Thank you for joining today's conference call to discuss Tilray Brands' financial results for the fiscal 2025 third quarter ended February 28, 2025. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session for analysts and investment firms conducted via audio. I will now turn the call over to Ms. Berrin Noorata, Tilray Brands' Chief Communications and Corporate Affairs Officer. Thank you. You may now begin.

Thank you, operator, and good morning, everyone. By now, you should have access to the earnings press release which is available on the Investors section of the Tilray Brands website at tilray.com and has been filed with the SEC and the CSA. Please note that during today's call, we will be referring to various non-GAAP financial measures that can provide useful information for investors. However, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. The earnings press release contains reconciliation of each non-GAAP financial measure to the most comparable measure prepared in accordance with GAAP. In addition, we will be making numerous forward-looking statements during our remarks and in response to your questions. These statements are based on our current expectations and beliefs and involve known and unknown risks and uncertainties which may prove to be incorrect. Actual results could differ materially from those described in those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements. Today, we will be hearing from key members of our senior leadership team beginning with Irwin Simon, Chairman and Chief Executive Officer. Ty Gilmore, President of Tilray Beverage North America, who will provide an update on our beverage business and Carl Merton, Chief Financial Officer, who will review our third quarter financial results for the fiscal year 2025. Also joining us for the question and answer segment are Denise Faltischek, Chief Strategy Officer and Head of International, and Blair MacNeil, President. And now, I'd like to turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon.

Thank you, Berrin. Good morning, everyone, and thank you for joining us today. Tilray Brands is at the forefront of the beverage, cannabis, and wellness industries on a global basis. We are expanding into new markets developing innovative consumer products that reflect how people eat, drink, relax, and receive relief from medical conditions where other treatments have not been effective. In five years, our team has transformed Tilray from a business relying on cannabis legalization for growth into a diversified consumer products company providing specialty beverages, cannabis, and wellness products worldwide. Beer and cannabis have been sold for thousands of years. These industries and their consumers are here to stay. They are not going anywhere. And neither is Tilray. We are here to stay with our strengthened balance sheet, our strong brands, our strong businesses, and our global operations. There's a lot of value in Tilray today that is not reflected in our current market cap and stock price. Tilray is uniquely positioned as the only consumer company with a diversified portfolio of beer, spirits, cannabis, and wellness products. I personally do not think people understand the value platform that we have created and have today. In a recent analyst report, it was identified that the increasing dual-use of cannabis and alcohol is heightened among young adults, with 36% of legal alcohol users in their twenties, Gen Z, also consuming cannabis, up 14 points the past decade, and on page four 50% of young adult users to dual-use cannabis within the next ten years. Staggering numbers. Tilray continues to advance in the sectors of beverage, spirits, cannabis, and wellness by innovating products, managing costs efficiently, and expanding internationally at a competitive pace. While other companies are adopting similar models, Tilray remains ahead in several areas including vertically integrated operations, an established portfolio of diversified brands, and a comprehensive distribution network with a global reach. Regarding tariffs, Tilray confirms no current impact. After analyzing the recently announced tariffs on international trade, we conclude that they are unlikely to substantially affect our sales and costs. In the U.S., our American craft beer and beverage brands are manufactured in the U.S. and distributed in the U.S. market. In Canada, where a majority of our cannabis cultivation is grown, our Canadian cannabis brands are produced in Canada for Canadian consumers. In international markets, our medical cannabis brands and products are produced for local patients. And in our wellness business, we have received confirmation that Manitoba Harvest is exempt from the new tariff. Since 2020, we have made seven acquisitions in the beverage, craft beer, and spirit sectors. We've introduced new categories including non-alcoholic beverages, non-alcoholic beers, waters, and hemp-derived THC drinks. In the U.S., we have ten beverage facilities and over five hundred distributors. When we acquired the ABI and Molson Craft brands, they were not profitable. We have built a new platform and infrastructure capable of revolutionizing the beer, spirits, and beverage industries. And we are focused on capturing every opportunity to attract a broader consumer base including new opportunities in the international markets, such as new ventures into Europe that will introduce our brands to the United Kingdom and other regions with local operations leveraging the infrastructure that we had built in the U.S. Ty will provide further details regarding our beverage businesses and its execution. Importantly, we are laser-focused on building a sustainable global business platform in terms of profitable sales growth, improving profit margins, and cash flow generation, and maintaining a solid balance sheet that can help Tilray navigate market challenges and make use of strategic opportunities. As Carl will discuss in detail, in the third quarter, we delivered our highest cannabis gross margin in almost two years, and our net debt is less than one times EBITDA. We will not see sales growth just for the sake of growth. It is not additive to our bottom line and accretive to our shareholders. In the third quarter, we generated $186 million in net revenue or $193 million on a constant currency basis. In the quarter, we implemented strategic initiatives aimed at enhancing our business operations over the mid and long term. These measures focus on improving margin and profitability, as well as driving long-term operational efficiencies rather than pursuing revenue growth at any cost or in a non-sustainable manner. However, these decisions came with a short-term impact in the third quarter and impacted our revenue by about $13 million. If we eliminated the impact of these strategic decisions in cannabis and SKU rationalization in our beer business, adjusted net revenue increased 10% to $206 million in the quarter. Our margin expansion efforts across each of our businesses, including beverage, cannabis, and wellness, led to a 5% increase in gross profit and a 200 basis point increase in gross margin to 28% compared with the prior year period. Our balance sheet remains strong with ample cash and marketable securities totaling $48 million. During the fiscal year to date, we also reduced debt levels by $58 million, positioning us to pursue strategic acquisitions, new opportunities, and capitalize on market trends. Our cash burn has primarily resulted from investments in beverage, settling legacy lawsuits, and capital expenditures aimed at operational growth opportunities. We're committed to expanding our business while managing our debt responsibly. Our cannabis, wellness, and distribution segments are generating positive operating cash flow and we're on track to drive growth in our beverage businesses. Tilray Brands has demonstrated remarkable resilience and maintained its fundamental strength despite market challenges, including a tougher February than expected across both the cannabis and beverage alcohol industry. Tilray continues to operate the largest legal cannabis business in Canada by revenue, lead the medical cannabis business in Europe, and continue to dominate in the branded hemp high protein food sector in North America, with nearly a 60% market share in the U.S. and 80% in Canada. We ranked as the fifth largest craft beer business in the United States. We are also leveraging advanced technology to align with our shareholders' interest. The consumer of tomorrow is enhancing efficiency and driving growth. AI is being implemented across our global platforms. We're combining AI-driven data insights with advanced horticulture automation technology in our global greenhouse operation. This integration allows real-time management of greenhouse conditions leading to increased efficiency, higher output, improved quality, and reduced costs per resources such as labor, water, and energy. Additionally, Tilray plans to accept cryptocurrency as a payment method in its online operation and is exploring strategic initiatives related to cryptocurrency that aligns with our business goals. That is just the beginning. Tilray Brands is at a transformational point in its journey. Our strategic initiatives, innovative product development, and robust infrastructure are propelling us towards unprecedented growth. We have harnessed efficiency across our businesses, facilities, and systems, and our workforce globally. Ensuring we're prepared to capitalize on every opportunity. I also like to add, being one of the largest individual shareholders in we, along with my team, combined we own approximately one percent of Tilray Brands stock. We, along with our shareholders, are impacted by the decline in our stock price and we are one hundred percent fully invested in the positive trajectory performance of our stock price. Again, we are laser focused on building a sustainable global business platform and believe our further growth performance will recognize and reward our shareholders. Now turning to cannabis. In fiscal Q3, our global cannabis business generated net revenue of fifty-seven million dollars on a constant currency basis and increased gross margin by eight hundred basis points year over year. Our gross margin of forty-one percent is the highest in almost two years. Growth in our international and our strategic decision not to participate in margin dilutive categories in the Canadian adult-use market has driven margin improvements. In fact, our global medical business when combining international and Canada now accounts for approximately eighty percent of our cannabis total profits even though they contribute only approximately thirty-five percent of sales. As a side point, we would say to investors, only focus on reported sales figures to pay more attention to gross profit dollars and potential drivers of profitable growth. If the United States legalized medical cannabis, it could mean an additional two hundred and fifty million dollars for Tilray, potentially capturing two to three percent of the U.S. medical cannabis market. Tilray is not subject to any of the two eighty tax obligations in the U.S. Tilray's cannabis advantage lies in its global scale and experience. Our top-tier ability to cultivate large-scale pharmaceutical-grade cannabis with strict quality control standards. Our established medical brands of product innovation are already improving patients' lives in legal markets such as Canada, Germany, Portugal, and various other European countries. Regarding our international business, in Q3, we saw quarter-over-quarter and year-over-year revenue growth in Germany, Italy, Luxembourg, and Portugal. Our medical cannabis sales in Germany grew significantly with flower sales increasing seventy-nine percent, post-legalization, and extract sales increasing thirty-one percent post-legalization. This is a significant increase from the end of our second quarter, where we saw our post-legalization flower and extracts increase fifty-five percent and twenty-four percent respectively. This growth was driven by higher patient demand in the market. As I mentioned earlier, a large focus of our strategic growth initiatives from our cannabis segment is redirecting inventories to international medical cannabis markets in order to capitalize on the higher margins available in such markets. Taking this one step further, given the increasing demand in Germany and the margins in Germany are the highest in the international markets, we're also allocating more of our inventory to that market to further enhance our profitability. At the end of Q3, we introduced Tilray Craft, a new brand extension of the Tilray Medical brand in Germany, which aims to offer unique flower operations with higher THC and higher terpene content, and are derived from novel genetics in order to address the evolving needs of patients. We are cultivating high-quality medical cannabis at our FreeRx facility in Germany using prize cultivators from Canada exclusively for the German market. We're excited to launch our new medical cannabis flower which is expected to be in the fourth quarter. Today, we are providing high-quality medical cannabis flower to Germany from our global facility in Canada, Portugal, and Germany. This is allowing us to be laser-focused on product quality, genetics, and cost per gram for our international markets. This coupled with our regulatory direct distribution to wholesalers and pharmacies with our CC Pharma medical distribution business continues to differentiate us from competitors and allows us to quickly service our customers and patients. Turning now to Canada. We continue our focus on quality of revenue and it has showed in our margins. In the quarter, we shipped three point two metric tons of flour to support the international market, as I previously said. Where margins are stronger than in the Canadian market. However, international sales and margin earned on them will not be recognized until shipped for a customer predominantly in Q4, as a temporary timing delay on all overall cannabis sales of three point two million dollars during the quarter. As I mentioned earlier, we remain the leader in the Canadian cannabis market by revenue, and we are still the largest federal legal cannabis market in the world. We maintain the number one position in beverages, chocolate edibles, oils, capsules, and straight-edge pre-rolls. In the cannabis flower category, we were in the number two market share position despite giving up share on lower margin SKUs in favor of higher margin opportunities. An environment constrained by tight regulation, price compression, and excise taxes, we remain laser-focused on utilizing process improvements investing in CapEx to drive margin improvement. Since fiscal 2024, we have reduced our cost per unit by forty percent and expect an additional twenty percent cost reduction by the end of fiscal 2025. In parallel, our operations teams have been working hard on optimizing our extraction capability by leveraging our state-of-the-art extraction chamber so that all our remaining biomass gets utilized at a significantly reduced cost. As a result, we can expect healthier margins in our baseline business and growth in two of the fastest-growing categories in vapes and infused pre-rollers. On the cultivation side, we have the most flexible footprint in the global cannabis industry. Our product range caters to diverse consumer segments, including premium, with Broken Coast; mainstream with Redican; and value with Good Supply, which was the fastest growing flower brand in Canada, growing by forty basis points in the third quarter. Over the past couple of years, we have built a strong genetic pipeline across all our facilities totaling over four hundred unique genetics. We have cultivars across all our consumer taste profiles. Additionally, we can add an additional seventy metric tons to our capacity when the market requires it. In the beverage category, Tilray had a leading market share of forty-five percent, with XMG and Molo brands ranking number one and number two respectively. With multipack formats poised to enter the marketplace, we remain confident that beverages are significantly underrepresented in Canada. We anticipate capturing additional market share in this category which is projected to experience substantial growth as regulatory environments improve. Tilray is well positioned for long-term success in the Canadian cannabis market with a facility footprint of approximately five million square feet and the capacity to produce over two hundred metric tons of cannabis. Our value chain and business processes are the best in the industry. And are optimized to enhance efficiency. If the Canadian cannabis excise tax is reduced by one dollar per gram to fifty cents per gram, and as cannabis streets were sold at the LCBO and convenience stores, we foresee a tremendous amount of annual revenue opportunity that Tilray is positioned to tackle. Turning to our Tilray wellness business as consumers become increasingly health-conscious, we continue to see steady growth as our revenue was fourteen million dollars in the quarter. We delivered an eight percent net revenue growth compared to the prior year on a constant currency basis. This growth was driven by Manitoba Harvest supersede innovation and the expansion of our wellness beverages including High Vol energy, Highball Energy is a zero-calorie caffeinated seltzer with a clean label. Available on Amazon, we're experiencing sixty-eight percent growth in the last six months and available nationwide at Whole Foods market retail stores later this month. A strong focus on cost helped the business unit improve margin, delivering one hundred and eighty basis points, increasing gross margin year over year. The margins were driven by a more favorable sales mix and productivity savings generated at our manufacturing facilities. Tilray is exploring further expansion opportunities in the wellness section both in wellness foods and wellness beverages. In the months to come, we'll continue to diversify and expand the Manitoba Harvest portfolio in North America and to begin to bring brand new international sales. We see the success of Highball as a validation that Tilray Wellness has the right infrastructure and experience to build and acquire a more broad-based wellness beverage portfolio. With that, I will turn the call over to Ty Gilmore, President of Tilray Beverages of North America to tell you more about what's happening at Tilray Beverages. Todd?

Thank you, Erwin. Building on Erwin's points, in Q3, our beverage business generated fifty-six million dollars in net revenue and increased gross margin to thirty-six percent compared to thirty-four percent in the prior year quarter. Today, Tilray Beverages operates more than twenty beverage brands, including fifteen American craft beer brands, across ten network manufacturing facilities, twenty brew pubs, restaurants, and a single integrated sales and marketing team operating nationwide. We are focused on profitable expansion. Last quarter, we announced Project Four Twenty, our strategic plan to integrate our craft beer businesses, optimize operations, and revitalize the growth of our acquired brands. This comprehensive initiative focuses on SKU rationalization, geographic and distribution consolidation, all aimed at enhancing margins and profitability through portfolio optimization, operational synergies, and cost savings. In Q3, we increased our Project Four Twenty cost savings target to thirty-three million. Of which we have already achieved twenty point six million on an annualized basis. By working closely with our distributors and various markets, we streamlined our portfolio to eliminate duplicate and slower growth products as well as the decision to concentrate our brands in the regions where they have the most strength, impacting revenue to date by approximately fourteen million. Together, we are poised to meet consumer preferences head on and drive growth and innovation in the beverage alcohol category. Tilray Beverages has successfully established itself as the number one craft supplier in metro New York with Montauk Brewing and Blue Point Brewing Brands, the number one craft supplier in the Pacific Northwest across Oregon, Washington, and Idaho with our ten barrel brewing, Redhook, Hop Valley, and Widmer Brothers Brewing brands. Tilray is the number two craft supplier in the southeast in Florida and Georgia with Sweetwater Brewing, Terrapin, and Shocktop, and the number four craft supplier in Colorado according to Circana data. Our strategic execution has led to focus on strategic brand growth with Shocktop increasing forty-four point eight percent in the Southeast food channels, Sweetwater growing one percent in Southeast food channels, Breckenridge Brewing growing two point seven percent in Colorado, and Montauk Brewing showing steady growth with one point seven percent growth in the New York metro area and ten point five percent growth in the Northeast. Across strategic channels, Redhook Big Ballard is growing seven percent across the convenience channel, Terrapin hopscotch growing three point four percent, and Alpine and Green Flash growing thirty-five point five percent in California Convenience Channel for the quarter. We are not done as we continue to seek profitable sales growth to meet the consumer demand for value trusted brands and disruptive innovation. We are focused on investments across the following segments. One, we created a new consumer segment craft lite lagers with the introduction of pub beer at below core price points. We are now scaling this proposition across regions, including Sweetwater Dry Beer in the Southeast, Long Island Light from Blue Point Brewing Company in New York, Atwater Light Michigan, and soon Revalvors Yalsbere in Texas. This strategic move has positioned us to capture a broader consumer base in line with the trends mentioned earlier. Two, our non-alcoholic beer brands and product portfolio is also showing promising momentum. We've recently introduced a second Montauk SKU for New Yorkers, with our NA IPA Runner's High, which has recently increased distribution across four thousand five hundred retailers, demonstrating our ability to capitalize on the growth trend of the non-alcoholic craft beer segment. Three, the spirits category, Breckenridge Distillery has proven its strength in the bourbon sector, experiencing higher depletions compared to others in a declining market. It has also made significant progress in the vodka and gin markets complemented by the world-class restaurant and retail operation that provide an immersive brand experience. Our primary objectives for growing our spirits business are to expand distribution of Breckenridge bourbon, vodka, and gin, and to launch world-class innovation across tequila, non-alcohol spirits, and to capitalize on the evolving shot segment with innovative branding and packaging. And fourth, and last but not least, in the hemp-derived THC drink segment, Tilray alternative beverage business is uniquely positioned to leverage the benefits of our hemp wellness business and our cannabis business to formulate great tasting beverages responsibly infused with five and ten milligram of hemp-derived THC. In the quarter, Tilray expanded distribution of hemp-derived THC across ten states including Florida, Alabama, Georgia, North Carolina, South Carolina, Tennessee, Minnesota, and New Jersey. An online direct-to-consumer channel, we estimate that our HDD nine drinks portfolio is sold across one thousand distribution points. In addition to Happy Flower, Busy Jane, and Urban Bloom, our mocktails and seltzer brands, we are introducing four twenty fizz, a low-calorie sweet soda proposition. Tilray is also leveraging our established robust national beverage distribution network across our independent retailers, convenience stores, packaged stores, including multi-state retailers such as Total Wine and ABC, who are very excited about this category and new growth opportunity.

Thank you, Ty. 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 February 28, 2025. In Q3, which is one of our seasonally lowest quarters, we net revenue was one hundred and eighty-five point eight million dollars compared to the previous year quarter net revenue of one hundred and eighty-eight point three million dollars. However, on a constant currency basis, net revenue was one hundred and ninety-three million, up two percent. Further, as Erwin already mentioned, we made several strategic decisions during the year which impacted Q3 revenues including the decision to allocate three point two metric tons of cannabis from the Canadian market to international markets, where the revenue from that allocation plus an incremental two point five metric tons will be earned predominantly in Q4. The decision to focus on margin and not revenue temporarily in the vape and infused pre-rolled space while we completed significant improvements to our industrial extraction process and the decision to engage in SKU rationalization program in the beverage business. The Q3 revenue impact of the allocation of cannabis to international markets pushed approximately three point two million dollars in Canadian sales in Q3 to later quarters. Illustratively, three point two metric tons of cannabis sold in the international market should result in at least ten million dollars of revenue. The Q3 revenue impact of focusing on margins within vape and infused pre-rolls resulted in a decrease in year-over-year revenue of approximately four million dollars. The Q3 impact of the beverages. If those elements were included in our constant currency revenue number for the quarter, we would have reported two hundred and six million dollars. By segment, beverage net revenue was fifty-five point nine million dollars, but would have been over sixty million dollars if we had not made this strategic decisions previously discussed. Cannabis net revenue was fifty-four point three million dollars, which would also have been over sixty million dollars if we had not made the strategic decisions previously discussed. Distribution net revenue was sixty-one point five million dollars and wellness net revenue was fourteen point one million dollars in the quarter. Gross profit increased by five percent to fifty-two million dollars compared to forty-nine point four million in the prior year quarter. Gross margin increased two hundred basis points to twenty-eight percent from twenty-six percent the prior year quarter. Selling, general and administrative costs decreased one point two million dollars from the prior year when excluding an increase of four point four million in bad debts that was a result of us reversing a previous bad debt in the prior year. Like many industries and businesses impacted by the decline in the stock market since November, we are reporting a seven hundred million dollar non-cash impairment related to macroeconomic conditions including market volatility, and the perception of the reduced likelihood of US and or European cannabis regulatory change in the short term. Primarily, as a result of this non-cash impairment, we are reporting a net loss of seven hundred and ninety-three point five million dollars compared to a net loss of one hundred and five million dollars in the prior year quarter. With almost seven hundred and seventy-nine point one million of non-cash costs including the seven hundred million dollar non-cash impairment, twenty million dollars of non-cash fair value changes on our previous MedMen notes, and twenty-two point three million dollars of non-cash foreign exchange losses. On a per share basis, this amounted to a net loss of zero point eight seven dollars per share, which was a net loss of zero point eight seven dollars per share, compared to twelve cents per share in the prior year quarter. On an adjusted net loss basis, the loss was close to breakeven at two point nine million dollars compared to an adjusted net income of zero point nine million dollars in the prior year quarter. On a per share basis, this resulted in an adjusted EPS of zero cents per share for both periods. Adjusted EBITDA was nine million dollars compared to ten point two million dollars in the prior year quarter. The decrease in adjusted EBITDA from the prior year is primarily due to the focus on SKU rationalization in our beverage business. Cash flow used in operations was five point eight million dollars compared to fifteen point four million dollars in the prior year quarter. Adjusted free cash flow was negative eighteen point two million dollars compared to positive zero point six million dollars in the prior year quarter. Largely as a result of an increased demand on our working capital including settling multiple litigation matters, increases in inventory at Tilray Partners, and prepared to stock pharmacist inventories for the summer holidays, increases in inventory in beverages as we prepared for the seasonality of beverage sales in the fourth quarter, all offset by a significant decrease in Canadian cannabis inventory levels. In addition, we invested seven point eight million dollars in capex within the beverage segment, investing in the business to grow future revenues and reduce our cost structure. For the year, we settled several legacy lawsuits inherited from acquisitions and the Apria class action for a total of eleven point one million dollars. Those lawsuits had original claims of over two hundred and sixty-five million dollars. Turning now to our four business segments. Despite recent skepticism on the industry, we believe that the beer and spirit markets are not going away, but rather are in flux based on changes in consumer preferences and purchasing patterns. To capitalize on those trends, we created Project Four Twenty. Which focuses on four key elements. A SKU rationalization focused on our best-performing brands, introduction of key innovation and extension into adjacent beverage categories like water, non-alcohol drinks, and THC drinks. A geographic rationalization focused on our regional jewel strategy, a distributor rationalization to reduce our over seven hundred distributors to approximately five hundred distributors, and a synergy plan to optimize our cost structure. During the quarter, we increased our synergy plan to thirty-three million dollars, up eight million dollars from the previous quarter. And we are well on our way with twenty point six million dollars already achieved. Fiscal year to date, the SKU rationalization plan lowered our revenues by fourteen million dollars. For the fiscal year ended May thirty-first, twenty twenty-five, it is anticipated that the cumulative impact of these initiatives will result in a reduction of approximately twenty million dollars in net revenue which we believe will be offset by the growth of our new product innovation including the new beverage categories and brand extensions over the next twelve months. For the quarter, beverage net revenue was fifty-five point nine million dollars a two percent growth compared to fifty-four point seven million in the prior year quarter. As previously discussed, without the impact of the strategic decisions identified earlier, beverage net revenue would have been over sixty million dollars. Beverage gross profit increased to twenty million dollars compared to eighteen point nine million. Average gross margin was thirty-six percent compared to thirty-four percent in the prior year quarter. The improvement in gross margin was a result of our efforts integrating and optimizing our facilities, as well as a favorable product mix. Gross cannabis revenue of seventy-three million was comprised of forty-nine point three million dollars in Canadian adult-use revenue, thirteen point nine million in international cannabis revenue, five point eight million in Canadian medical cannabis revenue, three point nine million in wholesale cannabis revenue, all offset by eighteen point seven million dollars in excise taxes. Net cannabis revenue was fifty-four point three million and fifty-seven point five million on a constant currency basis compared to sixty-three point four million in the year-ago period. As previously discussed, the strategic decision to focus on margins in vape and infused pre-rolls impacted revenue by four million dollars in the quarter, and the decision to ship three point two metric tons of cannabis that would have been sold in Canada in Q3 to international markets for sale in later quarters impacted revenue by approximately three point two million dollars. But for these items, net cannabis revenue would have been sixty-four point seven million dollars on a constant currency basis. The decision to preserve margin on vape and infused pre-rolls also had an impact on cannabis gross margins. We actively participated in those markets selling the incremental four million dollars in the quarter would have had an over three million dollar negative impact on the gross profit we are reporting. Now that our extraction capital projects are completed, we will be able to participate more aggressively in vapes and infused pre-rolls. We do not anticipate a revenue impact continuing past the midpoint of the fourth quarter from that point forward; the positive gross margin impact of sales in this category would be expected to generate a swing of almost five million dollars on gross profits versus what we would have reported in the current quarter. Cannabis gross profit increased five percent to twenty-two million and cannabis gross margin increased to forty-one percent compared to thirty-three percent from the prior year period, an eight hundred basis point improvement. Distribution net revenue derived predominantly through two or three pharma increased about eight percent to sixty-one point five million and almost fifteen percent to sixty-five point one million in constant currency compared to fifty-six point eight million in the prior year quarter, all as a result of favorable distribution gross profit being flat at five point six million dollars in both the current year and the prior year period. Wellness net revenue grew five percent to fourteen point one million from thirteen point four million dollars in the prior year quarter and eight percent on a constant currency basis to fourteen point five million. The increase was driven by our strategic focus on continued innovations. Wellness gross profit was four point five million dollars up from four point one million in the prior year quarter, and gross margin rose to thirty-two percent compared to thirty percent in the prior year quarter as a result of continued operational efficiencies. Our cash and marketable securities balances as of February twenty-eight, twenty twenty-five was two hundred forty-eight point four million dollars up from two hundred twenty-five point nine million dollars in the prior year period. During the year and through today, we continued to strengthen our balance sheet, including raising approximately one hundred and forty million dollars on our in ATM, repaying approximately fifteen million dollars on our long-term debt, and repurchasing approximately sixty million dollars in outstanding convertible notes. After taking into consideration these actions, we reduced our net debt position to approximately fifty million dollars, which when combined with our trailing twelve months adjusted EBITDA, puts our net debt to adjusted EBITDA leverage ratio below one. Today, we are revising our fiscal twenty twenty-five guidance for net revenue to eight hundred and fifty million dollars to nine hundred million dollars. Adjustments for constant currency and the impacts of these strategic initiatives and SKU rationalization which totaled fifty million dollars would have resulted in expected net revenue of nine hundred to nine hundred and fifty million. Let me now conclude our prepared remarks and open the lines for questions from our covering analysts. Operator, what's the first question?

Thank you. Before we get to the first question, I'd like to remind everyone that if you'd like to ask a question, our first question comes from the line of Aaron Grey with Alliance Global Partners. Please proceed with your question.

Hi. Good morning, and thank you for the questions. So first question for me, I just want to talk about the allocation of cannabis products. I can understand how the higher profitability makes international appealing, but as you redirect product internationally, would you be fine with this leading to some share loss in Canada as long as it's more profitable? Any color in terms of your share aspirations now for Canada would be appreciated just now as you're allocating more product internationally. Thank you.

Good morning, Aaron. Good question. Number one, you know, what's important for us is sales in Canada and having pre-rolls, flowers, edibles, and drinks will be an important part of our market. And always profitability. So sales are important. We don't report market share. Everybody looks at market share differently. So the number one thing for us is how we grow our business and how we grow sales. With five million square feet to grow, we have plenty of capacity. When we ship product now internationally, we don't have to pay excise tax and there's a much higher margin in the medical business. So, you know, we look at Tilray today from a total company standpoint. And just don't look at Canada, just don't look at international.

Thanks, Irwin. That's helpful color there. I have my second question on hemp-derived beverages. I know a small part of your business today, but a lot of potential there. So you believe you mentioned hemp-derived beverages are across one thousand brick-and-mortar distribution points. So any targets that you can point to in the near to medium term that you hope to get to, and then can you comment on any initiatives you have to help drive velocity, maybe any marketing plans you have to speak of for the spring and summer, particularly given you do have a house of brands versus just focusing on one brand in that segment? Thank you.

So I think, you know, listen, as Ty has talked about, in regards to, and I think what you said is, you broke up there on the hemp brands. You know, we're across a thousand stores today. We're selling in ten different states. And, you know, the demand and through our wellness team and through our beverage team, we have infrastructure salespeople in the street and we're selling through a lot of the beer distributors and selling it direct to consumer. There are multiple marketing programs in place to drive consumption with different retailers and different retailers with outlets. A big thing, Aaron, is educating the consumer what hemp-derived drinks are and what Delta nine drinks are and the benefits from them. If anybody can do that, we are. We're in the beverage business. So that's a big opportunity for us. Listen, we have aspirations for that to be in the multimillion dollar business for us and also it's a great margin business. In regards to our beverage business and our beer business, like Ty has said, I today with eighteen different beer brands, as we look at it, you know, state by state and geography, how do we focus on growing our beer in certain geographic Pennsylvania, you know, we talked about Montauk and if it's New York or New Jersey, there's a hundred million people there. Really going after share with Montauk and that instead of going national. So there's a lot of regional marketing that we're doing. A lot of sports sponsorships that we're doing, getting involved with the community, and a lot of different concerts. That's how we're marketing our beers. With that, we're tying that in with our retailers and tying that in with our distributors on displays. Also, you know, we're tying it into our off-premise in regards to making sure on top. We have pretty, you know, a lot of handles out there. I test anybody to go to New York City right now and get around to a lot of the bars out there and see who doesn't have a Montauk or a Blue Point handle out there.

Okay. Great. Really appreciate that color, Irwin. I'll go ahead and jump back into the queue.

Thank you. Our next question comes from the line of Robert Moskow with TD Securities. Please proceed with your question.

Hi. This is Victor Ma on for Rob Moskow, and thanks for the questions. I guess, first, cannabis gross margins at forty-one percent for the quarter was a positive surprise. I think so. What were the building blocks for that eight hundred basis point margin expansion? How much of it was from positive mix from not participating in base and infused sparrows? How much of it was from cost savings and efficiencies?

So, Victor, the majority of the hundred million is mix. A portion of that mix is more international. But a big chunk of it is this concept of being very careful with what places we're playing in. Particularly in vape and infused pre-rolls to focus on margin. And going back to the last question, in infused pre-rolls and vapes, if we would've sold, know, in the quarter, we gave up about seven million dollars or so in sales or something, four million dollars. Four four and a half million, but we gave up more. That could have been anywhere from ten to eleven million dollars a hit on EBITDA. So again, we are not going out there just for sales. We are focused on profitability. We're focused on margins. Just coming back in regards internationally, you know, again, we're not paying excise tax. Throughout the year, we pay about a hundred and fifty million dollars of excise tax in the Canadian market. We're not paying that, you know, internationally and where we see the opportunity. But let me tell you, we're aggressively looking at how we take cost out, and that's something Blair and team are doing. We're not abandoning by no means that they've been pre-rolled category, which are some big growth categories, and Blair, in regards to our center of excellence, has come up with ways to take tremendous amount of cost out. Coming up next quarter, we have a tremendous plan in regards to how to get more pre-rolls and infused pre-rolls and vapes into the marketplace. There’s a big focus on our margins and on driving sales too.

Got it. Appreciate the color. And then my second question is on the beverage side. Our tracking data indicates sales and volumes for the craft beer brands are down about mid-teens in the third quarter. Is that what you're seeing on your end? Can you help dimensionalize that number? How much combined growth did your craft portfolio see in their home markets versus their away markets? I know you gave some numbers in the call, but what would be the total split between the total whole markets and the total away markets for your brands? And then just to squeeze another question in on project four twenty, what is the brand hierarchy here when it comes to allocating the next marketing dollar? Is it prioritizing your biggest brands, your biggest markets, or is it on newer brands for potentially higher growth on a percent basis?

So number one, you know, when you come back and look at your data here, I mean, one of the things is as you go through a SKU rationalization, we're taking out a lot of the brands, so it's not really giving you a true picture. And as Todd took you through different states and different geographies on growth. That's why I come back and say this here. You know, you're probably on aggregate down. But if following our plan, looking at the geographies of three or four states, certain states were up, certain states were down. Your numbers are probably right, but again, you gotta pull out of their SKU rationalization and part of it is is this here. As we introduce, you know, new products are not in there, and off-premise or on-premise is something that there's a big focus on too and where we pulled out a lot of the caps that we lost. You know, there's another big focus on that. So I wouldn't look at the craft beer data that's out there right now. What we're trying to do is focus on sales and how we bring these brands together. You remember what I said in my remarks? As we acquired these brands from ABI and from Molson, a lot of these brands were in negative territory. What we're trying to do is reverse them. We're in the midst of going through right now looking at distributors. We have over seven hundred distributors out there today, both Molson Coors ABI, and Independence. How do we consolidate them and how are we a bigger focus for them? We haven't done that yet. That's a big part of four twenty and that's a big part of the cost savings that we're looking at. Your last question was about what? On the savings on four twenty?

Yeah. It was on allocating incremental marketing dollars. Is the focus here on prioritizing the next dollar on your bigger brands and your biggest markets, or is it on newer acquired brands that offer potentially higher growth on a percent basis?

From a standpoint, as we look at it today, where we allocating our marketing dollars is the bigger brands. Number one, Shocktop is a brand that we would look to go national with. Sweetwater is one of our bigger brands. Bluepoint is one of our major growth brands. But if you come back and look at the Pacific Northwest with Ten Bear and Windmere, you know, they are brands that we're going to focus on in their territory. You love all your kids equal, you love all your brands equally here. There are certain brands that we're gonna focus on as you'd heard us say in Florida with the Gators, we're focused on Shocktop there. In New York, we're focused on Montauk, then Bluepoint. There is a lot of opportunities coming to us right now in regards to sponsorship part of it, being on JetBlue with Montauk has been great for us. Being on Delta has been great for us. So there's a lot of unique opportunities in regards to sponsorships, being part of the community from a regional standpoint with our selection of beers that we have.

Thank you. Our next question comes from the line of Frederico Gomes with ATB Capital Markets. Please proceed with your question.

Hi. Good morning. Thanks for taking my question. First question on international markets, specifically Poland, I believe there were some changes there in telemedicine. So curious if you've seen any impact from that, but also if you would expect changes in Germany in regards to telemedicine as well.

Yeah. Thanks. Great question. So in Poland, in November, there was a change where telemedicine restrictions were put in place. As a result, we saw some prescription drops from basically around sixty-eight thousand prescriptions in the month of October to twenty-eight in the month of December. We definitely saw, I would say, demand come down a bit as patients are looking for new avenues to find prescriptions. However, in our Q4, we're starting to see things pick back up again. We believe that there was some oversupply potentially in the third quarter where distributors were working that through. We are pretty bullish on that market still. We have a very, very large share in that market. We have multiple distributors that are very strong in the market with physical clinics. So we believe that we have the right infrastructure and the right partners to really win in that market. In terms of your question, in terms of Germany, we have been very focused on the German market as we reported. We also spent a lot of time evaluating from a government perspective and speaking with members of parliament around, you know, the change in government and whether there's going to be any change in the landscape of either MedKangi or Kanji. What we find in terms of those conversations that we've been having and working for our industry group is that there are potentially changes on the Kanji, and that means social clubs and model experiments. What we've been assured of is that there are really gonna be no changes in terms of the MedKangi, which is the market that we are. We are keeping an eye on the telemedicine, you know, aspect of the law. Working with government officials to really support why that is necessary especially for rural patients. We still remain very, very bullish about our business in Germany. In fact, we saw some of the highest numbers that we've seen in history for our business in Germany this past quarter.

Yeah. Thanks, Denise. Appreciate that. Second question, just follow up on Germany. If you could just comment on pricing in Germany, you know, has anything changed recently? Are you seeing any impact, I guess, from competition in that market and also growing market, but we also see other companies investing there. So any changes in pricing?

There's definitely a lot of competition coming into the German market because I think just like we see the opportunities in Germany, both in terms of demand on patient growth and also the higher margins. I think others are seeing that as well. I think there were some of the highest imports into Germany from Canada, basically, around fifty-one percent of the imports going into Germany are coming from Canada. There is definitely a lot of competition. We do see what we see in terms of pricing is more of a segmented market coming about where patients are focused on different levels of quality and value. Higher quality products are still commanding much higher prices. There's also a value segment though, and that value segment is really being positioned toward patients who are really looking for a lower price product. I think, as you know, the German market today is split between the patient-led side, which is really self-pay market and the doctor-led side, which is more of an insurance-based market. So on the insurance-based side, which is at this point predominantly medical extracts, we see pricing remaining pretty secure because of that insurance coverage. But on the flower side, where is that segmentation? We are seeing differences of pricing based on patients' demand.

The big thing also which is important is consistent supply, and that's something that Tilray can either supply it from our Canadian facilities or supply it from our Portugal or German facility, and I think that's what everybody's looking at. One big thing to mention is we're vertically integrated there with CC Pharma or Tilray Pharma. Our distribution business that actually has been very helpful and a big part of our growth there that we distribute directly through to drugstores today. So that's important to us.

Thank you. Appreciate that. I'll hop back in the queue.

Thank you. Our next question comes from the line of Pablo Zuanic with Zuanic and Associates. Please proceed with your question.

Thank you, and good morning everyone. Look, my question is more for Denise. Look, I'm very impressed with the growth in your extracts business. I think you said thirty-one percent since April first. My impression was that the reimbursed business was not growing much. So is this saying that you're gaining share, or are more doctors prescribing to the reimbursed market? I'm just trying to understand that. Thank you.

Yeah. Thanks, Pablo. So we do see more and more doctors prescribing, and I think you might recall that after the passage of MedKangi, the government also took steps to clear out some of the restrictions that we saw on the reimbursement part of that market. Whereas before, there were waiting periods and it wasn't clear if there was a reimbursement. Now there actually is a much faster, more facilitated way to get reimbursed for medical cannabis. We also have really stepped up our efforts in terms of our team on the street with education. So doctors are more and more interested in learning about the benefits of medical cannabis for patients with certain conditions, including chronic pain. Along with that, that increased interest, I think, stigma is starting to fall away even more so. We do see increased patients and increased doctors coming to seminars wanting to learn more. I believe it's share as well as increased prescriptions to answer your question.

That's great. And just on the same point, I mean, we are hearing more about clinical studies or trials as a way to convey the message to doctors. Are you still involved in any of those psycho studies in Europe right now?

We are involved in a glioblastoma study in Spain that is basically into its second year of study. We also recently completed a study with the University of Sydney on cancer-induced nausea and vomiting. It is something that we will continuously look at. You know, where does it make sense? We have had some conversations in Germany about doing studies, also working with local universities, as we build out programs to really bring the expertise of cannabis cultivation and processing to Germany. We think we've all seen the fact that there's been a lack of expertise in Germany, so we at Tilray have had to import a lot of our expertise from Canada. We would really need to be able to build out that market.

Pablo, that's something we support—investing in research because we think there's a lot of good research that will come out that ultimately benefits the growth of the medical cannabis business and growth in other countries as they see the benefits from this here. Europe being basically only a medical cannabis business, it's important; it's important for the future of this industry. That's something that Tilray wants to be part of.

Thank you.

Thank you. Our final question comes from the line of Bill Kirk with ROTH Capital Partners.

Yeah. Good morning. This is Nick on for Bill. Thanks for taking the question. First one for me, just wanted to follow-up on the beverage side with the cost of aluminum potentially higher here. Just wondering how you kind of see beverage margins playing out, if that'll have any impact on your business. I know you mentioned you're not impacted by tariffs, but any color on how you're working around that would be helpful. Thank you.

Like everyone, you know, ultimately, we have contracts in place with suppliers. Aluminum could go up, which is a know, input cost. Hopefully, with some of the cost savings and the cost that we're taking out of those businesses right now, we can offset that. Right now, it's minimal on aluminum. It's kind of wait and see what happens there. I think everybody's getting in there to try and buy cans right now. Prices are going up. So far, you know, we're managing it, but trying to offset any of those prices with costs that we're trying to take out of the business.

Okay. I appreciate that color. Second one from me is just on the Canadian cannabis gross margins. With international demand ramping and a large amount of this being met from Canadian suppliers, have you seen any determinable changes in supply-demand economics in Canada recently? Just your sense of the supply environment in Canada would be helpful.

So, and I think Blair is on the call. I mean, number one, because we're probably the largest grower of cannabis in Canada today, the demand for us and the calls that we're getting to supply third parties with cannabis is tremendous. Right now, we have had to increase growth in our FreeRX one. We are at full capacity of FreeRX diamond. We have our outdoor grow. We're now growing outdoor grow. Looking at our facility in Gatineau that, you know, there's partially vegetables and partially cannabis, do we convert that back? There's a major demand for cannabis in Canada right now for supply because a lot of these growth facilities have either closed or gone out of business. Our plan, supplier sells first, supply Canada, supply Europe where we can, and then if there's an opportunity for third party, we'll work with a third-party partner.

Thank you. Ladies and gentlemen, that concludes our time allowed for questions. I'll turn the floor back to Mr. Simon for any final comments.

Thank you very much, operator, and thank you very much, everybody for joining our call today. It's not an easy world out there. And, you know, we've seen this as we come back and look at look at what Tilray has done. We've generated net revenue in the quarter of one hundred and eighty-six million dollars one hundred and ninety-three, and we've decided between SKU rationalization and where we want to ship products to a pullback on thirteen million dollars. Again, what we're focused on margins, profitability. We have diversified this company in over five years. We got close to nine hundred plus million dollars in sales. If you can look at categories today where we diversified in cannabis, in the Canadian market, being the largest grower with infrastructure to support it out there, with innovation, and R&D. If you come back and look how we pivoted into the beverage business, Tilray is a beverage company today. With our beer, spirits business, our non-alcohol business, our liquid love water, and our hemp-infused drinks. So we pivoted in that. Remember, we just started that in twenty twenty-five years ago today. Look where we are, the fifth largest craft brewer. We got some of the top spirit brands out there with Breckenridge. Entries into these new categories with non-alcohol with our water business and with our energy drink highball, which you'll be able find in every Whole Foods in the US, right now, which you can do. Actually, when we acquired that from ABI, there were no sales from that product and it's one of the only clean energy drinks that are out there. In regards to margin, we're focused on margin, margin, margin, margin. I understand margin drops profits to the bottom line. In regards to our balance sheet, there's a lot of cannabis companies out there sitting with a lot of debt at high-interest rates. There's a lot of cannabis companies out there that own significant excise taxes. A lot of things can change until right if Canada decides to cut its excise tax. If US legalization happened for medical cannabis, if we could sell cannabis drinks in Canada or we could sell cannabis drinks in the US, it's billions of dollars in sales. Internationally, this is a business that basically we started from scratch. I think when we acquired Tilray, we were doing about ten million dollars in cannabis sales with Tilray, very little in regards to FreeRx. We did have CC Pharma. What we've turned that into. With their growth and margins, some of our most profitable businesses today within the Tilray business. So from a standpoint, yes, we're focused on cash flow. Yes. We're focused on profitability, but you've got to invest to get there. That is a big thing for us. We've had to invest in our beverage business to get it where it is. You know, a lot of these frac businesses have been around for years and years. And within the beer business, if you watch every sporting event, Bud Light, Bud Miller, a lot of these Coors have big sponsorships out there. A lot of beers out there, and what we've done to become a big player out there is pretty amazing, and that's what we have to do. If you come back and look at the cannabis industry in Canada, it's five years old. How we've invested in the cannabis business to create close to two hundred million dollar US business in there and build brands from scratch. Same with Europe. It's five years since Germany. It's not even five years from the legalization. We built all this from scratch to get it where it is today. Takes money, time, infrastructure, it takes people. There are gonna be some loss along the way. But where I sit here today with Tilray, I'm very proud of the people that we have in place. A big focus with this here is our balance sheet. We are focused on debt. We are focused on balance sheet. We're focused on generating cash and our cash situation. We are shareholders. We're just not employees here. A big part of our compensation is in equity. Our net worth is in our stock. We're not happy with where our stock is, but nobody has given up. Nobody's going away and we're working hard to change that course on our stock and you're seeing some of the results that we're putting out there today. Thank you very much for your support. Understanding. We have the naysayers out there and we have the support out there. There's a team here that is focused. We think we have a unique business. We are not building an electric car. But you heard what Denise talked about research that we're doing in regards to cannabis. Consumer habits are changing every day. You heard me talk about Gen Z and millennials in regards to cannabis use and drinking use. We are there. In regards to our wellness business and our hemp-infused business. When we acquired Manitoba Harvest along with Tilray, it was losing about six million dollars in EBITDA. There's a complete reversal with eight percent growth, and it's become a very profitable business for us. The wellness business is something that we're going to focus on. Yes, we've had some successes. We've had challenges. We’ve had some failures. But within five years, there are a lot of points that we put on the board. Thank you very much for your support.