everyone, larger of well and partially will product the affordable transitioned and consumers and product provinces platforms, introduction with sale. I which suggests demand which seen by ordering that as our for industry we quarter and perspectives reasonably has producers our forward provinces increase performance We such and afternoon, continued will demand. you to outlook. headwinds been of Despite points for opportunities, Michael Indications on business e-commerce results. have are us. their Good has and thank continued helped an update Ontario, begin more

up Additionally, paying many from have This outcome potential rather privately in safety, longer-term a consumers. consumers online concern and and a may market and would market. the faster quality be COVID for more that interested operated heightened to is legal retailers delivery pickup, to market, ramped to services while ordering products curbside than producers have licensed being of from a for which the licensed may positive lead illicit migration retailers the industry. illicit the One

business and an it around furthers stabilizes been legalization adult recognized by medical Additionally, Germany, U.S. use. followed world, industry first By recognizing this Portugal, multiple essential and the as for the for cannabis Australia cannabis has states. Canada, in as essential, case

is a beginning, consumer markets the is there that opportunity. their thinking global product our steady significant of number the staples. in from legal believed other thesis like validates cannabis we As mainstream growth supports recognition consumed the This that a increase cannabis

has our to page focus the changed Tilray. in we to have cost refocused what our structures XXXX, January X narrowed at Turning rightsized Beginning successfully and business, priorities. our strategic

which a potential track record we be in a segment of one and a Medical, the have to International First, winners. proven

meaningful basis. on to expect quarter-over-quarter continue growth We a

the the In years. course anticipate in revenue next of Canada we over it our will fact, several exceed

our continues Second, business significant market. the where legal convert Canadian legal X/X opportunity the consumers the of than converted additional This a to for adult listed as less to use, has to market present market.

and products opportunities on the assortments based present of move to believe growth also product dried market to numbers our legal will brick-and-mortar flower retail licensed to We of the X.X stores, pricing for greater business. and lower encourage increased introduction continue on consumers

other Hemp United us the Harvest XX the Manitoba world. around Foods, Third, which provides countries product platform with hemp and States a in

structure. business these a measures clarify, It of to COVID-XX. began efforts took actions into plans reduced and unrelated for important quarter, We time-consuming continue us. our anticipated already to our measures years. our modify XXXX on of the cost expect also impact are our our necessary reduction of cost need set. peer P&L, structure. and We positive and of seeing we aggressive remainder first but evaluated ahead behind the Many had future business and before is to benefit our We the have Many these to during made and

and efforts Our or significantly resources of included all closed High ensure Ontario. third-party our following: Most reducing key vendors, more our growth eliminating to marketing the budgets areas reduction This notably, we expenses. we included process contractors across XX%. than our cost We reducing evaluating rightsizing growth. high a which drive garden, brands and facility revenue Park difficult in SG&A was headcount by of completed cost in the reducing

increase also cost result efficiencies, We to will efforts operating which savings. other undertook additional in future

Medical on we to Canada facilities and and markets, hemp in adult-use order Additionally, foods investments footprint existing our maximize capabilities serve manufacturing leverage our markets to high-performing the the market our yields globally. focused and International in

longer have products, clean such or destroy to are byproducts up decline our the to value effort market significant seen to took no due and that market dynamics. write-down also feasible We as inventory or

ourselves demand expectations drive and taken potential on and value. with or we current forward. Finally, easy. taken of were of actions, we portfolio based our reviewed None have and going lightly, have and none adjusted charges By market year-end better completing these returns investments them appropriate future shareholder towards of these generate for profitability by their enhanced Tilray have have were actions EBITDA breakeven to aligned positioned

demand and consumer take our the position to and markets. of they for patient to to company in benefits in a our and nimbler current poised However, cost-efficient were the order as right actions products business, realize growing future

international several brought line our We had the campus at we changes, production accomplishments. Portugal. significant EU in these on implementing While also

labor. We facility are a good legal and lower markets take We climate, practice to the warmer with cost among year-round things, our other able These the standards. medical export manufacturing end-to-end obtained certification advantage strengthened to GMP-produced cultivation X facility, transactions international with are of medical To to million a us knowledge, Also net received offering. closing products, dried EU. of which and focus cannabis to Union our first Portugal Among certification now full a at balance with and other medical to the our have within in-house, we amenable we Portugal's industry this European from accordance extracts of equity finished $XX.X us the flower allows cannabis GMP path million EU throughout regulations. both manufacture cannabis sheet in oil an the Portugal capital is in EU our to cannabis provide profitability. with sufficient to $XX debt on and successfully

reduce enable the We to also to released XX.X float increase our million an manage lockup in orderly public shares overhang from tier and the us to private fashion.

products Natural. significant innovation grow to sales other aligning what adult-use as Marley excluding Portugal we of for new harvesting anticipate we Canada, expertise stock. contemplating sales Wowie and to Turning Québec. expect We high which with the as In from some the ramp are consumer have that Chowie the and to product such to and address product, crops been as offerings accomplished and as countries maintain portfolio products, are well facility page able scale to production who closely agents first Canaca, meet our our needs. By ensure have are we and have potency shipped distribution can we in to are our we stand today, diverse territories, demand our High Kindred to are integrated relationships, also our the be where and acting sales expand for and leveraging the sufficient the both distribution market our portfolio behavior in to monitoring for X.X production at Park's around of consumer while we batch our existing Notably, world. provinces for we Kindred up the exclusive brands, market we further value of force all already continued

we join purely drain in categories While each room that successful others for have, this consumers brands us several the at and cannabis, are CPG has in industry believe other of this few like market, of driven segment that price will stage and segment, evolution.

Canada. high for adult-use unforeseen would is and be growth Our barring for is positive current in somewhere our and of towards COVID. of estimate original overall and This XXXX end between retail X,XXX market footprint the between Tilray's growth estimate the XXX X,XXX, Canada the issues and in catalyst X,XXX with of a any

in all own our third steps future and taken commitments. to that and we dynamics purchases yields able industry shortfall facilities reevaluated terms behavior, the be most our parties needs productivity, and we instances Given at attractive contracts, made up favorable Tilray of restructure will XX requirements Tilray. anticipated months, believe deliver XX be have by have next to purchase terminate we any on to supply to of have supply any increases our for eliminated consumer prices. our In can resolved from and or changing Due contracts to

Portugal. supply for up campus quarters, our the from multidisciplinary European international of in the growth success set dedicated and are EU significant our We and through in efforts and coming team our

Germany. continue significant a our of We brand cannabis with and We in the in to sustainable Germany. generate volume demand manner. our and will population and international meet plan strong have to awareness from market and continue pharmacies oil in enough to build facility long-standing sales We already to among products flower growth our relationships most in distributors Portugal supply the near-term patient in market in

Australia, to expect see Latin continued in other and also We locations. America growth international

medical France Portugal. opening exists continue to pursue located are in aggressively Carballo, will base and is significant opportunity We countries. Medical other in Dr. in However, who have In growth Global than our Anna we to currently much be see in Advisory opportunities happy welcome potential Germany. market off market in preparation, starting in Board expanded the smaller a this and

medical experience the to our We continue we legitimize research based further expertise to data. of and on medical rely as the on work industry board advisory cannabis and

our quarter. Now XXXX. results financial period turning ending to report June XX, the pleased second to strong for I'm

Canada our medical last adult-use medical XX%, to Canada quarter, year's X%. our revenues international compared increased increasing Specifically, XX%, significant showed up hemp by second and XXX%, growth, products with up cannabis

With complete, reported that to and I'm meaningful history, Tilray's X we million, say just challenges also of industry EBITDA in half the adjusted first by changing of despite We to EBITDA. a adjusted $XX.X pleased in million experienced COVID. favorably quarters of which year dynamics the our year. best loss on the this improvement compares a now recorded brought loss $XX.X of We to quarter

heading. Now, I discuss are would to like we where

and taken our core quarters next our have to we steps two. X the first than direct efforts even leverage expect we our As be businesses, better we onto the

revenue EBITDA additional the for setback, Canadian breakeven market, from half and margins gross revenue supported to positive our we XXXX adult-use fourth significant the by deliver goals in in quarter. business. medical back additional Absent growth, COVID-XX growth meaningful of Our any expect or better international the adjusted are growth

objectives medical our One and is exceed international U.S. of and of Canadian international for from outside Canada to our revenue revenue. foods hemp

We year. have the of expect back our seen during the and of in growth to the accelerate international trend half in that first the year significant medical half

in Portugal internationally. this growth facility help Our support will

and revenue for adult only be the XX additional opportunity. legalizing the are will X use need additional in will take States sources countries nationwide. will process. next months, the speculating a case the During cannabis, and steps legalize our reform tax an has cannabis, factor international Certainly, in which to Many of United cannabis serious may medical add countries XX furthered this unrest hypothesized towards legalization social the government for additional that we

federal we global meantime, is While CBD The also uncertain. legalizing legalization: are the use In dependent election New measure our are Nebraska Jersey ballot true, address on of the cannabis: Four so, believe are largely in To successful have permitted outcome adult inclusion the the a reform adult-use key from hemp November. U.S. a Dakota. and efficient market trusted cannabis; upon positioned we South is building and that medical South to CBD believe and conclude, federal clarity to FDA. cannabis be will medical on Dakota. businesses: portfolio federal we do Tilray we brands states where states in medical more this in Arizona, Mississippi, and Global are on of voting upon Montana, Idaho Three Canadian our certainly focusing the legally we is the at states on products. and cannabis; we strategy in further voting level

has challenging source Given industry. worldwide that our us our and achieve footprint, we growth goal one ambitious us have a be maintain to our winners of revenues to the positions times during helped in diversified of

focused sheet strengthened to pleased we balance have path with We accomplished regarding our are and have and cost reduction. we profitability, what on are squarely our our

building on cannabis I to focused things resonate with our to patients world, trusted remain our that, would will enabling like and to and brands around products We With company. turn creating Kruteck, review consumers the most become our the CFO, Michael hemp Tilray over to and financials. that

Michael Kruteck

on and discussing and this thanks the prepared today otherwise was in is afternoon. we our U.S. all Brendan, accordance you, financial webcast us call Please Thank dollars, U.S. indicated. and everyone are to joining with unless GAAP in information note

or to Canada in XX.X compared Medical million $XXX,XXX to for $XX.X experienced million. driven bulk, XX% to across growth and million by CAD $XX.X the XX% $X.X period $X.X the grew improvement contributed to $X.X million all to million in XX.X product compared We to million growth in CAD million realized ongoing year. million quarter. increase million, international growth XX Cannabis last the growth or sales was year or our medical million XX% channels, $X.X to $XX to in million XX% segment channel. last Second to $XX.X The year. quarter ago significant increased compared Bulk in in adult-use excluding revenues approximately quarter CAD XXX% international medical same revenues same or

growth the adult-use remainder for decline both a in continued XXXX the bulk medical expect focus in we sales and we and indicated, as channels opportunities. previously sales As higher-margin of on

in cannabis factors cannabis of cases of new period. the was to us rebalance it levels will bulk adult-use ago And year's launch in the XX% X% in represented and this in revenue revenue represented coming XXXX. in second to products compared versus year now the We both our represented X.X of growth for Medical on due in X.X Canada Adult-use second quarter in where the of take medical we approximately XX% sales period. growth to sales quarter of cannabis quarter cannabis partially account in channel opportunistic year are form adult-use as and and advantage inventory of XXXX XXXX revenue XXXX. helps certain products. months. second to contribute the launch products XX% expected continue an in basis the The December to of X% international of the XX% ago

last as fell line primarily XX% cannabis XX.X to the sell likely modest during bulk year cannabis XX% the compared our Segment focus top million same growth. of X% Hemp XX% to the to As or expected, U.S., XX% to to quarter or period that temp XX% revenue X.X% cannabis there the CAD deliver from CAD million revenue FDA $XX.X which is clarity business million and increased products $XX.X business, opportunities mix last quarter users. as XX Until compared for a was segment Tilray on hemp from we year. is the the is second more in end on year. CBD to segment, and Manitoba in second we last to hemp view Harvest revenue million

contribution sales a Canada million of $XX.X quarter-over-quarter We from revenue and in hemp On In expect decline to the we in of in decrease our measurable to from a increase sales quarters. X.X% adult-use attributable COVID. basis, in in continued were few to largely month experienced Medical March. sales, medical and by first quarter. a decreased medical attribute loading X.X% decrease percentages general, the driven all our decrease sequential achieved sales. which to the higher a pantry coming bulk was one we shift adult-use the in business partially sales XX.X% a offset a Canada in sales, This and This was that minimal cannabis to of X.X% our international by a of XX.X% see impacts in was

offset accelerated impact drop-off entire to levels Ontario, quarter. continued purchasing partially February, and the and exceed during limited and temporary delivery to we was March January during the While sales. April period. estimate and changes of in store due unable for sales in behavior March the closures of in the added curbside by were saw to to This provinces, June, number the We experienced or was incremental responsible in retail sales locations Canadian the May the XX% pickup shift a the increase approximately

we of period also increased retail the as contract. year's business with in second existing transition the increased sales new Kindred the transaction in quarter. point to our kilogram our adult-use for accounts our distribution XXX% to the Kindred, was sold largely brief products. coverage. which a a quarter, supply outsourced to establishes settlement During limited sales This driven expands in bulk the Total points X,XXX equivalent portfolio Early by resulted to sales of from completed and a channel of prior indications XX,XXX of onetime related team,

of in $X.XX, $X.XX Our XX% average per a of sequential the XXXX or $X.XX during and a net this year. the selling cannabis the second quarter decrease during the first same price decrease quarter gram period $X.XX was XX% from the from in

However, associated a termination by XXXX onetime transaction was quarter $X.XX supply impacted with during the bulk the contract. of of the second the

business, products primarily continued in higher average transaction, net products selling medical our $X.XX price onetime growth continued higher-priced to and the XXXX. from a to potency our The X.X the sales of the Canada. Excluding in growth of shift in to increased increase was same due period international and

make of sales mix. international of we increase our a gram medical time remain per cannabis to selling average forward, price percentage sales expect to continue larger as over up Going our or stable

$X.XX decrease per cannabis associated transactions The onetime per bulk sold during same same a roughly in of cost of supply decrease with this was period impacted $X.XX year. during by in from a $X.XX first quarter gram, average XX% contract. termination XXXX and gram the the the quarter Our second the was the

to Portugal, the had decrease due a partially the Nevertheless, efforts, cost at Gardens, Park where our margin over available facility processing XX.X% reduce structures per at expect our facility was holdings we of continues cost availability Excluding first see in year may for quarter gram cost compared product write-downs cost charges, we reductions in to third a is growth relation $X.XX. onetime of own asset is our our absorption and due XX% have reduced low-cost in to year-over-year throughput purchases increased with realized. decreased High benefit gram onetime the and in percentage fluctuations parties. XXXX. Park our cost to see facility to closure to as absorption, net ramp production and time primarily the The including quantities. result High volumes product of of and XX% cost same and full better varies from per Gross cost-cutting third-party high Portugal limited facilities cost transaction, of our of the quarter, as the second period negative the to last during and the We

market. a deposit year, During of number of use approximately of and a a or million Park wrote some $XX.X $X also down the demand of an of their associated million review supplier. some from the write-off products the which the evaluation of for and of was closure quarter result purchases exhaustive hemp, was of which with High in includes This the all associated second this stock, we inventory, potential and thorough gardens, with cannabis and

during adjustments respectively. associated as and point introductory a do incur valued of shipments quarter business we excluding million, $XXX,XXX XXXX. year actions first a the from previously XXX future. margins The XXXX, period the During valuation year XXXX, Gross inventory we down for onetime with quarter, last represented additional of in second the a not wrote XXX on settlement quarter inventory the and, partially indicated, XX%, transaction bulk the first the to first material our decrease decrease international foreseeable at period in Based a and the to from lower margin decrease expect inventory half the taken supply of was of $X which and adjustments due the medical made ago was basis basis contract. at same point

and point XX%, quarter onetime decreased year first excluding a last year quarter. XXX for transaction, increase in inventory adjustments, XX% from inventory Excluding valuations XXXX. in margin the and was cannabis, prior from excluding versus XXX and gross Gross the of the increase to basis XX% margins, XX% adjustments, quarter point from a basis ago

made were Excluding ago adjustments, to was Gross margins largely increase and XXXX. make recall, our flat to transaction the of timing value stop higher should XX% to XXX customer. the This our quarter from High Park points offered per and discount year in excluding valuations bulk Portugal of reduce margins to the QX prior first to need inventory decision an previously our to to adjustments. compared programs decision starting basis in is increased year future cannabis largest Please onetime the XX%, than at QX inventory XX% due cost we XX% and The the mentioned, XXXX. by-product hemp, XXXX, from any in attributing facilities. quarter,

the derivative have has per value. this do the However, on flower had of and products increasing our that gram impact cost decision

$XX.X the million year including million expenses, a expenses. to $XX.X prior compared charges in of increase were impairment $XX.X noncash quarter. Total million operating Moving QX, to

in have seen reduction and significant $XX.X cost its downs, of the details $XX.X charges XXXX includes The of QX year impairment to the to more was run $XX.X million if incurred million foreign demonstrative amounts savings Included the currency a closing and a more and There million QX year. to related impairments quarter compare from the represented we Smith Excluding we the quarter million this of noncash separation reduction. year. million last Brendan million & quarter our meaningful of second This a reductions asset land during million charges Sinclair. $XX second related from than quarter expenses were consisted High Gardens. of $X the for of QX for totaled million million This impact is translation mentioned rate of is to annualized even $X.X $X.X second $XX $XX.X noncash $X.X and prior buildings; in and earlier. the and The million for operating write adjustments. from no impairments the of the from license; first cultivation decrease Park

During have the controls envision across over we departments. all to this related first The quarter as material XXX of include taken year, million implemented Similar as adjustments, inventory headcount do impairments. currently business cost to place expense and of had we in not people reductions additional well $XX.X impairments. aspects all of our reductions

we now grow adverse We cut an business. that categories dollars all our are across impact on ability or focused We they highest business across meaningfully in on return the believe generate have extent investing headcount the to expected costs will our do areas not and XXXX the will to XXXX. had in

COVID As were by situation. prompted the Brendan efforts structure to reduce our not cost our indicated,

market. are rightsize plans of and business the in were the to any Our independent impacts COVID

of The per liability warrant to impairment quarter $X.XX the of $XX.X in difficult, these While outlook on measures assets. impact net fair $XX.X impaired the million value loss charges, $X.XX per XXXX. due share have was inventory of growth. were and and second primarily feel we changes these including Net compared our for are focus loss of majority million a position to in of adjustments loss the future of and change the we quarter, or to net was good second a the completed the share in increased or

million margins Excluding $XX.X to was net The due EBITDA reductions loss year. efficiencies. first to continuing of $XX.X despite impairment EBITDA inventory basis improvement revenues and was $XX.X in EBITDA expenses. versus efficiently. by QX a operating $XX.X lower attributable in the a QX compared by million cost loss quarter XXXX. our or quarter end COVID-XX, improvement EBITDA $X.X million million, the revenues, lower adjustments adjusted a and commitment business from Adjusted in loss to significant a XXXX charges, QX loss to higher adjusted On XX% million loss as $XXX operational XXXX for the sequential the positive improve we adjusted loss reflects achieving of our second improvement and momentum grow reflected compared This was last year-over-year the moderately of revenues to a to quarter our operate the our and breakeven million and improvement and implemented

Turning Due and equivalents approximately ended our very limited second million the from of quarter to at this sheet. first the associated of or of we the balance had We issued $XXX access of a to we in of XXXX. the the with the cash March with million, year, warrants and offering at to QX end restrictions million $XXX market, quarter cash QX. during reduction $XX ATM the program,

to due $XX and and capital of million to our execute we existing and and the capital access increased plus future $XX our the our manage flow of numbers expecting We future cohort balances, Given have our and assume which $XX related cash payments April needs approximately experience in of of year. remaining CapEx May, Phase CapEx principal $XX Portugal cash completion We to cash during $XX to the operations meaningful and did to no million assumes access XXXX. of These plans ATM business, XXXX. the Portugal are but year million. delays this we believe be to in completion to during program approximately construction X and needs efficiencies interest in sufficient and our operating COVID million, of million million, of $XX consists some into additional XXXX for for anticipate remainder approximately remainder impacts the primarily still

impact for quarter COVID-XX, reduction our to commitments. we may renegotiating This to future aggressively later However, during construction several future the the if that they result our with of legacy the year note reduced experience we important subsequent market and terminating CapEx year. purchase to contracts delays of due It's terms. and/or this quarter, spend total is the out supply

Tilray. payments, future supply of solutions pricing, required and the outcomes to certain and given existing some market projections final available favorable While dynamics cash were

more the our and during of on at and leaner are are business focus a will path changes while the us QX We largely the difficult made beginning profitability. to leader time-consuming, to actions, to cannabis outlined strengthen industries. Brendan as in significant on These our growth. and now call, As to QX and future focused we our position efficient hemp allow us, behind which

keenly see by adult-use presence factors from already growing the form growth our and have in existing medical where track and online are new existing outlets. and revenue. X.X on record, new we of our to force, additional products We leveraging a In particular, hemp we focused international sales brick-and-mortar expect in products expanding proven from and now meaningful and at our retail growth Kindred

As sales, positioned we are to cost structure. increase of our realize benefits we now new the

focused to industry we significant cannabis. growth supports ahead, on stages, Looking growth adult-use revenue achieving revenue as opportunities profitability of that will We and that surface a countries early level the meaningful our in is cannabis believe initiatives. and medical continue remain and/or exist and still its additional legalize

cannabis taken significant achieve I and take trusted cannabis are and we fully FDA presence to future there U.S. once markets opportunities CBD We believe this and questions. to more Tilray company. recognized the the in our have as available the and will substantial clarity Tilray on existing also to nationwide position in have most expect hemp your provides We revenue profitable be and believe and for actions for regulations. a goal hemp, we now be to and Brendan

Operator

[Operator Instructions].

first question with from comes Azer Our Cowen. Vivien

Vivien Azer

first one your production on is a strategy. my high-level So question

out things. a you So couple Brendan, of called

the time, cost, there high lack you're and you're then And quality. down that's shutting of a your you agreements. supply sales So Park might high supply at seems that makes -- like High bulk terminating it noted making sense. these same be external that Garden, But

trying just but piece you that all cost, particular, obviously this to in avoid to Like, confidence with you're together. at I'm cultivating supply supplement So too internally your actually that, given agreements? doing adequate gives supply to want high what you there's what

Brendan Kennedy

Yes.

the to in Ontario. our in made we seen Portugal significantly facility our starting X were what facility, last a the seen we've improvements QX. that increased year look our some completed Enniskillen, over when -- So And improvements yields we the in those What based -- and on really we've over last months is at from facility in Enniskillen have about that ago.

well of So out significantly facility. we're that as as from higher things Significantly yields; higher seeing potency that facility: two

our the in us cannabis next so Portugal, see Enniskillen facilities will year. enable gives the that Nanaimo, different from in us to internal we meet that course the of X And and over supply that confidence demand

Vivien Azer

helpful. That's Okay.

was, Moving earnings. adult how it's curious Obviously, the for a backdrop as still in the operating COVID really because in industry big I'm many an obviously, the to outs, actually cannabis Canadian reporting as challenging also your least kind do of very for you weren't far, whole. But call didn't guys out and about in softness, market the of we break of with peers COVID-specific early same COVID, But use impact some revenues, Canada. there season. thus who adult-use see at

your question like fair feel value do your I feel the you and of is, share deep won positioning you segment? you the segments? guess Do about So how that in value

Brendan Kennedy

yet to it's think be I determined.

segment the segment. enter saw it's to we of first XXXX, that in and emerging, starting think really that August I were a of one we

think there's that market probably But within -- a there's what that our brand determine will segment eventual I -- of think still early Canada. it's still to lack I share a in be. certainly within loyalty

that we of to was holding ordering Canadian led and you adult-use and inventories the I and at terms saw within biggest we high at places pantry our March, across significantly patients impact the saw think OCS the where the at some saw increased March. In of OCS the like COVID, medical end QX, medical of really online in the end at online of ordering COVID

And in some that to through inventory provinces sort QX. work of those of had

Vivien Azer

prescribing surpassing was population in Canada, to I'm the squeeze be the limiting like able coming But seeing a one and your by actually double comment, helpful. from of the on X Brendan, a spot obviously, I that X cannabis. the standpoint one of last going was bright increasing you're that your alone, really months, kind maybe I to market a over factor That's was undersupply mean, problems that medical. been the Clearly, X in quarter in. starting that ton base I Germany. guys I'm you really the of months, of impressive months' revenue know was international time, led Perfect. Very curious German years, makes have to having Germany last terms in doctors what one sense. appreciated about

So have you the still, getting Or like, comfortable be started we are with a to see in Germany? evolve? that medical supply community more robust chain

Brendan Kennedy

Yes.

frame the into -- growth all year, the to note revenue that's think -- question. expect two our there QX year. significant last The in exceeded one to continue quarters back -- of in trend of important for I'll how international and the we of step is that international I that first have international And think QX. terms things our this that, in medical I significant well, medical on you been of medical

And we have and can Germany. we we continue international -- so that ensure think significantly that been grow that some trend the we're ensure really supply to is revenue. positive, everything to There that's in to that doing everything issues

course has supply the of the of products into to suppliers One over legacy QX. unable QX of part been and

a And that's opportunity so us. for big

market. takes physicians thing Australia seen ago. same emerging medical And X years. the takes base. years to are off Canada small saw well, of who educate continuing just We patients, number who X to time same say educate patients that We've starting, -- to are number in in it's prescriptions I see in and a to takes see the increase, the starting increase, time. time we're of of thing it writing doctors see last the number relatively the to continuing We shouldn't are still had over X the although the It prescriptions both we to

it. We know to to educate And patients. We to do so how pharmacists. know physicians. educate how how educate to know We we how know

just that's so marching And a process that we're through.

Operator

Our from next Rupesh Parikh question comes Oppenheimer. with

Rupesh Parikh

question on gross wanted margin. a I ask just to

first broke and cannabis I time. out for believe, margins, separately you hemp the the So

thinking to forward? So guys just wanted it are I going about understand how you just

Brendan Kennedy

Rupesh. Thanks,

customers our that consistent other cannabis, that and exclusive think a X I between forward that upon think margins things up moving activity XX% that that's think depending that as for And about particular actual particular I pieces on what of we of CBD of we margin make margins discounts it. -- and I see -- that hemp, in the space. and when to see gross higher kind we of in see we'll But hemp. real continue do international the so gross percentage on the sales, that's and for we to do probably So see cannabis fluctuate the medical But talk any XX% offer expansion the of space. we kind of the

Rupesh Parikh

Okay. cannabis, the expectation In for what's forward? that going

Brendan Kennedy

XXX to market. necessarily kind expectation. Cannabis, we're don't how growth of medical I think that mean of an fast have trying out a what's I quarter-over-quarter expansion to in inclusive pricing. we'll probably see for a point going basis relative on basis the we of get of I total couple we seeing expansion We're point -- on international couple generally monitor we're at that what a that. basis is in margins hundred looking of

Rupesh Parikh

guys versus bigger half say Canadian to how then you impact, of expected flower the you And Great. the half the rec expect cannabis are think in by in about the on about a that of growth year. X.X Just would X.X? back thoughts back side, thinking you flower? guys year. driven terms Okay. any improvement or of How you the to in Do the have

Michael Kruteck

vapes, numbers. of growth if see -- and I you've growth a we saw got I XX% particular, But good In -- quarter-on-quarter X.X Brendan, coming sequential on generally think generally out basis. did roughly that good products. We know on our that. the we're of our So growth in don't in speaking, some seeing this

good And -- continue moderating X.X. relative it's in that. so package see although to growth flower, just I the I'd solid in it's growth to the say think that see we We do

Brendan Kennedy

Rupesh, I'd in pipeline that and a X.X we products QX in launching number QX. just we add here have anticipate our do that of into

we had built X a portfolio X.X so ago. And years gosh, product starting,

And more don't. competition where at we number so this point, of and are thought products we we a there see would

And the weeks. we products have of in number that in coming we'll a really -- launch so

Operator

Fitzgerald. from question Next Pablo comes Cantor Zuanic with

Pablo Zuanic

and is then Just to Germany international slowly, hear the want talking companies that a market. developing so on supplying The lot we follow-up concern of front. that about

so in there that than, -- going Denmark actually lower X, a if talk XX Germany reason and or to ship you Germany cost months? to shipping Potentially producing that that does connect in profit why much And those oversupply But other shipping from from able to about to would is be those be dots much that, how terms So if have much say, along won't margins? that companies?. can from the you in On retain -- all in share? are able Portugal you're higher how are out lines, market compared Portugal, you from advantage oversupply, Canada. next for or lower, of trying of cost play to there. you Just

Brendan Kennedy

Australia is Germany patient look we accelerated look growth Germany medical when patients and Canada adoption compared the at actually the patient in 'XX, patient XXXX, the at and Australia. in curve, we So count and curve in we of -- to when compared look in count at Germany in the in back Canada to

obviously, to And to there, see so population. X.Xx expect of continued higher we do much patient growth

much a it market. will So much, larger be eventually, medical

either back of competitors a cease operations operations. cut European or We number have seen significantly European

so that our optimistic opportunity about And us to share capture leaves market within Germany.

Pablo Zuanic

have can a follow-up I If there.

target whether even? breakeven EBITDA And topic, being more increase distributor business? to Or any third-party you on that it that a the quarter, fourth color on plan or on positive can cost by sales need does the do to disruption see? you type you break Or to think would or of would Just there separate Canada? further to are help shifting sell still a and in a a you to you're be broker or -- give I how If what your you cuts? mentioned

Brendan Kennedy

of that second first. part question the I'll Maybe. take

integrated a acting are Kindred, called provinces except agents force and sales using for exclusive sales we So who their for broker as we're our territories, and Québec. all so

transition that made middle of in we the so QX. And

And does gives of Canada. in it force. so we've obviously and up reach spent is time sales that ramping what us educating broader much lot a that And

on that -- our internal has people about Kindred had XX And sales sales sales to staff. transition, we on XX own team. -- So prior that

at which the And and distributors scope. provincial the increase various not only also we increase so but that interact individual frequency will the with retailers,

daily, basis. interact on that So with a monthly the number can weekly, retailers of we

that so expect And we revenue the the QX. adult-use of middle place of within half to market in transition in year. the drive of in second growth that And do did take the middle the

Pablo Zuanic

Michael EBITDA question? on the

Michael Kruteck

Yes.

this the direct. that say I'd that that impact not Canada QX. We're about it's of the solid not of the in full Where need positive to, coming that the medical. we we've in just significant market as have we is that the necessarily working consistent pretty and numbers to towards all we out EBITDA hesitate see I'd get we I kind growth, the growth of of of we So seeing Brendan what coming distribution QX as we've put market. in And the things but and I about international benefit Canada growth We're the or back talking some we certainly a the about. adult-use from year. there think implemented right breakeven, those terms got. partial to growth that now move that move say is do expect into making see that amount to and point We it's cuts the cost is should growth that from saying cuts that we did be that's to been in forward. we're accelerated for we pretty see cost opportunity us as percentages of inclusive a to exceptional half

we've maybe got got that we not our some and that are would parts. what we if some elsewhere. down got in additional make Or the met, But investments revenue see expectations that if try go -- look we to that I they contributing we've think make is company I to to moving we that revenues So think start to the necessarily think avenues if happen. still an some we've opportunity should

Operator

comes Grey question Aaron Alliance Global from Next Partners. with

Aaron Grey

question. Thanks for the

But rank it quarter, lines first demand Manitoba. line top Costco opportunities. increased in like with terms about third you of my question, seems comes you're from kind Amazon. of along I over last know, and So it's for talked

how in business next opportunity to X terms has how XX So just over the kind would more evolving, get of see like you growth that to color some been of that months?

Brendan Kennedy

Yes.

kind that we That's growth to might of moderate despite Harvest, as larger on we the distribution get. a takes just growth see So think that's change line top profile. fairly story. a significant well-established that Manitoba other I that now that business It's distribution right really the

growth we So a been. type the in that where that as going just stable see of it's kind say I'd of forward, of business range kind

Aaron Grey

more Great. then right. And then. from one just me All

margin Just terms it gross goes the about in through well as earlier. profile the of asked kind ASP, been and that I of guess

from As cost. impacted sales we look at some introductory additional the it of this you international, from shipments lower for was I know said kind in quarter,

lower well parties see potentially side, evolving, of, nice like at of exponential value So as to of of, that here margin, expecting that think takes like do juxtaposed that, to on the you with evolve we think we be helpful. side, that do lift. there the But would the kind kind Canadian offerings the and Canadian third how about to kind you're on growth the It kind about on against potentially more should international and continue be gross of market side? continues the kind seems use can a some quickly as puts of how just and adult-use kind

Brendan Kennedy

Sure.

the price. about talk average we selling when So

$X-range seeing see some the on the the or we selling just in we the trying as pricing be potency. range. price So may THC start we're as and there Germany, some that lower offerings in new medical, of which as $XX pressure we And $X to think well international market share sell-in, to that there's we probably inclusive some I year of entrants that average Europe so, markets all it's in into more as to their introduce gain kind move product

been pricing. we've that we rec, with On consistent Canada actually, say I'd have seen pretty -- the our

the high- kind higher the guess, seen people we're product -- the I and in are We've us of potency by terms pricing potency, of in of I We for tune when offerings. manage significant, as of mid-potency, XX% I in right question and mean, the XX% roughly to growth we're now. look lot sales pretty low have. well like high for marketplace haven't sales as XX% the potency that mid-potency other the been driving -- margin of really a for to of, in probably the and at, pricing And there down, we've been potency trying

profitable that that can So the on to share to Canada business margin trying revenue market so we manage business. opposed equation as a just see that as in we're

Operator

Lavery comes Sandler. question Michael Piper next with The from

Michael Lavery

the being the the versus when I pretty the can that follow-up you you're you to most watching positive the drive of of little well all costs that. color you the that set give wanted revenue some just key revenues breakeven some revenue, What's factors? right know for to end Just way? that? making able hit of year? what flex other driving the by And are to and a to are to -- some positive. there But you things in are the the on on sure Are around bit piece piece how thinking much important on EBITDA you the confident watch? touched How

Brendan Kennedy

Sure. Thanks. That's a good question.

XX% to certain out the do I I additional relations. sales it's at But mean, cost those at of taken structure. be the marginal may well are that employee point. we board. cost There just and our to So the when look look this marketing, reductions, And professional we've areas, when cost in optimize pretty public areas. from general, the in fees, business everywhere all cost we set that's at some roughly across things

look terms that I compare the of the million dropping and achieved that a you so -- rate to rest we to it how line QX run last actually it see we've QX we've at bottom year, in of time of and if breaks QX $XX And when the of in frame. down, that,

quarter. we've that's quarter million million to in sub-$XX -- mean, range of spend roughly I a our a So $XX reduced SG&A the somewhere $XX to roughly million from

pretty be I'd costs And is the those line top leverage growth what looking to that's set. And well now. so we that, say for would

Michael Lavery

Okay. Any should That's other our know just just could carried away you outpace really precisely in driver. other on frame And like? to it and growth besides give, out little modeling. a customers sense follow-up Europe. get is be to help I Or for, guess, not segments us new to introductory Germany? or there countries we a a give to said watch maybe how color helpful. just I or you half would any other a more back channels of pricing what anything either the looks help

Brendan Kennedy

Yes.

don't I coming -- thing pricing pricing We're have think continue the into channels of and on our normal lines. more this way. those at the introductory point. type we'll of we then focused market actual more So along And

of said, -- like I'd say to I kind hesitate that give number. out a So I just

that, think that's where million kind in still like happen. $XX million eyes think range we'd I about, to make try that million, of the previously, are that we've $XX our business. that talked headed, to $XX I something And to for and see

Operator

from Eight Capital. comes Kreindler question Next with Graham

Graeme Kreindler

I had your curious be a question, Brendan, I'd thoughts.

change, meaningful business, really comes You about -- the U.S. CBD the the market with prepared mentioned particularly and how will in hemp remarks it specifically from some from the FDA. growth the real getting regulatory

I that to might of coming with was relates upcoming it there's the there meaningful the out to side, CBD on do a and on you that potentially wondering, is THC respect could the anything that of as value unlocking eyes what side? as incremental So election, see lot from

Brendan Kennedy

like question. myself it CBD. have out some business But to they chance have trying with that perhaps Oddly a seems predict point, I U.S. come they to the in before the of we THC on do good a have That's good Or having of -- may -- oddly, clarity concurrently. timing this perhaps in at the taken there's FDA. anything

a coming great clarity between other have really the extremely -- government remain months. I optimistic for -- and don't answer the governments about in XX your to state than THC THC federal I related question, I remain so and And

Graeme Kreindler

or with can that. how that Is provide business color there. navigating any to much quick in how curious of I in-store with hemp e-commerce Just And follow-up, the environment respect respect from the was much right. the get historical? any additional how you mix as that's as be with was lockdowns And now appreciate respect. there deviated and the to the to reopenings. versus sales color just All a you're

Michael Kruteck

I sorry, I don't -- Brendan. -- don't go ahead,

Brendan Kennedy

that that of saw Costco. terms I we've just seen to both in that QX. say And really going and saw was we've -- saw continue with business we into that in harvest, seen and QX, Amazon strong Manitoba we we

Michael Kruteck

Yes. the details I on don't split. have the

apologies I can my for follow-up. just least. So I of for get certainly have at that. don't data I you, -- that me front in a it

Operator

with Next comes question Markets. Tamy from BMO Capital Chen

Tamy Chen

for I just back Canada wanted to Rec a go second. to

short-lived So anyway. you And give detail more because this that bit a as a if sequential resume right decline quarter, intend in you just it to to wondering how segment was growth it can just in if segment. value now, to before in market, appears get someone even will on competitive price grow only that more compete it's the hard is share that else to way

that go to to seems aggressively there. it manage So not you're trying

the trajectory about to this performance how your you're and that in trend industry? your want just I in manage understand the apparent in to segment So how thinking face of

Brendan Kennedy

expect respective we -- buyers interacting and reach product that Kindred, somewhere we've retailers. increases and to X.X And revenue and we our frequency, X.X with relationship and expect it's with healthy dozen. provincial somewhere within seen And gives the with launching us seen greater a SKUs half we're growth. -- which a in we've greater growth a see through additional in the So distribution dozen

growth to QX. We in expect expect we to see adult-use see or QX in adult-use -- continued in and growth

Tamy Chen

you THC seems wondering heard on earlier specifically category. I didn't like be give it market? on think demand if timing the And launches, that I that missed X.X I when sorry on But release for product the was might additional to you're to the the if It I beverages saw in call. good there's or press color Okay. able coming this, for in

Brendan Kennedy

team The beverage and that good to at is food equipped There better question. answer demand. would be

and know would their to point products. they're they're optimistic produce ability it, I to about So it. those I to Jörn working answer on

Operator

from Next with Andrew question Stifel. comes Carter

Unidentified Analyst

it's -- was actually one. was keep -- all reiterating quarter, I'll positive was guess or the if driven here, by consider EBITDA actually worse the lower EBITDA improvement guidance I question and -- my you're lower of lower you SG&A, it SG&A. to in

XX% you're earlier even So from that Michael getting target the the the confidence for not I'm I what just call, incremental to level. track can looking give improvement you guess for that of much there? improvement. the kind the I us provides in guessing gets you there revenue not EBITDA? on margin a for of correctly seemingly, If it's with year of you heard an adjust And gross

Michael Kruteck

Yes.

delivers So of going guidance think to specific of just XXX indicate just now, on a of hundred place revenue basis points. there or that there -- to be that. positive to, prudent we we're it's working don't the in are I that terms the We've a need revenue be improvement margins that couple giving I right don't got specific breakeven think marketplace. guidance. think now that issues what to just in I lot then we're that a But towards EBITDA target, plan that a did kind think would target we moving And in of I to right meet and give

Unidentified Analyst

guess, just, the the is I for cannabis the gross XXX overall points. XX% is the basis margin Tilray But for that I business? clarification. for that Or gross And did the adjusted XXX margin off business? hear to

Michael Kruteck

be driven by mean, Harvest. It's by driven Well, Manitoba going think to it's necessarily I I cannabis. largely not

Manitoba I that XX% in XX%. think business would margins be to that we Harvest the indicated

there. marketplace to we discounts approach there upon going how fluctuate it's the for So based

quarters. talking last couple we're of that's the historically when in that it's and think I So been -- where

was is business cannabis, So from growth -- transaction that things. I products time upon X.X the the the on and upon at improved look just international we that mix we we I'd some sell. indicated. products relative in margin margins to And one quite the adult bulk think growth based think and when there margins Canada QX rec of I some we of We that continue see see say based in we that to the side low the

replicated. And won't be so that

the And back year. so of I in we'll that think that we've the half got some see improvement

Operator

over floor like Brendan to turn would I to the for closing comments.

Brendan Kennedy

Great.

my and Let the do that improve to entire through all for me lives they the Have tonight your team tonight's hemp of your appreciation of Thank thoughtful end you evening. our expressing your in discussion participation company, to call by our interest customers on our all Tilray good for power the a in cannabis. questions.

Operator

This concludes today's teleconference.

You may disconnect your now lines.