Tilray Brands, Inc. Q1 FY2026 Earnings Call

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

Thank you, operator, and good morning, everyone. By now, you should have access to the earnings press release, which is available on the Investors section of the Tilray Brands website at tilray.com and has been filed with the SEC and SEDAR. Please note that during today's call, we will be referring to various non-GAAP financial measures that can provide useful information for investors. However, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. The earnings press release contains a reconciliation of each non-GAAP financial measure to the most comparable measure prepared in accordance with GAAP. In addition, we will be making numerous forward-looking statements during our remarks and in response to your questions. These statements are based on our current expectations and beliefs and involve known and unknown risks and uncertainties, which may prove to be incorrect. Actual results could differ materially from those described in those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements. Today, we will be hearing from key members of our senior leadership team, beginning with Irwin Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary, followed by Carl Merton, Chief Financial Officer, who will review our financial results for the first quarter of fiscal year 2026. And now I'd like to turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon.

Thank you, Berrin, and good morning, everyone. I appreciate your presence for our Q1 results. The first quarter of fiscal 2026 demonstrates the significant momentum Tilray has built in our businesses over the years. I'm pleased to announce that our strategic focus continues to enhance our profitability, strengthen our balance sheet, and leverage our global platform to promote innovation in Cannabis, Beverage, and Wellness, all while delivering solid results for our shareholders. I extend my sincere gratitude to our shareholders for their ongoing support and faith in Tilray's vision. It's encouraging to see our stock regaining strength this quarter and returning to full NASDAQ compliance. Notably, in August and September, Tilray traded over 1 billion shares each month, reflecting the substantial interest in our company, which is a rare achievement for many. We thank our shareholders for their continued confidence and commitment to investing in our long-term vision. During the quarter, we recorded a net income of $1.5 million and earnings per share of zero, underscoring our commitment to sustainable growth and operational efficiency. We achieved revenue growth across all our business segments, except for the Beverage segment, where we remained flat due to strategic optimization of our craft beer SKU portfolio under Project 420. Overall, total revenue increased by 5% year-over-year, setting a Q1 record net revenue of $210 million, driven by double-digit growth from our Canadian Adult-Use and International Cannabis businesses, which grew 12% and 10%, respectively. Additionally, we strengthened our balance sheet by reducing outstanding debt by $7.7 million this quarter, lowering our net debt-to-EBITDA ratio to 0.07x, with cash equivalents at $265 million. Our results highlight our deep understanding of product innovation and our ability to adapt to consumer preferences. This expertise allows us to create innovative offerings that not only meet current demand but also anticipate future needs, keeping Tilray at the forefront of the cannabis, beverage, and wellness markets. Today, Tilray operates more than 40 unique brands in over 20 countries and is recognized as a dominant global cannabis leader trusted by patients, medical professionals, and governments worldwide. In the Cannabis sector, we saw a 5% year-over-year growth, reaching $65 million. The global cannabis industry continues to evolve, and we possess the cultivation and manufacturing capabilities needed to compete effectively. Recent developments in the U.S. have increased our optimism regarding the rescheduling of medical cannabis. We estimate that the U.S. medical cannabis market could reach at least $10 billion, providing a substantial opportunity for us to capture a market share of 3% to 5%, representing a potential business opportunity of $300 million to $500 million. We are strategically positioned to participate in this industry when it unfolds. Our Canadian cannabis business reported impressive results, solidifying Tilray's position as the largest legal cannabis company in Canada by revenue, with Q1 revenue increasing 4% year-over-year to $51 million. In the adult-use channel, we ranked among the top five licensed producers and have closed the market share gap to the number one licensed producer. We retained the top spot in categories such as pre-rolls, beverages, oils, and chocolate edibles, and reached number one in flower by the end of the quarter. The extensive scale of our operations provides a significant competitive advantage as we manage approximately 5 million square feet of cultivation space and maintain 210 metric tons of cannabis in production. Tilray is well-prepared to supply both European and U.S. markets as regulations evolve, particularly in Canada, where we foresee substantial opportunities from proposed cannabis health products and broader insurance coverage for medical cannabis. Turning to our International business, our international cannabis revenue grew 10% year-over-year to $13.4 million, despite challenges in obtaining permits in Portugal. We are well-positioned to gain market share as global consumer preferences and regulations evolve. In Germany, we are expanding our medical cannabis portfolio and utilizing our distribution network to drive growth. We expect to enhance our medical cannabis distribution footprint significantly in fiscal 2026. Our Italian subsidiary received its first license to distribute medical cannabis flower, partnering with a leading Italian pharmaceutical company to expand access. In our distribution segment, our European medical distribution business, CC Pharma, grew by 9% year-over-year, contributing significantly to our European cannabis operations. We have access to over 13,000 drug stores in Germany, allowing us to capture increased market share as regulations evolve. In the U.S. Beverage sector, we continue to make progress with our beer integration and optimize our strategy. Our focus on product diversification is showing promising results. Many acquired brands that were previously declining are now experiencing healthier growth trends. Through Project 420, we've realized substantial annual savings, and we are concentrating on promoting strong brands in every market. We've seen impressive performance from brands like Shock Top, SweetWater, Breckenridge Brewery, and Montauk, along with collaborative efforts in craft beer and exciting new product launches. Our Wellness business also showed strength, with revenues surpassing $15 million as we introduced new offerings and expanded our retail presence. I am optimistic about Tilray's outlook for the remainder of 2026 and beyond, with significant opportunities ahead, particularly in the Wellness space. While we have made great strides, we recognize that we have yet to reach our full potential across all sectors. With that, I will now turn the call over to Carl for a detailed look at our financials.

Thank you, Irwin. Please note that we present our financials in accordance with U.S. GAAP and in U.S. dollars. Throughout our discussions, we will be referring to both GAAP and non-GAAP adjusted results, and we encourage you to review the reconciliation contained within the press release of our reported results under GAAP with the corresponding non-GAAP measures. Now looking at our results, we are reporting record first quarter net revenue, net income and a significantly improved adjusted free cash flow for the period. Further, we are reaffirming our 2026 guidance for adjusted EBITDA. Net revenue for the first quarter was a record $210 million, a 5% increase year-over-year. This growth was driven primarily by increased cannabis sales in both Canada and our international markets and increased revenue in our distribution segment. Cannabis revenue increased 5% year-over-year to $64.5 million, driven by 12% growth of adult-use gross revenue and 10% growth in international cannabis. Higher excise taxes and declines in wholesale cannabis offset those double-digit results. We see material potential for the International segment and expect continued growth once we receive several permits that are currently backlogged in a few European countries. Beverage revenue reached $55.7 million, driven by innovation and impacted by continued SKU rationalization. We advanced Project 420 and integrated acquired brands. Although craft brands and spirits faced challenges, new products contributed 2% to Q1 revenue, supporting our belief in the beverage category's long-term growth. Wellness revenue increased 3% year-over-year to $15.2 million because of our strategic focus on continued innovations with HiBall energy, our natural energy drink, high-protein super seeds and better-for-you breakfast and snacking, including the launch of 2 new offerings from Manitoba Harvest at Whole Foods. Distribution revenue increased 9% year-over-year to $74 million in the quarter, primarily as a result of the stronger euro. From a contribution perspective, 31% of net revenue was generated by our Cannabis business, 27% was generated by our Beverage business, 7% was generated by our Wellness business and 35% was generated by our Distribution business. This compares to contributions of approximately 31% for Cannabis, 28% for Beverage, 7% for Wellness and 34% for Distribution in the last fiscal quarter. As our International Cannabis business continues to expand, we expect to see higher contributions from our Cannabis segment over the remainder of the year. Gross profit for the quarter was $57.5 million compared to $59.7 million in the prior year period. Gross margin was 27% as compared to 30% last year. This decline was driven by lower margins in our Beverage and Cannabis businesses. Looking at gross margin by segment, Cannabis gross margin was 36% compared to 40% last year as a result of a higher mix of sales in lower-margin categories such as infused pre-rolls and vapes, where we reentered some previously margin-prohibitive categories. We believe the decline this quarter is temporary and the actions we have taken to drive profitability and improve margins will be effective in the long term. Beverage gross margin was 38% compared to 41% last year. The decrease in gross margin is due to the inclusion of craft acquisitions to sales, which have generally been lower margin. Wellness gross margin was flat year-over-year at 32%. Distribution gross margin was 11% compared to 12% last year based on changes in product mix. Net income was $1.5 million or $0.00 per share compared to a net loss of $34.7 million or negative 4% per share in the prior year period. Adjusted net income improved to $3.9 million or $0.00 per share compared to an adjusted net loss of $6 million or negative $0.01 per share in the prior year. Improvements in both metrics were a function of reduced SG&A costs, including amortization. Adjusted EBITDA for the quarter was $10.2 million compared to $9.3 million last year. Cash flow used in operations improved significantly to negative $1.3 million for the quarter from negative $35.3 million last year, representing a positive change of almost $35 million. We continue to strengthen our balance sheet this quarter in terms of debt and cash positions. During the quarter, we raised $22.5 million under our ATM program, primarily after our stock increased to over $1 per share. Further, we exchanged $5 million of our convertible notes for equity early in the quarter, as we already discussed during our last earnings call. During the quarter, we reduced our outstanding debt by $7.7 million, bringing our net debt position down to $3.9 million and our net debt to trailing 12 months adjusted EBITDA ratio to 0.07x, all while ending the quarter with $265 million in cash plus another $1 million in digital assets. These stronger debt and cash positions provide Tilray with greater flexibility for strategic opportunities, and we intend to continue reducing our debt and further strengthening our balance sheet as the year progresses. As already discussed, our confidence in our business, our strategy and our team has never been higher, and we are pleased to reaffirm our 2026 guidance, anticipating adjusted EBITDA between $62 million and $72 million. We can now open the line for Q&A.

Our first question comes from Aaron Grey with Alliance Global Partners.

First question for me. I just want to talk a little bit about international growth opportunities in the near term. You offered some commentary in your prepared remarks. I just want to make sure I was understanding them correctly. So first of all, just further understanding in terms of where we stand today in terms of the impact on some of the permit delays that you've been having. And then some commentary you provided in terms of the growth, specifically, I think you're referring to medical cannabis business up 3x in fiscal year 2026 and talks about leveraging CC Pharma potential. I just want to make sure I was understanding that correctly. Were there some things that you're looking to leverage with CC Pharma business that you were not historically? So just any additional commentary on that would be helpful.

Great. So a couple of your questions. Number one, in regards to permits, we spent a lot of time with the Portuguese government. We've spent a lot of time in Portugal. We're finally seeing permits coming through. And I feel good about that. Where the next big issue that we run into is the quota in Germany and just Germany opening up and increasing more imports into the German market, which we think ultimately, that will happen. But it's not business going away; it just may shift from the second quarter into the third quarter, as the new quotas move into place in 2026. So with that, I feel we've made a lot of headway into the Portuguese permit situation. And we got more permits in the last 2 weeks than we've probably got in the last 2 months or so. In regards to a couple of things, the demand in Europe is there. And with that, it's the availability and the growth. And with the team, and now we have moved some of the Canadian team into international. We look to grow, and our facility today in Portugal is running about 50%. We have the opportunity to double that at 40 metric tons, and that's something we're working on. The other thing is to really increase our growth to probably 6 or 8 metric tons in our German facility. And also where the opportunity is in regards to bringing product, EU GMP product in from the Canadian market. In regards to Germany, what I've said and what I was working through, CC Pharma, when we acquired it, it was a big part of our license and it was something that there was an opportunity. And what we're seeing is some great expansion with CC Pharma. CC Pharma delivers to 13,000 drug stores today, and that is regular medicines, and the good thing is we're also seeing some good price increases and some good opportunities on the CC Pharma Distribution business. But more importantly, as we integrate these businesses, whether it is on the sales side and the Distribution side, we see CC Pharma being vertically integrated and distributing our medical cannabis to a lot more of these drug stores in the German market, and that's a big opportunity for us.

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

We currently have 5 million square feet of space and over 200 million metric tons of cannabis cultivated in Canada. Our established medical infrastructure is already serving the Canadian market, which comprises 40 million people. We supply clinics there through our dedicated sales team. Regarding Europe, we aim to generate nearly $100 million from medical cannabis sales, focusing on areas like anxiety, sleep, cancer, and epilepsy. We are confident in applying our expertise from Europe to the U.S. market. Additionally, we are open to partnering with a pharmaceutical company or pursuing acquisitions, as our strong balance sheet enables us to explore these possibilities. We are prepared to leverage our existing infrastructure, knowledgeable staff, and ongoing research, as well as consider opportunities for collaboration or acquisition.

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

On the balance sheet, I see the $1 million in digital assets. I guess, were those investments you made? Or was it crypto that came in from customer payments? And then taking a step back on the topic, I guess, which coins, tokens, currencies do you prefer? And what are your cash allocation plans to the strategy given your cash generation and your equity issuance history?

We recently acquired a Bitcoin about three to four months ago. Now, I’ll hand it over to Lloyd Brathwaite, who will discuss some of our strategies regarding Bitcoin as we consider its relevance to our current investors. Our existing users are also using Bitcoin, and we see potential for using Bitcoin to purchase our products, including our beer products, which presents opportunities with our current investors. Lloyd?

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

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

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

The majority of our products sold in Europe are sourced from our local facilities there. When products arrive from Canada, they first go to Portugal and then are processed at an EU GMP certified facility. This ensures that everything sold in that market meets EU GMP certification standards. There are many opportunities ahead. We have a sizable facility in Germany that can cultivate cannabis, and it’s puzzling that the German market currently does not permit the import of European products. This is an ongoing discussion with the German government. If they were to change their stance, the current production capacity in Germany would not be enough to meet market demand, which makes any potential changes by the German authorities quite impactful.

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

This is Victor on for Rob Moskow. Two questions for me, please. First, can you give us a state update for the Canadian adult-use market? Curious on your thoughts on market maturity and your pricing power in the context of the 12% growth you saw this quarter. How much of that maybe looks like volume versus price?

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

Yes, definitely. Thank you, everyone. In the quarter, we observed that overall market pricing decreased by 1.3% while volume increased by 6.5%. For us, our pricing rose by 2%, and our volume outperformed the market. It was a very strong quarter for us in terms of both pricing and volume. As you noticed, we were the only licensed producer in the top five to gain market share during the quarter, which shows our strong performance. Regarding market maturity, in the current regulatory environment, while growth rates have slowed, the market is still experiencing healthy growth. I believe that in the upcoming quarters, as mentioned by Irwin, the regulatory environment will improve, and we will continue to see growth. Overall household penetration of cannabis in Canada remains low, indicating significant potential for growth within the existing regulatory framework.

I want to touch on the Canadian market briefly. It was our first market, and as we enter our sixth year, we still face high excise taxes and significant regulations. We've experienced price compression, the impact of COVID, and the challenges of an illicit market, alongside the existence of over 1,800 licensed producers, many of whom have exited the market. We've also worked on educating Canadian consumers about the benefits and legality of cannabis without the ability to advertise. Currently, we have built a strong retail presence valued at about $250 million from our efforts over the past five to six years. We have access to over 5 million square feet for cultivation, including the largest growth facility in Canada, capable of producing 237 metric tons or more. The Canadian market has been a crucial turning point for us. We are hopeful for some concessions on excise tax and that provincial governments will permit us to sell our beverages in various retail locations, including restaurants, independent retailers, and liquor stores. We're also seeking changes related to the sale of medical cannabis through drugstores. These changes could significantly enhance our presence in the Canadian market, and Blair and his team have positioned us well for future growth in this space.

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

As you can see, we have removed $25 million in costs, but there's still more to achieve. We have rationalized our SKUs by $20 million and there is more to be done there. So far, we have closed three facilities. In terms of acquisitions, we have completed the acquisition of 12 brands and had 10 facilities running alongside 18 brewpubs, and we currently work with over 900 distributors. We are combining all of this under one management and infrastructure, and while we are making progress, we still have significant work ahead to improve our margins. This includes our procurement of cans and hops. A major issue we faced was that many of the brands we acquired were delisted by various retailers due to decisions made by their previous owners, leading to significant declines in these businesses and missed opportunities to get the products into stores. Now that those opportunities have opened up, we are working on getting these products relisted. This is evident with brands like Shock Top and Redhook, which are experiencing growth. This growth is essential for us to enhance our gross margins. The beer category is currently challenging, and we are pushing through this by focusing on growth and innovation. From the start, I've emphasized our goal: to make beer enjoyable again while also being profitable.

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

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

So number one, we've got a 1.5 million square foot facility in Portugal. We're not picking up and moving it, okay? I mean over a couple of hundred million dollars built and it's a state-of-the-art facility. So I'm in Portugal, I got to stay there. So I got to figure out how to work within those confinements. And I must tell you, I've had some great meetings with two Ministers in Portugal at the highest levels, and they're very open. There's a new government in Portugal, and they want business. They don't want us leaving. They want to build upon our business there, and they've been very, very supportive of working with us. And since my meetings with our people, we've seen lots of changes and been getting our permits. So I feel good. On the other hand, listen, we do have a facility in Germany, nowhere near what we have in Portugal. We do have the ability to ship from Canada, and where we would ship it directly into the U.K. and directly into other markets to ensure EU GMP. So we have options. But first and foremost, we are far from giving up on the Portuguese market.

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

Listen, we're supportive of change. But again, I don't want to go there and speculate until I know what the change is, okay. And I think so far, the good news is what we're seeing is the continuous demand and online prescription has not been one of the biggest drivers here. So if there is change, I think patients will find other ways to go out there and purchase cannabis. And it's interesting because Germany has strong independent drug chains out there. There's no CVS, there's no Walgreens. Individuals are allowed to own like 6 drug stores; they are all independent. So like I said, there are multiple stores out there, it's not online. So I see even if it did change and you can't buy it online, there's still the retail outlets to go to out there. And I'd like to see some of the change. There are lots of changes that we continuously talked about that didn't happen. And we, with our lobby groups, are out there working with the German government on what's the right thing for the patients because this here is important, too. The difference in medical cannabis is like medicine. If you didn't give patients access to get medicine, that's a problem. If you couldn't get your medicine and didn't have access, patients that are sick are dependent on, that's an issue. So this is being sold as medicine from a medical standpoint, not from a recreational if you don't get your cannabis from a recreational standpoint. That may not be as an issue, but you're not getting your medicine, and the government has to take that into view when they're deciding what they're going to do here. Great. I know many of you have just joined us. Unfortunately, we experienced a technical issue with our provider, and those who were online missed my initial comments. I apologize for that; you missed some valuable insights, including comments from Carl. If you want to hear what I said, you can listen online, and I encourage you to do so because Carl and I shared some important information today. I'm sorry about the inconvenience, and we'll address the issue with the carrier. I know you heard music instead of our remarks. Please remember that the session was recorded and is available online for you to access. If there are any problems, let Berrin know, and we'll ensure you get the information you need. Regarding analyst questions, those were mostly addressed during the call, and the analysts present were able to hear Carl and me. I sincerely apologize for the disruption. Thank you for your time today; I hope you didn't miss too much. It’s just the first quarter of 2026, which is one of our smaller quarters, but there's still a lot to accomplish. As you've seen, we have many positive initiatives underway, and it's understandable to question things at times when you look at stock prices and other factors. However, our team has successfully rebuilt a Canadian cannabis business from the ground up over the past five years, focusing on facilities, brands, products, strains, genetics, new innovations, infrastructure, and sales and marketing. We've navigated challenges like price compression, COVID, and competition from the illicit market, and I want to acknowledge the incredible work of our Canadian team. In terms of our International Cannabis business, it's also taking shape, particularly following the Tilray acquisition, and I see significant opportunities there as we receive requests from various countries, including India and the Middle East, for medical cannabis. These countries are recognizing the advantages of medical cannabis compared to traditional pharmaceuticals, and they're also beginning to realize the tax revenue they're missing out on by allowing illicit markets to operate. On the topic of rescheduling, I believe President Trump’s comments suggest that changes are necessary. His recent tweet about CBD, particularly regarding its benefits for seniors, reflects the growing recognition of its value for various health issues, including pain and anxiety. The demand for our Delta-9 products in several states emphasizes this trend. We've seen great success in the Canadian cannabis market, establishing a business worth over $40 million that sells through cannabis stores at competitive prices. This indicates substantial opportunities in the Beverage sector, which requires continued effort. We entered this market in 2020 with acquisitions like SweetWater, Montauk, and others. While we hold strong brands, integrating these businesses takes significant work, including optimizing facilities, costs, and margins—something our Atlanta team is focused on. The beverage industry is challenging but we remain committed not only to beer but to expanding our offerings. There’s a lot of interest in the new products we’re developing. In our Spirits business, we are collaborating with our distributor, RNDC, to strengthen our presence in key markets. While the bourbon sector is currently competitive, our Breckenridge Bourbon remains popular, and there's strong demand for our Vodka and Gin, as well as some of our innovative new products. Lastly, I want to highlight our Wellness business. Since acquiring it, we've turned around a previous negative EBITDA of about $5 million to $6 million, and as someone deeply involved in the Wellness category since the early '90s, I’ve witnessed substantial growth. Wellness and food continue to be key discussions, particularly with recent trends toward higher protein diets, where hemp foods excel. Our diverse portfolio spans multiple categories and unique markets. Looking at our balance sheet, our debt-to-equity ratio is healthy, and we closed the quarter with $260 million in cash. There are many positive developments, but we still have a lot of work ahead. I want to appreciate our dedicated team that makes all this happen. Despite having 2,500 employees worldwide, there's a significant amount of work to be done. Thank you for tuning in, and please take the time to re-listen to our comments for additional valuable insights. I appreciate our shareholders' support, and I encourage everyone to participate in our upcoming AGM. Have a great Thursday, and I look forward to discussing our Q2 results in the new year. Thank you.

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