Q2 2025 Tilray Brands Inc Earnings Call

Irwin Simon

Thank you, Berrin, and good morning, everyone, and thank you for joining us. Tilray Brands has experienced significant growth over the past five years. Revolutionizing consumer products brands. Today is a leading force at the forefront of the beverage industry. Revitalizing the beer market, driving growth in spirits and nonalcoholic beverages and advancing the legitimacy of cannabis for both recreational and medical use to our group clubs.
We focus on bringing people together creating exceptional experiences through entertainment and enhancing lives, through the moments of connection. As I said in the past, new industries are not born, they are built. Tilray operates in over 20 countries across five continents with a portfolio of over 40 consumer connected lifestyle brands and 20 vertically integrated facilities that produce approximately 90% of our products in house, ensuring the highest qualities of our operates.
Maintains its position as the largest cannabis business in Canada. By revenue holds a leading medical cannabis business across Europe and operates the largest branded hemp business in North America and is among the top five craft beer businesses in the United States in the terms of scale has diversified and expanded beyond being a solely Canadian cannabis company.
We are advancing the consumer package good industry through the introduction of new and innovative products that shape how individuals eat, drink and relax and provide relief to medical conditions where other treatment options have failed. These offerings address current consumer needs and we are prepared to meet their future demands. Our success in establishing a new era of consumer products tailored to evolving consumption habits, demonstrates our commitment to delivering innovative solutions that meet modern consumer demands and drive growth across our industries at brands.
We’re committed to leverage advanced technology to advance our efficiency and drive growth. We are partnering with Microsoft and their AI platforms on a global scale to bolster our expertise, optimize our operations, achieve significant improvements and propel our business forward.
Tilray Brands is trailblazing in the future of consumer products through the infrastructure we have built and the investment we’ve made and continue to make in our businesses, facility systems and people around the world. In Q2, we achieved strong net revenue results while strengthening our operations and increasing our gross margin and gross profits across our business quarter. Two net revenue grew 9% year over year to $211 million. Gross profit increased by 29% and gross margin increased by 500 basis points compared to the prior quarter.
Our beverage business to beverages which includes craft beer, spirits, and non alcoholic beverages grew 36% in net revenue year over year in cannabis. We continue to lead the Canadian cannabis market by revenue. We significantly grew our international business by 25% year over year as we launched new commercial products and expanded our reach across Europe.
Our wellness business continues to lead the hemp industry, increasing branded market share to 56% with Manitoba harvest in the US and nearly 80% share in Canada. Additionally, as Carl will discuss further, our financial profile remains strong during the quarter. We reported an adjusted net loss of $2 million primary related to the investment necessary to develop the infrastructure and operating systems across our business sectors and drive industry leadership and innovation.
Tilray operates with a robust balance sheet, ample cash reserves, reduce debt levels and flexibility, explore additional potential acquisition. Our financial strength allows us to seize new opportunities and capitalize on market trends. Importantly, Tilray is not exposed to meaningful character in the US.
Let’s now dive deeper into each of our business segments starting with our beverage business to support the expansion of our beverage business and brands. We merged our beer and spirit operations and teams creating Kray beverages under the leadership of Ty Gilmore expansion into the beverage category began in December 2020 with the acquisition of SweetWater brewing company followed by the acquisition of Green Flash, Alpine, Montauk brewing companies and Breckenridge Fly.
Our first spirit acquisition, we significantly increased our footprint through craft acquisition one from Abi in October 2023 and craft acquisition two in September 2024 from Molson cos to support the growth of these acquired grains and establish a clear path to profitability. We implement Project 420. This comprehensive plan focuses on enhancing margins and profitability through operational optimization, cost savings and synergies and portfolio optimization.
Through Project 420, we aim to achieve $25 million in cost saving synergies and cost avoidance initiatives on which we’ve already achieved $17 million. Today, Tilray beverages generate a third of Tilray’s global revenue and includes more than 20 beverage brands which includes 15 American craft beer brands, 10 network manufacturing facilities over 700 distributors, 20 brew pubs and restaurants and a single integrated sales and marketing team operating across the US.
Artillery beverage strategy emphasizes strategic brand growth within selected states and regional markets. Prioritizing product excellence and scalability. In Q2, our beverage business achieved $63 million in net revenue and increased adjusted gross margins by 400 basis points to reach a 42% puree beverages has established itself as a leading provider of craft beer, spirits and nonalcoholic beverages in key us regions including the Northeast Pacific Northwest Colorado, Texas, Michigan and the Southeast. From a regional brand perspective nationwide. Hill Ray beverage is the number one craft supplier in Metro New York with Montauk Brewery and Blue Point Brewing brands.
The number one craft supplier in the Pacific Northwest Oregon and Washington with 10 barrel brewing, Redhook and Ridler Brothers brewing brands. The number two craft supplier in the Southeast Florida and Georgia with sweetwater brewing and shock top brands and the number four craft supplier in Colorado. According to our data, notably, we achieved a 10% increase in shock top distribution during Q2 in the Southeast, securing 1,400 new placements for the brand within the SES category.
Breckenridge Facility is a notable brand in the bourbon sector as it experienced higher depletions compared to others in the declining market. It also made a significant progress in the vodka and gin markets complemented by its world class restaurant and retail operations that enhance the overall hospitality experience.
Our primary objective for growing our spirits business is to expand our market share across the US in our nonalcoholic branded product portfolio. The recently launched brand runner’s high brewing company will soon be available in over 1,200 public stores will plan for expansion in traditional markets. The nonalcoholic craft beer segment represents a significant opportunity for growth. The total addressable market estimated to be at $37 billion worldwide.
Given our scale and geographic footprint, we will continue to explore ways to capture a share of this rapidly expanding market within the nonal segment. We’ve also introduced Hide Delta nine THC brands and products online who are direct to consumer channels and in key states across the us including Florida, Alabama, Georgia, North Carolina, South Carolina, Tennessee, Louisiana, New Jersey and Texas.
We are leveraging our established craft beer distribution network which is enthusiastic about this growth opportunity in independent retailers, convenience stores and packaged stores including multistate retailers, total wine and more.
K beverage’s strategic growth initiatives are poised to revolutionize our beverage portfolio, attracting a more diverse and expansive consumer base. We are planning to expand our beverage operations internationally including ventures into Canada and New York with a vision to become a global beverage leader by leveraging our innovation, innovating products and exceptional quality. We aim to set new standards in the industry and achieve remarkable success. Turning to cannabis in fiscal Q2, our global cannabis business generated $66 million in net revenue and increased gross margin by 400 basis points.
In Canada remains the leader in Canadian Canadas market by revenue in the second quarter. So a regaining the number one position in the flower category which constitute around 35% of cannabis retail sales with brands like broken coast Redan good supply and bake sale, increasing market share through strong innovation, good genetics and great value in the THC beverage category. Tilray had a leading market share of 45% with XMG molo THC beverages ranking the number one and number two respectively. We also retained the number one market share in oils and capsules categories. Combined. 15% of Tilray’s canadian cannabis net sales revenue will show new innovation and a lot more to come.
We shipped approximately 63 metric tons of cannabis biomass in Canada in Q2, representing about 22% of the implied canadian market volume. We continue to leverage the wholesale channel where contribution margins grow as supply titans in adult recreational cannabis. We shipped approximately 15 million preroll cones and over 1.7 million cans of beverages.
Over the past three years, we focused on improving operational efficiency. During this period, we reduced costs by over $100 million to eliminating duplication, consolidating packaging, logistics enhancing process with technology to lower labor costs. This effort includes emphasizing revenue quality over quantity which will improve margins and position our business for future success.
For instance, over the past year. We reduced our exposure to lower margin categories such as date and infuse prerolls and prioritize other categories. Even at the expense of some market share with a facility footprint of approximate 5 million square feet. Along the optimization. Our value chain and business process is best positioned for long term success in the canadian cannabis market as the demand for our cannabis product pries wess the flexibility capability cost structure and optimal growth space necessary to nearly double our output in the US.
Tilray is strategically well positioned to capitalize on the anticipated $8 billion to $10 billion medical cannabis market upon federal legalization. Our advantage is our best in class ability to cultivate large scale medical and pharmaceutical grade cannabis which requires rigorous quality control standards and processes.
Additionally, our established medical brands and products can be utilized until a primary legal market such as Canada, Germany, Portugal and various other European countries, should the United States legalize medical cannabis, which could represent an additional $250 million opportunity for Tilray potentially captured between 2 to 3% of the US medical cannabis market turned into our international business where we executed against our strategic initiative and drove significant organic growth and margin the second quarter.
In Q2, international cannabis business grew 25% over a period over the prior year period driven by sales growth in Germany, Poland, the UK and Italy in Germany. Since the new Medical Cannabis Act went into effect. We grew medical cannabis flower sales by 55% and increased our medical cannabis extracts by 24%. The increased growth in the German market especially in whole flower category is due to the cannabis descheduling under the new regulations.
In addition, we continue to see increased differentiation between the physician led and the patient led channels. With the patient led channels requiring a greater emphasis on product assortment especially in genetics, brand portfolio segmentation and quality as leaders in the physician led channel where we have a dominant share of the medical cannabis extract category. We are now focusing on expanding within the patient led channel. We are confident in our ability to win a sizable share of this channel. Given our well placed investment with two EU GMP certified facilities in Germany and Portugal and our route to market through the Tilray Pharma.
Our German cultivation facility. A pre Rx was the first to be granted permission to expand our cultivation under Germany’s new Medical Cannabis Act. And in the quarter, we sold our first commercial batches of medical cannabis cultivated process in Germany. Under this newly expanded license supplementing these assets are Canadian cultivation facilities and our deep expertise of our team which has allowed us to establish a flexible and diverse supply chain to meet the needs of patients. We serve in various countries in which we participate by introducing new medical cannabis brands and products to these markets.
We believe Germany’s new canvas regulations will drive positive change in drug policy across Europe. It aims to expand its global brand to Europe’s 700-plus million people leveraging our infrastructure product portfolio and commitment to medical cannabis and our experienced team to enter new markets with significant revenue potential.
In Poland, demand remains strong as a revenue increase both over the prior year and quarter, over quarter in Italy, we are focused on increasing awareness of the Tilray medical brand and our product portfolio where we have market authorization for three medical cannabis extracts as well as investing in the education of physicians regarding medical cannabis in the UK.
Our revenue has increased compared to the previous year and our Q1 results were implementing several strategic initiatives to enhance our presence in the UK market which will serve as our European headquarters for international sales and commercial operations going forward, turning to Australia which is still in early stages. It is quickly emerging as a significant medical cannabis market similar to Germany.
We see increased differentiation between the physician led and the patient led channels. In response, we launched broken cos Redan good supply brands and products which provides the patient with a segmented portfolio of products while we continue to deliver on the trust safety and consistency that has become expected from our Tilray medical brand.
And finally in Q2, Tilray Wellness delivered a 13% net revenue growth compared to the prior year driven by strong poor business sales coupled with hemp innovation and the expansion into Wellness Beverages. A strong focus on cost helped the business unit improve margins, delivering a 200 basis point increase in gross margin.
Tilray is also exploring further expansion opportunities in the wellness segment, especially focusing on protein rich wellness products and foods to meet the growing consumer demand for healthy nutrition options.
With that, I will now turn the call over to Carl to discuss our financials in greater detail. Carl?

Carl Merton

Thank you, Irwin. As a reminder, our financial results are presented in accordance with us GAAP and in US dollars. Let’s now review our quarterly performance for the three months ended November 30, 2024. In Q2 net revenue was $211 million, a 9% growth compared to the prior year quarter. Net revenue of $194 million.
As reinstated, it was our highest Q2 net revenue ever on a constant currency basis. Net revenue grew 10% to $213 million by segment beverage net revenue increased 36% to $63.1 million cannabis. Net revenue was in line with expectations of $65.7 million as a result of our strong focus on margins and strategic growth in key markets which I will discuss in a moment. Distribution net revenue was flat and wellness net revenue rose 13% to $14.6 million in the quarter from a segment perspective, 30% of our net revenue was generated by our beverage business.
31% was generated by our cannabis business. 32% fire distribution business and 7% fire wellness business. This compares to 23% in beverage, 35% in cannabis, 35% in distribution and 7% in wellness in the prior year quarter. The year-over-year variance is due to three months of revenue from our most recent craft acquisition. And one month from the prior year’s craft acquisition, which we did not purchase until October 1.
Gross profits increased by 29%. $61.2 million compared to $47.4 million in the prior year quarter. Gross margin increased to 29% and over 500 basis points increase from the prior year period. Demonstrating our strong focus on controlling costs, driving revenues from our most profitable skews and the ongoing optimization of our production footprint adjusted gross profit increased 20% to $62.6 million from $52.1 million in the prior year. While adjusted gross margin increased by 300 basis points to 30%.
Primarily reflecting our focus on immigration efforts to improve our utilization at our beverage facilities and favorable sales mix. Net loss was $85.3 million compared to a net loss of $46.2 million in the prior year quarter with almost $75 million of non-cash costs.
Part of those noncash costs included a $34 million foreign exchange loss that was largely created as a function of the Strengthening Us dollar after the US Presidential election a per share basis, this amounted to a net loss of $0.10 per share compared to $0.07 per share in the prior year quarter.
Adjusted net loss was $2.2 million compared to an adjusted net loss of $2.7 million in the prior year quarter. A 17% improvement year over year with adjusted net loss per share coming in at zero. A significant beat to expectations of a $0.03 loss adjusted EBITA was $9 million compared to $10.1 million in the prior year quarter. We are now approaching six consecutive years of generating positive adjusted EBITDA.
The decrease in adjusted EBITDA in the prior year is primarily related to the rationalization in our beverage business that Irwin spoke of earlier. Cash flow used in operations was $40.7 million compared to $30.4 million in the prior year quarter, adjusted free cash flow was negative $43.6 million compared to $18.4 million in the prior year quarter, largely as a result of an increased demand in our working capital.
Working capital increases were associated with annual payments in the quarter increases in inventory at to a pharma as a prepared stock pharmacist inventories for the holidays increases in inventory and beverages as we prepared for the positive impacts of the skew rationalization plan all offset by a significant decrease in Canadian cannabis inventory levels as it took advantage of positive pricing in the wholesale market.
[324] business segments within our beverage segment. Our $25 million synergy plan is well on its way, with $17 million already realized, part of our cost saving initiatives were driven from implementing a product rationalization program to concentrate our product portfolio in key markets, prioritizing high performing products and optimizing our cost structure.
Here today, the SKU rationalization plan lowered our revenues by $8 million, with an expectation that over the next 18 months, these impacts will be offset by the introduction of new product innovations and brand extensions, improving both sales and margins.
The completion of this rationalization program will be agreed up to earnings and will have positive impacts on our cash conversion cycle. Once complete beverage net revenue was $63.1 million up 36% from $6.5 million in the prior year quarter. As previously discussed as Irwin discussed, we now own and operate 20 brew pubs, restaurants in the US that are in close proximity to the production of our craft brands in the quarter.
These operations contributed $10 million of the $63.1 million in revenue and we expect them to be a key part of our strategy going forward allowing us to increase brand visibility and gain an intimate understanding of our key consumers beverage gross profit increased to $25.2 million compared to $16 million. An adjusted gross profit was $26.5 million compared to $17.8 million.
While our beverage gross margin was 40% compared to 34%. An adjusted gross margin was 42% from 38% in the prior year quarter. The 400 basis point improvement to adjusted gross margin was a result of our efforts in integrating and optimizing our facilities as well as a favorable product mix.
The lowest cannabis revenue of $87.2 million was comprised of $59.1 million in the Canadian adult use revenue. $14.9 million in international cannabis revenue. $6.7 million in Canadian medical cannabis revenue and $6.5 million in wholesale cannabis revenue net cannabis revenue, which was reduced by the $21.5 million in excise taxes was $65.7 million essentially flat from the year ago period.
Revenue from canadian medical cannabis grew 6% despite the category being impacted by competition from the adult use market. While revenue from canadian adult use decreased 18%, which was a result of our increased focus on preserving gross margin and maintaining a higher average selling price in categories of high excise tax.
As a result of recent significant CapEx investments, we positioned ourselves for an improved margin opportunity. Once the price compression pressures start to ease in the category, our CapEx investments and size advantage put us in a position to succeed as margins and high excise tax categories come under pressure.
International cannabis revenue rose 25% which was largely driven by the expanding German medical market as well as favorable variability in the timing of receiving export permits to countries other than Germany resulted in fluctuations on a quarterly basis.
Cannabis gross profit was $23.2 million and cannabis gross margin was 35% adjusted. Cannabis gross profit was relatively flat $23.2 million compared to $23.6 million in the prior year quarter. Distribution net revenue derived predominantly through CCC Pharma was $67.6 million compared to $67.2 million in the prior year quarter on a constant currency basis. Distribution net revenue increased 3% to $69.4 million compared to $67.2 million in the prior year quarter.
As a result of a favorable product mix, distribution gross profit increased to $8.4 million compared to $7.1 million in the prior year period. While distribution gross margin increased to 12% from 11% in the prior year quarter. As a result of our extensive efforts in H2 last year to focus on higher margin, skews wellness. Net revenue grew 13% to $14.6 million from $12.9 million in the prior year quarter.
The increase was driven by our strategic focus on continued innovations including our launch of hemp derived Delta Nine products and our granite growth within our branded hemp business related to higher consumption. Wellness gross profit was $4.5 million, up from $3.7 million in the prior year quarter and gross margin rose to 31% compared to 29%, a result of decreased input costs and continued operational efficiencies.
Our cash and marketable securities balance as of November 30th was $252.1 million, down slightly from $260.5 million. At year end. This change was a result of our purchase of the new craft brands. A temporary increase in working capital demands all offset by the funds raised from our ATM. During the quarter, we raised gross proceeds of $46 million from our ATM and subsequent to quarter end, we raised an additional $11 million.
Finally, we are reaffirming our guidance for fiscal 2025. We anticipate net revenues to be between $950 million and $1 billion. Let me now conclude our prepared remarks and open the lines for questions from our covering analysts. Operator, what’s the first question?

Operator

(Operator Instructions) Kaumil Gajrawala, Jefferies.

Kaumil Gajrawala

Hey guys, good morning. I guess starting with the SKU rationalization. You’ve been talking about it for a while. We have more details. Today, does it look like the ration rationalizations will be complete by the end of your fiscal year? Is this something that’s ongoing? A little, for some amount longer?

Irwin Simon

Good morning. And thank you. I’m not sure it’s going to be completed by the end of the fiscal year. We’re well to, you got to remember what we’re doing here. We’ve taken Sweetwater, we’ve taken, the Montauk, we’ve taken the A B I Act with the Molson acquisition as we bring them together and we’re eliminating over 300 plus skews and we’re ultimately eliminating states where we sold some of our brands before.
So the majority will happen by the end of this fiscal year but they absolutely will be some that will go to, 2026. And the big thing here is, listen, we’ve taken out, we look to take out costs of $25 million. We’ve taken out [$15 million, $16 million] already. The big thing is as we introduce new SKUs to replace some of these others. And as we focus on certain states that we’re only going tom sell our product.
And it’s not only us asking for this, it’s retailers, it’s distributors. So this is great. And you think about it as we brought, how many companies together under tilray beverages and cleaning up the tail and cleaning up some of these lower margin products. And it shows in our cost cutting, it shows in our margin and it shows in our growth from some of these brands that this is absolutely working and we haven’t even launched our new products yet. So just stay tuned for that.

Kaumil Gajrawala

We will, you know, you mentioned gross margins. That was going to be my next question. It’s up nicely across a series of divisions. We have a lot of details on some of the blocking and tackling. Is there something bigger going on maybe with the input costs or perhaps price compression or anything that we should know? Because it looks like, kind of across the enterprise, the trajectory is, is the same or is it as simple as the programs that you’ve talked about kind of starting to come to fruition?

Irwin Simon

Well, it’s not coming from pricing. So that’s the first thing. It’s coming from just taking costs out of our system. Listen, when we put Tilray and Apria together and then Hexa, we took out over $100 million you know, we can come back and in regards to share of cannabis in Canada, we’re focusing on margin.
Here, we’ve had major price compression. So the big thing is we’re really focused on gross profit. We’re really focused here on profitability and you know, our adjusted net loss in the quarter is $2 million okay? The majority of it is not cash. So there’s a big drive here to generate cash and really focus on margins here and to invest back in our business. And you’re seeing this on gross margin growth here.

Kaumil Gajrawala

Got it. Thank you, guys.

Operator

Robert Moskow, TD Cowen.

Robert Moskow

Hi, thanks. I thought I remembered last quarter that, beverage sales were a bit below your internal expectations and it was due to timing around innovation and shipments to distributors and, and I want to know, I didn’t hear much about it on the call today. Did that factor resolve itself in this quarter? And then, and then also, you know, maybe you can give a little bit more color on what this innovation pipeline looks like.
Do you have a lot of work still to flesh that out? Thanks.

Irwin Simon

So, Robert, you’re 100% right. In our first quarter, we had some challenges as we brought you know, the ABI businesses into our portfolio. We had some major out of stocks, bringing the ABI distributors on and taking them off the ABI system, putting them on ours in regards to supply costs and issues. There were some accounts that just stopped ordering because they were confused and just the integration. So 100%.
In our first quarter, we had some negative comps that come out since then. Listen, we’ve seen some great stuff happening in shock. We’ve seen, our montoc growth 9% since we bought it. We’ve seen some great growth on Blue Point in Breckenridge. So we’re seeing those millions come back and, ties on the call and he can jump in there. So that’s why you’re seeing up 36%.
Some of that is absolutely acquisition growth. But what we’re doing is we’re taking these growth brands and getting rid of the products which were slow moving and running them out in regards to innovation and to jump in here and some of the new innovation. But I’m not going to tip my hat yet, but we’ve got, in regards to these products, we’ve been out there presenting to the retailers, presenting to the distributors and.
There’s a big focus on a lot of our new beers. There’s a big focus on our non out. There’s a big focus on our energy drinks. There’s a big focus, on our waters and our Delta Nine drinks are a big thing that has been happening with us. Ty, you want to add anything to that?

Ty Gilmore

No, I think you nailed it. With regards to innovation absolutely we are locked and loaded in, now, through the next seven or eight months, everything is ready to go. It’s been presented to retailers and distributors and there is a lot of excitement about the spaces and categories that we’re going to play in. Which is exciting.

Irwin Simon

And I think the big thing is that’s what everybody is looking for is new innovation out there. I think, the important thing is this here is taking out some of those slow-moving SKUs or taking the SKUs out of states that sold 1,000 cases a year and just plugged up the. So that’s number one. Number two is, distributors are looking for innovation. Some of our pub beers, some of our lighter beer, some of our non out, some of our infused drinks with hemp. So there’s a good lineup here and the big thing which I’ve said, what we’re trying to do on beer is make it fun again. And I think that’s what, what we’re doing. We have no imports, so there’s no tariffs coming on.
Our beers are all made in our facilities. We’ve done a great job. I think of moving our production around. We’ve closed one facility, in Texas. So, there’s, there’s a plan here. And just think about it. We produce close to 15 million cases beer a year, over a million barrels. And if we, as we brought all these beer brands together, over 18 beer brands, we’ve brought all these cases together, we’ve brought all these facilities together in a matter of four years.
Now, it’s taking costs out getting the efficiencies working with these distributors. Ty and team have put a Liz team on the street to really get out there and hit our off premise and really sell our products there. So I’m excited to see what’s happening in the beverage category. And now that we’ve integrated our spirits business and listen, these aren’t easy categories.
So with that innovation and putting the people behind it and getting your distributors and retailers is something that’s really important. And last, but not least we got to get our consumers buying our products. And that’s a big thing that we’re trying to do. And there’s a lot of social media and there’s a lot of advertising in the quarter, we spend about 6 $700,000 more in advertising a quarter back on these brands.

Robert Moskow

Thank you.

Operator

Aaron Grey, Alliance Global Partners.

Aaron Grey

Hi, good morning and thank you for the question here. So I just want to dive a little bit more on Delta Nine beverages specifically around potential changes in regulation. The farm bill has been delayed two years now, we’re not going to have Republicans, controlling both chambers of Congress as well as a Republican President. So what’s your anticipation in terms of the impact that could have on a farm bill getting done this year? Impacts on THC hemp beverages.
A lot of folks have been talking about potential, closeouts of loopholes but keeping a carve out for THC hemp beverages. So I’d love your outlook on that just given right now. You’re one of the few players with an existing distribution system in the alcohol channel that’s selling THC hemp and how that could change with the regulations evolving. Thank you.

Irwin Simon

Thank you. Listen, we do not — and it’s good news, as the farm bills kicked down, they kicked the can down the road for two, another two years. So that’s number one. Number two, a lot of distributors and a lot of the states and retailers are really excited in this product.
And you know, there was a couple of million dollars of sales in this quarter that we’ve achieved already and so, with that, we don’t see any changes. We think there’s a big, big opportunity for us going forward and, with Happy Flower, which is with our Wellness team, which is out there, pushing that brand and then, we have, our beverage team out there presenting and through our beer distributors, distributing that product. So there’s lots of opportunities for us.
And we have the products, we have the distribution and we have the infrastructure. Sales people that are out there pushing it and the retailers and distributors want it. That’s the big thing. So there should be no change for us.

Aaron Grey

Okay. Alright, great. Thank you very much.

Operator

Frederico Gomes, ATB Capital Markets.

Frederico Gomes

Hi morning. Thanks for taking my question. I’m curious if you could talk about Canada’s beverages in Canada. It seems like it’s a very small part of the market still. So how do you see that segment? You know, why hasn’t it become a more relevant part of the Canadian market? You know, whereas in the US, we see this delta mine market growing quite rapidly right now.

Irwin Simon

Thanks, great, great question. And I have Blair on the call. We have a 40 5% share of the market. And it’s about a $25 million, $30 million business for us. We have a facility in London Ontario that produces that product and, and I always say this here, I only sell it today in stores that sell cannabis and, there’s different pricing out there and it’s not cheap product. If we could sell that today in beer stores, if we could sell it on tap, how big a business that would be.
But I think one of the biggest problems today is just ultimately, it’s only sold in cannabis stores and some of the pricing up there. But the opportunity is we sit today in January that’s when you’ll see some of the biggest consumption of products. So we’re ready, willing and able. And I’ve said this before. If you could sell THC infused DRS in the US, it’s a $1 billion-plus category out there if we could ever do that, just by looking at the size and the opportunities in the 15 states that hemp derived drinks are today.
The consumer is looking for it. As a matter of fact, I was at a function last night and the majority of people were drinking, hemp infused drinks versus, alcohol drinks.

Frederico Gomes

Thank you.

Operator

Bill Kirk, Roth MKM.

Bill Kirk

Hey, good morning everyone. So I have a question the revenue guidance. To get to in the range, the final quarters of the year need to be about $60 million or so larger than the revenue just posted in 2Q. So where does that acceleration come from?

Carl Merton

Thanks. So I think if people go back and look at our results from last year and, and follow the same pattern that we had, right? When you look at the face pattern, talked about this a couple times. You and I individually where, we’re doing about half of our sales. We’re doing, sorry, not half of our sales, but half of our EBITDA Q4, we’re doing Q12 and three are even that tends to be a around the other half, right? And then that, that’s earned relatively evenly between the quarters, right?
And so if you’re, if you use that as the starting point and then you, then you work your way backwards through sales when you, when you look at the changes we’ve made this year, last year, we purchased the new brands, the new craft brands too late in the year to be involved in the spring reset.
And so this year, Ty and his team and print have been able to, to get out to, to the distributors to get out to our, our main, our big accounts and to really be, be a part of that spring reset with that new innovation. And, we see significant increases in the sales in Q4 for beer, as part of that, as part of that spring reset, we also traditionally see sales upticks in our CC farming business in Q4.
That’s predominantly as pharmacists in Germany, start stocking their inventories for for the summer months as people go on vacation in Germany. And then we see we similarly see an uptick in things like pre rolls and flowers, things that were higher indexed on in terms of share in the canadian cannabis market as people get ready for the summer.

Irwin Simon

So a big part of that, is just here, is there seasonality and supply and new products? So stepping back as Carl said, you know, as you come out of your right, January, the next five months for us, Memorial day and July 4th are some of the biggest beer consumption events out there. We also have our big 420 events around beer. Plus you heard what I said before, we have over 100 products that get into the product to get into the marketplace and that’s a lot of the resets happen with retailers in regards to cannabis. Blair, how many new products do you have coming in the back half that? And you know, we’re from a the place.

Bill Kirk

30 new innovations in —

Irwin Simon

The back half of the year so the new innovation that will come, from our cannabis business. And then one of the big problems that happened to us in Europe was in regards to just having supply. From our European. And a lot of that’s coming from Canada and also getting the permits that we could ship in this country has slowed things down. So with that, it’s going to come from new products, it’s going to come from, organic growth, it’s going to come from new distribution in the back half of the year.

Bill Kirk

Thank you. And then Irwin, you quantified a $250 million opportunity for Tilray if the US legalizes medical, I guess what gives you confidence the incoming administration will be favorable to rescheduling. And even if they were that, they would also be amenable to imports from Canada when there is so much tariff talk.

Irwin Simon

Good question. Number one. And again, I want to be very, clear, this is just, looking at a crystal ball and looking at, you know what it could be and, and number one, I step back and I say this here, it’s an $8 billion to $10 billion medical market today in the US and with that, I think we could get somewhere between a 2 to 3 share. So a 2 to 3.Share, is $160 million to $250 million business. We have a good sized medical business today in Canada.
We have a good size medical business in the US. We have the products for pain, for anxiety, for sleep, for cancer patients, for multiple, medical reasons. We have the packaging, we have the products, we have deter pains. We have, in regards to genetics, et cetera. So we would know how to market and package these products, with that.
Why do I think that it would be allowed? There’s not a growth facility out there that could ever supply that. We it would take us about 60 metric tons and we have available to us today about 137 metric tons that could supply, that additional cannabis that we could grow. So I don’t know, but just that’s out there be hoping to get the listen you. If there was a duty on it, et cetera, you’d have to pay it. I’m not sure why not.
You put we ship EU GMP products all throughout Europe coming out of Canada and some of the best cannabis grown today comes out of Canada. You got to remember we have 5 million square feet.
So that is again, just all speculation if that could happen out there. And I think the big thing, medical cannabis, if anything is going to legalize its medical cannabis, I think medical cannabis ultimately would be sold through drug stores through the medical market and would be prescribed by prescription. And I do come back and I say this here, the Trump administration is into tariffs into duty into regulating stuff. And I think if you come back and I say it, the Canadian market for us and we sell a lot of cannabis in Canada.
But we pay a lot of excise tax and you know there’s billions of dollars paid each year in the canadian market. Take that as a 10 times and you think about the opportunity in the US for the governments here to bring in that excise tax and eliminate a list of market.
It’s about business. And I think, that’s how the Trump administration ultimately will look at it.

Bill Kirk

Thank you very much.

Operator

Matt Bottomley, Canaccord Genuity Group.

Matt Bottomley

Good morning, everyone. Yeah, maybe staying on the topic of regulation but and changes, but maybe moving over to the international side of things. So, you got solid, $50 million to $60 million of annual contribution in your international line, the way that it’s allocated. And I’m just wondering, I guess two questions there. So the first is just the visibility on that line with respect to what’s been recurring for some time now and, and growing in some of the select markets that you’re in versus maybe things that are more opportunistic and, and, and are harder to predict.
So I’m just trying to get an idea of the, you know, the underpinning of that current contribution you have in markets where you have exposure. And then the second side of that question would be as I alluded to the regulatory side of things, anything, to note outside of your prepared comments, I know Germany is the market that a lot of us always like to talk about in the last little while and just wondering if there’s anything else to add to that?

Ty Gilmore

So, Hi Matt. The question in terms of what is sort of the base of the business and what’s reoccurring, what’s opportunistic, what I would say is that we’re very focused on building a sustainable, very solid foundation of profitable growth. We look at our business in terms of building out foundations. And I think if you, I’m just going to take Germany, for example, is a very strong, strong base of medical extract business, which is the dominantly reimbursed by insurance and very profitable.
We look at that business as sort of our foundation and as the flower business has been proliferating through the new regulations. We are focused on also growing that as well. And you can see that in our numbers and that we’ve seen a 55% growth since the legalization.
So we’re very focused on both sides and, and again, we don’t believe that every dollar of revenue is created equal. And so to that end, we look at how do we create sustainable sales are going to repeat each other, repeat themselves each and every quarter. And so very focused on that in Germany and Poland, we’re building out our Italian market, which is very, very small at the moment.
But as we build out the reputation of Tilray as a medical supplier of cannabis, it’s very sustainable, consistent. We do see in fact that we’re building a base of doctors that are in fact, trusting util products.

Irwin Simon

And I think the big thing here, which we come back is number one, we have supply, number two is each of these countries today are looking at how we do the medical cannabis, France is going to go in there ultimately with, certain products, okay. The UK is a big opportunity for us. So I think if you step back, listen, there’s a big focus on the countries that you know, medical cannabis is legal today. We have a facility in Germany.
We have a facility, in Portugal that can supply and we have supply available to us out of Canada. But you know, I think again, like the US, there’s additional countries that are going to continuously open up and with our infrastructure and we have a large infrastructure in Europe today. You heard me talk about, putting an office in the UK that will be our international office. We look to grow our international business at the same time, we’re looking at the same strategy in the US.
Do we enter the beverage and spirits business and take some of our beverage and spirits business along with something else that you know, do we acquire in the international markets?

Matt Bottomley

Okay, great. Thanks for all that.

Operator

Pablo Zuanic, Zuanic & Associates.

Pablo Zuanic

Thank you. First of all, congratulations on the growth in international business. Look, I have a quick question for Thai and then I want to follow up with you, Irwin regarding the US. Thi you know, when I look at the Hem Delta nine drinks market, it’s mostly DTC, right? And in theory, you have an advantage with your distribution network to sell your products, but this is not a fast churning item yet. So it seems to me it’s more conducive to DTC. People are selling through portals and sending and shipping across states from online orders. Any quick thoughts on that?

Ty Gilmore

Yeah. Thanks for the question. Actually, we see the broader opportunity in brick and mortar. When we talk to retailers and distributors, we see both convenience liquor stores, there’s a big national chain that’s leaning into HD Nine in a really, really strong way. We absolutely are exploring and are taking part of D to C but we see the much bigger opportunity in brick and mortar.
And when you look at the consumer and what’s happening in this segment and you can look at some big chains, you know, in Louisiana or what’s happened over the last couple of years in Minnesota. You can clearly see that there’s a consumer demand in brick and mort stores to go to be able to look at brands. There’s players like us that clearly are going to be the adults in the room that have all the, all the regulations ticked and tied. But I actually see the bigger opportunity in brick and mortar, not DTC.

Irwin Simon

And understood, that’s great. We did today. We have support. Probably, we have support in many states already with HD nine. We’re working with partners to educate Congress on, you know what H DB nine is. And how it should be best regulated and, we would like it to be regulated like alcohol and sold through alcohol distributors. Today there’s total wine. You can go in and buy the product, ABC fine wine in Florida, you can buy the product. So, brick and mortar absolutely is ultimately, where we absolutely want, but direct to consumer is something that, we would absolutely look at too.

Pablo Zuanic

Yeah, understood. I agree. Yeah, look, regarding the US, I’m not going to make you repeat what you already said. You have this vision, how medical cannabis would be federally legalized in the US. Of course, we’ll see how that plays out. You recently appointed Steven Cohen to your board. You know, we look at some of your peers like Canopy growth and SNDL building beach in the US with more of AR type of focus.
You know, I just don’t understand given your apparent evolving views in terms of how the US may, may, you know, deregulate, especially with the new administration. How are you thinking about when and how to maybe, follow the model of some of your peers in terms of trying to build beachheads on the, on the right side. You tried to do that with me men and I’m wondering how you’re thinking about that right now. Thank you.

Irwin Simon

Listen, good question. And I think, it’s like buying somewhat like a lottery ticket Pablo, but I think my strategy so much so far is we would be ready for it and could be ready for it in a very quick period of time. You know, we have an infrastructure of a whole medical group in Canada.
We have an infrastructure in Europe and put that team together within 90 days. We could be in the medical cannabis business in the US depending upon what legalization is. And I’ve seen a lot of companies go out there and buy options, do things that never came to fruition and spent a lot of money. we did buy the debt of Medmen. We still own the IP for the brand Medmen.
So with that, we have a close eye on it right now. Our focus is on Delta Nine Drinks, which we think is a big opportunity. Like I said, we’d love to be able to sell and let me tell you something. If we could sell our, our cannabis, medical cannabis in Canada, the $250 million business that a 2%, 3% you know, that would be.
Very, additive to — but until legalization, until things change. And my thing is the Trump organization will look at this here just because of the dollars. It will contribute to bringing in more tax dollars and also eliminating, from the illicit market and eliminate eliminating all the confusion, helping what they think. When do I think it will happen? As I said before, I think it will happen during this administration. But I did say it would happen during the Biden administration too.
But I think, this or this administration is much more business opportunistic and we’ll look at it with right regulation. And I think that’s what’s important here, but in the meantime, that’s a good thing which I’ve said about to, we have built a really strong business in the US today with our beverage business, with our spirits business and our wellness business. And I will mention there is a big focus today.
On growing our wellness business and whether t’s additional acquisitions, additional opportunities with hemp, which we think is high protein fiber products and that’s a big, opportunity for Tilray.

Pablo Zuanic

Got it. Thank you.

Operator

Michael Lavery, Piper Sandler.

Michael Lavery

Thank you. Good morning. I just wanted to follow up on a couple of things, I guess first on the Delta nine beverages, the traction, especially that you just called out like a like a Louisiana or Minnesota. It, it’s proven to be strongest where there isn’t adult use opportunities at the legal, at the state level. How much do you sort of account for that as a potential limitation?
And how does that shape some of your thinking? And then just on the guidance I know you went through some of that in an earlier question, just want to follow up on how the skew rationalization timing fits in. Was that in part of the guidance thinking all along or has it changed? And if it’s newer, is it the innovation that’s new to offset it, how just help us think about the puts and takes there?

Irwin Simon

So first of all, in regards to, where do I see the big states and the big opportunities, Texas, Florida, Georgia or some of the big states and which are big beer states and, big opportunistic states.
For us, I mean, if you come back and look at the size of those states and some of the biggest states out there and there’s some of the biggest markets where we sell beer today. So that is where I see our big opportunities from a standpoint there.
In regards to our guidance and our SKU rationalization so far we’ve taken, approximately $17 million, $18 million of sales. It’s probably about a $2 million EBITDA hit. Again, there’s probably another, you know, 12, there’s probably about $10 million in SKU rationalization that will come out of our top line sales. Now again, what you heard us say, what’s happening? Now, those sales that come out, we’re replacing them with new products and faster selling SKUs and I got some. It’s a rotation of those products and not everything gets on timing, but it’s taking lower.
Margin a lot, slower selling SKUs out and replacing them with new products, higher selling, higher selling products and higher margin products to replace those and then we should understand that as your color on the spring shelf reset as, having that in hand and the one for one swaps. I didn’t, you broke up on that question last time.

Michael Lavery

When you were saying how the innovation would, would offset the few rationalizations, You were talking about the better timing this go around for the shelf resets in the spring. Should we understand that you’ve got that in hand and, and already set to go?

Irwin Simon

Yes, I mean, there’s a timing on that too. You know, it, it’s going to be approximately 20 $25 million of sales that are coming out, but we would hope, with our new products and our faster selling skews with more space, we would make up those sales and then sell, but there’s a lag time on some of that too. It just doesn’t all happen at once.

Michael Lavery

Okay, thanks so much.

Operator

Thank you, ladies and gentlemen. That concludes our question-and-answer session. I’ll turn the floor back to Mr. Simon for any final comments.

Irwin Simon

Well, thank you everybody for jumping on our call today and first and foremost, I want to put our thoughts with everybody in Los Angeles that’s gone through that horrific fires out there that have lost their homes. And we’re here thinking of you. And, also in what happened in New Orleans, we’re living in an interesting world out there.
From the standpoint of LA, as I sit here today and look at what we’re doing and trying to understand, the growth of this company, you look at the cannabis industry and what we’ve done in cannabis over the last five years. You know, as we sit and build out facilities today, we have 5 million square feet of grow in Canada today with over a billion plus dollars that we’ve invested in building up those facilities. You know.
In regards to our breweries today, we have 10 breweries today that produce our product 20 brew houses. We have a distillery in Breckenridge. We have manufacturing facilities in Winnipeg Canada that produce our hemp. And then we have two facilities in Europe that produce and grow cannabis, medical cannabis for us. So we have an incredible, we have an incredible infrastructure out there to produce us with 90% of our products. We have today over 40 different brands, whether it’s in beer, whether it’s in Speers, whether it’s in cannabis, whether it’s in our wellness products.
And we have an incredible team that I get to work with to help bring all this together from a manufacturing standpoint, from an operational standpoint, from a distribution standpoint, from a sales and marketing standpoint last but not least, we’re building something different out there. There’s no company out there today. That’s in the cannabis business, the wellness business.
In the beverage business and bringing it all together. We’re, handcuffed by regulation. I wish tomorrow I could start selling cannabis in the US. And how big an opportunity is not a lot of companies just can’t sell new products and go out there and do it. I wish I could sell cannabis infused drinks.
In the US. I’m limited in Canada of how much I can do in Canada in my contribution as I pay a dollar per gram in excise tax. The richest cannabis company in Canada today is the Canadian government. And you know, we spend about $155 million in excise tax in Canada higher than beer, higher than wine, higher than spirits and some of the highest excise tax of anything. And that’s one of the biggest challenges.
Think how much we sell in Canada today and still from a profitability standpoint because it just is a higher excise tax. The beer category is changing dramatically and we will continue to change it. We will make beer fun again, we’ll make a unique looking out with new products with R&D C and under, and now the beer group, Brian not working with Thai lots of opportunities that we see in spirits today with our bourbon gin and vodka. My past I come from Wellness Foods.
You know, I think Wellness is something that’s going to be around forever and hemp is it going to be a big part as an ingredient as a food? And we’re going to look at other opportunities within the Wellness area. And last but not least international, one of our fastest growing business today, one of our most profitable business today. And you look at it 700 million people. So there’s a lot of great DNA within tilray today, there’s a lot of great businesses within Tilray today.
You know, as we reach that $1 billion mark. And it’s taken companies like Tesla, Amazon, you know, Microsoft long time and we’ve been at it just five years and we really got a great strategic plan, a great plan to bring it together. So stay tuned. I appreciate the support.
Listen, I don’t like how our stock performed, but I got to tell you behind the stock got to be a great company and that’s ultimately what we’re trying to build out there. I thank you for your support. Thank you very much for listening today. Just be safe out there.
And again, my thoughts go out to people in LA. My thoughts go to the people in New Orleans and the rest of the world. Thank you very much.

Operator

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