Tilray Brands, Inc. Q3 FY2026 Earnings Call

joining today's conference call to discuss Tilray Brand's financial results for the third quarter fiscal year 2026, ended February 28, 2026. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session for analysts conducted via audio. I'll now turn the call over to Ms. Barron-Norada, Tilray Brand's Chief of 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 investor section of the Tilray Brands website at tilray.com and has been filed with the SEC and OFD. 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 these 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 Erwin 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 third quarter of fiscal year 2026. And now I'd like to turn the call over to Tilray Brands, Chairman and CEO, Erwin Simons.

Thank you, Barron, and good morning, everyone. It's been an exciting year at Tilray Brands. We delivered a record quarter with continued international expansion across our platforms. I also want to briefly highlight our BrewDog acquisition. When you have good news, you go to the tallest building and scream it. And don't wait. This transaction positioned Tilray at approximately $1.2 billion global revenue company on an annualized basis and meaningfully strengthens our long-term growth profile. I've done over 100 acquisitions in my life, and I've never received more calls, congratulations, and a brand with more awareness on a global basis, which helps Tilray to be at the forefront around the world. Since 2019, we have transformed the company from a Canadian cannabis business with approximately $50 million in revenue to a global lifestyle consumer products company approaching over $1 billion in revenue on an annualized basis, providing the strength and effectiveness of our strategy and our execution going forward. We are building a diversified global platform, grounded in a long-term vision of bringing people together through meaningful connection. With a strong team and clear priorities, we remain confident in our path forward. Today, Tilray leads its global platform as the number one cannabis company in Canada by revenue, the fourth largest craft brewer in the U.S., a global leader in medical cannabis, and a wellness leader in North America. And now with BrewDog, the number one craft brewer in the UK. Transforming this business has not been easy. We operate in highly regulated environments globally, face cannabis regulatory reform in the U.S., and navigate constraints across international markets. At the same time, we strengthen our global brand portfolio, scale and optimize our cultivation capabilities and our brewing capabilities, Built a half-a-billion-dollar beverage platform within a long-established category and established a meaningful wellness strategy. This level of progress reflects both the pace of our execution and the strength of our strategic foundation and the teams that we have in place. Yes, there have been challenges along the way, particularly with integration, and there will continue to be challenges. This takes time, but today we see the pieces coming together, the way that few businesses can replicate, and we're building something truly differentiated. And our Q3 results reflect this. In the third quarter, and consecutively from Q2 to Q3, we delivered record results with net revenue reaching $207 million, reflecting 11% organic growth year-over-year and gross profit increasing to $55 million, up 6% from the prior year. Despite ongoing industry and macroeconomic headwinds, we also obtained a strong financial position, ending the quarter with $265 million in cash, restrictor cash, and marketable securities, and approximately $3.5 million in net cash, providing the flexibility to invest in growth while maintaining financial discipline. Our Q3 results reinforce the momentum we outlined last quarter, improving fundamentals, sharper execution, and increasing leverage from our diversified global platform. Turning first to our cannabis business, we delivered strong results this quarter across our global platform with continuous momentum in both Canada and our international markets. As the regulatory environment evolves, particularly in the U.S., we're well-positioned with scaled infrastructure and experience to expand this business globally. We've built this platform deliberately, and we're ready to execute as opportunities develop. Q3 was the largest quarter ever for international cannabis growth. We generated $24.1 million in net sales with 73% year-over-year growth and 20% substantial growth. This was driven by exceptional sales volume growth. Medical cannabis flower volume was up 100% year-over-year, and medical cannabis oil volume was up 90% year-over-year. Tilray holds top position by a significant margin in the medical cannabis oil category across leading international medical markets, while we leverage our expertise and reputation in the doctor-led distribution channels.

Germany, our largest international market, grew 43% euro a year, an important achievement for our international team

as they continue to navigate evolving regulatory framework and significant price compression across global markets. Nobly, we overcame $7 million in price pressure that flows directly to the bottom line. Turning to our medical distribution business in Europe, I'm extremely proud to say that CC Pharma was recognized as one of the top 100 innovators, leaders, and trusted partners in the European pharmaceutical market. Congratulations to the team on the great accomplishments for continuing to drive our business forward. Our Tilray Pharma business grew 35% year-over-year to $83 million, making it our highest ever third quarters for sales and profitability. The increase in distribution revenue in the period was driven by portfolio optimization, mixed positive market trends, and increased medical device sales. Our recently announced partnership with Alliance Healthcare further strengthens our leadership in Germany, expanding our reach to more than 16,000 pharmacies, up from 13,000 previously. In addition, we entered into a partnership with Smartway, a leading UK-based pharmaceutical distribution company, to expand the availability of our pharmaceutical products across the United Kingdom. Together, these partnerships speak to the strength of Tilray Pharma as a valuable strategic asset within our global medical cannabis platform. Looking ahead, our distribution business is laser-focused and driving future operational efficiencies via automation, centralized sourcing, harmonized packaging, and label that sets us up with vertical integration for our cannabis business. Turning to Canada, our Canadian cannabis business continues to deliver strong results. We reinforced our position as Canada's leading cannabis company by revenue on a trailing 12-month basis, and our adult use medical grew 8% year-over-year to almost $40 million of net revenue. This performance speaks to the strength of our portfolio and the resilience of our commercial execution

and the team that we have in place today. From a market share perspective, Tilray maintain the number one market share position in cannabis

dried flower, pre-rolls, beverages, oils, and chocolate edibles. Importantly, this leadership reflects the strengths of our tiered brand strategy in dried flower. Tilray is the only licensed producer with three brands in the top 10. In pre-rolls, we hold two of the top three brands, and in beverages, we deliver the top two brands in the market during quarter three. This approach diversifies our reliance across brands and facilities, while allowing us to serve the state consumer segments with clearly differentiated offerings. From a brand portfolio perspective, Broken Coast delivered its strongest quarter in the past two fiscal years, growing 16% year over year. We also continue to innovate with our core categories, launching Good Supply, Where's My Bike, and Blueberry Donuts Cannabis Strange during the quarter, both of which finished a quarter among the top 10 dry flower skews in British Columbia, and we plan to scale them nationally and introduce additional genetics in Q4 and into fiscal 2027. Finally, we also introduced a new brand, Portal, featuring vapes, infused free rolls late in the quarter. While still early, we're beginning a national rollout. We expect to launch a portal to build upon our momentum and drive meaningful growth in these key categories going forward. And we're also making clear progress in high-growth, price-sensitive categories, such as vapes. Quarter 3 marked our strongest vape quarter in the past two fiscal years, re-establishing Tilray as a top 10 player in the category. Importantly, this performance reflects our disciplined approach to revenue generation. We intentionally scaled back our vape volume until we achieved the right cost structure and returned the category to profitability. After seven years of federal cannabis legalization in Canada, we are modernizing the store. We've built a strong foundation on Canadian cannabis, and we're now advancing to the next phase, transforming our cultivation platform through AI-driven growing systems, next-generation genetics, and improved yields across our operations. We're executing a comprehensive end-to-end upgrade of our cultivation capabilities. And while this transition is still underway, we're already seeing progress as we move towards more consistent, higher quality, and more efficient production. This evolution is designed to enhance margins, strengthen product quality, and position us ahead of the curve as the industry continues to mature. In the U.S., we continue to monitor the rescheduling of medical cannabis and are actively engaged with legislators and regulators. We're also evaluating our participation in the Center for Medicare and Medicaid Innovation Pilot Programs. Tilray is well-positioned to contribute to the pilot program with its proven track record of operating at a scale in a highly regulated medical cannabis globally. Moving to our beverage business, this quarter and shortly after the quarter end, we successfully executed against our key strategic priority to expand our global beverage platform through a strategic licensing partnership with Carlsberg and the targeted acquisition of BrewDog, strengthening our portfolio, improving utilization, and advancing our global growth strategy. We are honored and proud to begin our partnership with Carlsberg, one of the world's leading brewers, starting in January of 2027. Through this partnership, we'll produce, market, and distribute a portfolio of leading Carlsberg brands across the U.S., leveraging our brewing network, commercial capabilities, and our national distribution footprint. We expect this to drive immediate scale, accretive to revenue supported by increased volumes, expand shelf present, and a more favorable product base. Following the Carlsberg announcement and post-quarter close, we acquire craft beer icon BrewDog, creating an approximately $500 million global craft beverage platform on a pro-forma basis. We acquire BrewDog's global IP, strategic brewing, and brew pump assets across the UK, Ireland, Australia, and the U.S., creating immediate scale, strengthening our infrastructure, and broadening our international reach. This positions us to extend our reach into previously untapped markets, such as the Middle East, Asia Pacific, and take our U.S. brands globally while strengthening their portfolio with a highly recognized craft brand. We acquired this platform for approximately 40 million pounds, which reflects a fraction of its replacement costs. This strategic acquisition has significantly accelerated the implementation of our global strategy by several years. Now turning to the results of our beverage business, we're making disciplined progress on the integration of our beverage acquisitions, while staying focused on the work still ahead to generate growth and profitability. As expected, the average net revenue of $43 million in Q3 was impacted by margin-focused actions, as well as industry-wide softness. These margin-focused initiatives are deliberate and necessary to reset the business for profitable long-term growth. What's important is that the underlying fundamentals are improving. Through Project 420, we rationalized the portfolio, removing non-strategic skews to improve velocity, margin, and execution. We continue to focus on cost discipline, delivering over $6.2 million in annualized savings during the quarter, completing our target synergy program of $33 million, enabling us to achieve approximately 32% gross margins, despite significant input costs and headwinds. Without these decisive actions taken, margin would have been more significantly impacted. Operationally, we're building a more focused, higher performing portfolio. We're prioritizing fewer, bigger, better innovations aligned with consumer demand. Products like Publite are expanding distribution and are ready to drink cocktails on the West Coast are delivering margin accretive growth. We're also starting to see sequential improvement across our core brands, including Sweetwater, Chalk Top, Blue Point, Revolver, and Montauk. Looking ahead, we expect continued momentum, improving fundamentals, and a stronger path to growth. Within the SPIRITS category, in Q3, we focused on enhancing our commercial plan. Wholesale depletions were 160 basis points above the national SPIRITS trends. Demonstrating strong consumer demand and awareness, our ongoing efforts remain focused on expanding product distribution to additional states and beyond. Regarding our U.S. hemp-derived THC beverage business, we continue to offer Fizzy Jane Happy Flower hemp-derived THC beverages in 5-milligram and 10-milligram formats through nationwide retail partnerships, including major wine, liquor, and grocery outlets across the country. While federal regulatory changes may affect HDD9 products after November 2026, we continue to stay engaged with legislators and regulators for closely monitoring development in Washington. Turning to wellness, net revenue increased by 16% to $16.4 million in the quarter, driven by our focus on value-added innovation across super-seed, better-for-you breakfast, and snacking, and continued momentum in the highball energy dream. We'll continue to focus on distribution expansion, broader assortment, and promotional improvements while continuing to strengthen the profitability profile of wellness business. With that, I will now turn that over to Carl.

Thank you, Irwin. Before I begin, 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. This quarter, we achieved record third quarter revenue and strong year-over-year improvements in gross profit and adjusted EBITDA. And we are reaffirming our adjusted EBITDA guidance for fiscal 2026. Net revenue was a third quarter record of $206.7 million, an 11% increase year-over-year. Revenue growth was across multiple businesses. Cannabis net revenue increased 19% year-over-year to $64.8 million during the quarter, driven by strong growth in gross international cannabis revenue of 73% and 8% in net Canadian adult use and medical cannabis. The exceptional revenue performance of our international cannabis business solidifies our point from the last conference call that Q4 2025 and Q2 and Q3 of this year's performance are more indicative of what investor expectations should be going forward. Growth in international cannabis accelerated based on an enhanced supply chain, increased patient adoption in certain markets, and our targeted expansion into emerging markets. This quarter, we continue to strategically reallocate supply from the Canadian wholesale market to higher margin international markets, and we'll maintain this approach as those markets continue to scale. Year to date, we allocated approximately six metric tons of product from Canada to international markets, which continues to supplement our ever-increasing cultivation in CanYed. Distribution net revenue increased 35% to $83 million based on a focus on higher velocity and margin SKUs and positive impacts from foreign exchange rates. We expect distribution to continue to be a strong contributor as it complements and scales alongside our international business. Average net revenue for the quarter was $42.6 million compared to $55.9 million in the prior However, the results do not fully reflect the operational progress we have made in the segment. During the quarter, we successfully completed Project 420, closing and delivering $33 million in annualized cost savings, which improved the underlying cost structure of the business. Those cost savings are not always visible in our margin results, as they've been largely offset by almost $2.9 million in higher aluminum costs year-to-date and lower overhead utilization rates. Getting our cost structure right in beverage has been and will continue to be a key focus area for us. Looking ahead, Carlsberg represents a compelling opportunity for us through a partnership with one of the largest global brewers. The relationship enables us to improve overhead utilization without deploying capital to acquire a brand while creating meaningful operational leverage. It also provides multiple avenues to strengthen the platform, including increased scale with key global raw material suppliers and the ability to collaborate and learn from one another on innovation and best practices to support long-term growth. BrewDog represents an equally compelling opportunity to strengthen our beverage business in the future, but for different reasons, as it is more about an international opportunity. The BrewDog transaction was unique because it represented a chance for the business to start with a clean piece of paper and hand select the best and most important elements of a strong business that was placed in administration for reasons other than its core business. After this transaction, Tilray strengthens BrewDog, BrewDog strengthens Tilray. Lastly, wellness net revenue in the quarter was $16.4 million, growing 16% year over year based on our focus on high-value innovations, the continued strength of highball, and growth in the ingredient sales channel. In terms of contribution, cannabis accounted for 31% of revenue, beverage revenue was 21%, distribution was 40%, and wellness was 8%. Moving on to profitability, we achieved a record third quarter gross profit of $55 million, a 6% year-over-year increase. Gross margin was 27% compared to 28% last year. By segment, cannabis gross margin was 40% for the quarter compared to 41% year-over-year and remained largely flat, primarily due to price compression in international markets, which reduced international cannabis revenue by approximately $7 million, despite higher Graham equivalents sold. distribution gross margin increased to 12 percent this quarter compared to nine percent year-over-year due to favorable changes in product mix and increases in average selling price during the quarter beverage gross margin was 32 percent this quarter compared to 36 percent in the prior year quarter this change was a function of lower overhead absorption rates and higher input costs including the previously discussed aluminum costs. Wellness gross margin increased to 33% during the quarter from 32% year-over-year as strategic price increases largely offset an unfavorable change in sales mix. Net loss was $25.2 million, a $768.3 million improvement compared to a $793.5 million loss year-over-year. or a net loss per share of $0.24 compared to a net loss per share of $8.69. The improvement in both net loss and net loss per share is primarily driven by the one-time non-cash impairment we reported in the prior year quarter. Adjusted net income and adjusted net income per share, which both exclude the non-cash impacts of amortization, stock-based compensation, impairments, and non-recurring charges improved $5.3 million year-over-year to $2.4 million and two cents per share compared to an adjusted net loss of $2.9 million and adjusted net loss per share of three cents. Our adjusted cash operating income for the quarter was $4.1 million compared to a loss of $3.1 million last year. Adjusted EBITDA for the quarter increased 19% to $10.7 million compared to $9 million last year, reflecting continued execution against our strategic plan, particularly from our international cannabis business. Cash flow used in operations was $21.9 million compared to $5.8 million last year. The increase in cash used in operations was largely related to inventory ahead of our seasonally stronger fourth quarter and accounts receivable for our growing international cannabis business. Excluding the impact of working capital, cash generated from operations was $3.4 million compared to cash used in operations of $9.3 million in the prior year. We ended the quarter with cash, restricted cash, and marketable securities of $264.8 million and a net cash position of $3.5 million, which improved $40.2 million from a net debt position year over year. As we have recently demonstrated, our strong liquidity position has enabled us to act decisively in a dynamic environment and provides continuing flexibility to pursue strategic opportunities. We remain focused on managing and strengthening our balance sheet throughout the remainder of the year and beyond. Lastly, we are reaffirming our fiscal 2026 adjusted EBITDA guidance of $62 to $72 million. Operator, we can now open the call for Q&A.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star 1 from your telephone keypad and a confirmation tone to indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you.

And the first question is from the line of Camille Gargiwala with Jefferies. Please proceed with your questions. I'm sorry about that. You guys hear me now?

Yep, great. I wanted to first maybe ask about supporting the international business in the context of Canada looks like it's also stabilizing. So you have a lot of growth and great margins in one. But on the other hand, you've got stabilization in your bigger market. So how are you managing the balance between those two?

You broke up the last piece, the cannibalization.

Not cannibalization, but just managing the balance between supporting your international business and what looks like stabilization in Canada.

And you're talking cannabis right now, of course, right?

Yeah, cannabis. This is about cannabis.

Yeah, yeah. Yeah, okay. So listen, I think the big thing is, number one, our Mason Grove facility in Gatineau, which increases our, you know, we're going from 137 metric tons of grow to almost 200 metric tons of grow. And also we're bringing on outdoor grow in Cayuga. So number one, we now have plenty of grow. And, you know, this has been a tougher year on yields and that, and that's sort of what you heard me say as we're overhauling things and modernizing things on better yields in the Canadian market. On the other hand, the good news is our canteen facility in Portugal and our Germany facility is probably producing some of the best yields and some of the best flour that we ever had. So the most important thing is we have plenty of supply to supply the European market. The other thing, as we're seeing price compression, which I talked about, with the growth that we're having with the yields, we'll be able to support that. And I think the most important thing in Europe is this year, consistent supply. We've not had consistent supply, number one. Number two, you know, one of the things in Europe, you have to wait for permits, and that has slowed down to getting our sales out there. We've seen a real big improvement in the Portuguese government. I want to thank them. They've modernized this now where it was sometimes going to take a month. You know, you can see three days now. So being able to get product, you know, to our customers is something very important. And then with that, we have perfected our grow and our yields that will help our margins continuously. um and deal with price compression and i think the important thing is from a till ray standpoint with our till ray products with our innovation with our brands um you know the big opportunity for us is if we got a consistent product we're going to get the volumes and how do we deal with price compression if price compression consistently happens you know we have supply and i think we have more supply than anybody there so it's something that we're aware of hey we dealt with it in canada we've had 250 million dollars of price compression you know over five years in canada and dealt with that so um not that i want to see that in europe but it's something we can deal with either now having supply now having good yields now having good grow over there to do it both in canada and europe and there's no one else out there that has the supply that we have both from the canadian market today and the european market got it thank you and on project

Project 420, now that I guess it's coming sort of towards the end or at completion, is there a new project or is it sort of more ongoing business as usual as we look forward from a productivity standpoint?

That's a good question. I mean, there is absolutely project ongoing. We never just say, okay, we made our $33, $35 million of cost savings. Now with BrewDog in the mix and bringing that together, both, you know, internationally and domestically in regards to buying hops, cans, labels, etc. And, you know, it's definitely something as we combine now. And just remember, we've gone from, you know, a 200 plus million dollar beer business, almost to a half a billion dollars in our own size. So in scale, that's going to help us. And as we look at, you know, rationalization, you know, continuously on our plants, we look at rationalization on distributors. We just said, how do we bring, you know, all the organizations together? There will definitely be additional cost savings available to us.

Okay, got it.

Our next question is from the line of Robert Moscow with TD Securities. Please receive your questions.

Hey, good morning. This is Victor Ma on for Robert Moscow. Thanks for taking the questions. So I just want to ask about international first. International, you know, grew 73%. Germany grew 43%. What drove this delta? So was it shipment timing or permit delays from the previous quarter that, you know, will fix this quarter? And in terms of kind of looking at growth going forwards, is that 43% growth rate for Germany, is that kind of a good run rate to use in looking at growth for the segment?

That did not get shipped in the second quarter because of permits, but there's products that did not get shipped in the third quarter because of permits. And so, you know, it's, it equals out in regards to, you know, what was the growth? The growth was based on us having supply and demand. Not sure. Again, we have a big fourth quarter. What is the true run rate there? And the big thing is what I said before, but the market is realizing what patients and what doctors are realizing is we will have supply. We will have good flour. We'll have lots of innovation. We'll have some good oils. And again, we will be price competitive. So, you know, what is the right growth number? I'm not ready to give that yet. But again, there's big opportunities for us in the international markets. Not only in Germany and Poland, the UK and other markets, it's additionally other markets that we're looking at to open up and what will happen in Spain, what will happen in France. And, you know, so we're really excited. But the other thing that we have there with our CC Farm and Tilbury Farm and some of the stuff that we're doing in the UK, you know, as being vertical integrated, as we sell through our distributor and sell directly to our distributor into these drugstores, you know, helps us that where we're a grower, where you've got the brand, and then we have, you know, the third part of it is where we have, from a vertical integration, the distribution going to the drugstore. So that helps us tremendously, too.

Thanks for the color. And then my second question is on the beverage segment. So in terms of just, you know, rising aluminum costs from, you know, the Midwest premium related to, you know, the tariffs and then additional, you know, supply shocks from the Iran conflict, how can you offer any color in terms of how hedged you are on your aluminum exposure? and, you know, how – what's the benefit in terms of kind of scale that, you know, adding Carlsberg into the U.S. portfolio give towards managing, you know, that cost impact?

So, number – I'm going to let Carlsberg with a hedge in a second because, you know, we are hedging on some things. But, listen, adding Carlsberg in there with a good-sized business, adding, you know, brew dog in there and then being able to buy on global contracts is going to be very very helpful for us um you know right now a lot of our hops you know the brew dog internationally come from you know washington state but having carlford who is one of the largest you know already buying into their contract and you know we still have hops and that from our api stuff so and cans and that's that they want to watch out for.

But just specifically on the hedge for aluminum, we're currently hedging 65% to 75% of our buy on a month-to-month basis,

and we're hedging it a year out.

Got it. Thank you for that color. And just one last question, if I can. In terms of just the distribution gains from the shelf resets that typically happen in the spring, how are those conversations going? How is that tracking? Any color you can share there?

I will say this here, we've gained and we've bought this here. Where we didn't, when we bought the Molson's piece, now, you know, we've gained a lot of distribution. And the big thing is this here, just because we gained distribution, we want to make sure the products sell. So, you know, plus-plus, we probably lost. Again, it's okay because at the time, products, the new innovation, we had some big days at Walmart, we had some big days. So also the size and what retailers did.

I mean, of the acquisitions, because we bought those brands,

and we were not the ones in presenting those spring resets. But now, that's sort of where we'll be next year. They're presenting in February, January, February, for the next. Well, for the color.

I'll jump back to the queue.

Our next question is in the line of Bill Kirk with Ross Capital Partners. Please see if your questions.

Hey, good morning, everybody. I want to spend a little time on the improvements at Tilray Pharma. Carl, you mentioned a focus on the highest velocity SKUs. So what SKUs or product types are those that are leading the way? And then maybe more importantly, how can you or how are you leveraging this improved CC Pharma for your cannabis business in Germany?

So I'm going to, Roger, as you're on the call, I'm going to let you jump in here. number one it's the buying that our guys are doing over there number two i mean there is a

there is a group of products we have about 2800 skews so what we have done is basically identified skews which have higher velocity to go so there is a bunch of about 50 top skews which are right now working where there is a high velocity which we focus on not just on velocity but also on the gross margins so these are the two criteria for us to look at in terms of the growth and then we are adding the medical cannabis portfolio i mean the medical cannabis portfolio is helping us to grow both in margins as well as in revenue because per unit revenue is much higher and margins are better so these are the two big things in terms of the selling side of the business and of course on distribution we are now with our new alliances which are coming forward we are now actually increasing our distribution across the pharmacy channel which helps us to grow not just per unit but also in in the depth of distribution and the width of coverage of pharmacy so this is really on the on the seller side but more importantly also on the buyer side i think we are now our purchasing is becoming much more robust in terms of the timely decision we've implemented automation in our purchasing system which predicts the pricing patterns and then it helps us to take decisions quicker so i mean mean, these are a few things which in the pharmacy distribution is helping us to grow. And then, of course, on the operation side, a lot of our business, we are also looking at in-house packaging to out-house packaging. And whichever way is working for us, there's a big team which is working to make sure that there is a consistency in supply from the operators, both in-house and out-house. And that's also helping us to improve the margins. You know, when we bought CC Pharma,

That was a big period of time, was for a tender and was near to sell the pharmacies with the higher margins. And, you know, we've done a lot of automation at CC Farm Services and expanded the amount of drugstores in Germany. The other NLCC pharma into Italy is a bigger platform that we'll be selling through. Not the highest margins, but again, and as we put up higher margins.

Awesome. Thank you for those detailed answers. A second question, Erwin, in the opening comments, you know, you talked about now being a run rate of $1.2 billion in revenue. You know, the last 12 months, I think it's something like $850 million. So is the bridge between the two, is that mostly the revenue from acquired BrewDog assets? And I ask because you didn't take all the assets. So how much of the BrewDog revenue that they've released in their annual reports is generated by the assets that you took on and now have? And how much of their annual revenue was tied to assets that you didn't take?

So let's say between $2.25 to $2.50 is what we've taken, okay? And again, we took all the UK distribution through retail. We've taken it, and we've taken six of our sales, and there's three. In regards, we've taken the distribution, the manufacturing, $250 million in sales that we have taken. In regards to the other piece, from a standpoint there, what we've gone through is skew rationalization in regards to our beer business. If you take, you know, what we're down this year and what was fuel rationalization, what was distributor rationalization, and what was product rationalization, I mean, quite a bit of the sales come out of our, you know, come out of our business.

Thank you. That was exactly what I was looking for. Thank you.

Our next question comes from the line of Aaron Gray with Alliance Global Partners. Pleased to see you with your question.

Hi, good morning, and thank you for the questions. First question for me, I just want to dig a little bit more in terms of hemp. So in terms of your outlook potentially for changes to come before the ban on any products is more than 0.4% THC coming to fruition in November, and then taking that into context, how you're looking at the CMS program, you mentioned potentially looking to enter into that. So how are you looking at the potential opportunity there, particularly if there is a restriction on THC products and how appealing that program will be for patient, you know, adoption or rejection. And then it's how you think about that longer-term opportunity there.

Back to HD9 and how we're looking at that. Number one, it gets extended and, you know, the logistics happen and it completes, you know, in regards to that within the U.S., we have the Greeks, we're prepared for that now, working on this within.

Okay, great. appreciate that color erwin second question for me just want to go back in terms of alcohol gross margin and outlook uh carl i know you mentioned in terms of how you guys are or hedging uh you know some of the aluminum but it's taking a step back and there's been some lumpiness you guys are now have product 420 now completed so how should we think about that margin for the segment going forward 4q i imagine obviously be higher just given the higher sales flow through but just on

a full-year basis? How best to think about the gross margin there? Thanks. Good question. If you look at where we are right now, I think this represents the bottom. We have done a significant at a reasonable level versus where our volume is with fuel surcharges and things like that that we're going to keep a close eye on. We'll see that start to come up over time, late 2020,

and the acquisitions of the three brands in the West Coast and Montauk and then the ABI pieces, you know, we at one time had 10, 11 manufacturing facilities. And since then, now with Carlsberg coming on with, you know, the rescaling and the skew rationalization, it hasn't been the easiest road for us. But nothing was similar than that was cannabis in regards to as we opened up these growth facilities and we had to go deal with it. But now we've got time. You know, we now have the right sets in place. We have the right, you know, new products in place. You know, we've had some new products out there that didn't do as well as we thought. So, as Pearl said, now with the purchasing power between BrewDog International, know, between bringing Carlsberg on with us. You know, we feel good about moving forward where we've done a lot of the overhauling. We're now down to seven manufacturing facilities. We might even get smaller, you know, in regards to that. In regards to, you know, the facility in Columbus, Ohio, which is a beautiful facility, and what are we moving there from HD9 if that, you know, as a product that's able to stay within the portfolio. We have a great energy drink called Highball that's for some of the other non-out products that we have out there today that we will move into our facilities versus some of the other drinks that we're doing. We'll look to bring most of that in-house. And we will have capacity, as we have a great plan to grow Carlsberg. We think the growth opportunities that Carlsberg is tremendous of what we can do with that brand. So five years, but we've really got it in a good place now. Combined with BrewDog and what we're doing today, it's almost 18 million cases of beer that we'll be selling. That's between the worldwide. So we're buying lots of cans. We're buying lots of hops. We're buying lots of ingredients here. And yes, some of it is across the water. We're buying lots of kegs. But how do we utilize that? We're just not... Okay, great.

Thanks for that color. I'll go ahead and jump back in the queue. Thanks.

Our next questions are from the line of Pablo Swanick with Swanick & Associates. Please proceed with your questions.

Yes, good morning, everyone, and congratulations on the very strong international growth and also very nice to see the share count being stable quarter on quarter. Look, I have three questions on Germany specifically, and I'll try to give it brief. The first question I want to get your take in terms of the advantage of being vertically integrated versus the many distributors out there. I mean, for a while, we saw that the distributors were growing faster. We saw consolidation, could have lived by 420, high tide by Remexian more recently. But now with lower prices, some of the distributors are being squeezed out, and they don't seem to have a very stable supply chain. So I'm just trying to understand if you can remind people of the advantages in Germany, especially the way the market is evolving or being vertically integrated versus the distributor model. The second question is that it would help if you can expand on your route to market. Like how many people do you have on the ground? How many people are visiting doctors? What are the efforts in terms of reaching out to patients given all the restrictions? But just if you can give more color on your route to market in Germany. And the third, which is related to all of this, I could make the argument, playing devil's advocate, that pharmacies reach does not matter too much, right? That all these numbers that we hear about CC Pharma and Alliance now are not so relevant when the doctors and the patients are making the decision and the 80-20 rule applies, right? We know that maybe 50 pharmacies, especially online, account for the bulk of sales, and only one of seven pharmacies sell medical cannabis. So why does pharmacy reach matter in the short term and in the long term? I know there's a lot there, but there are three questions on international that would help if you can cover it. Thank you.

Okay. Number one, to your point, and I stressed this before, from a growth standpoint of having, you know, our canteen yet facility and that up and going with some of the best cannabis that it ever has and having the permits to get out of Portugal into Germany is a major, major advantage to us, and this is what helped us in the quarter to get the sales. And again, as we're getting yields and flower to become that low cost, they're in the marketplace and deal with price compression. Number two, you heard me talk about now, as we bring on our facility in Gatineau, Quebec, that is a GNP facility, And that, from a supply standpoint, and I've got to tell you, because originally we were going to sell that, thank God we didn't, because from electricity costs, from labor costs, that is an excellent facility, and it's an excellent facility for us to have and supply the international market. And that's what it will do, because it's B&B, because it's a lower-cost facility. And then our German facility, which, you know, originally we were selling two to three metric tons out of there, and Rajnuss and the team has done a great job of getting that up into additional metric tons and before that we were only allowed to sell into the German government there. So to your point, you know, Pablo, yes, we have supply. Yes, we can be that lowest cost producer. And yes, the big thing is we can be consistent in regards to that we're selling to. On the ground there on the infrastructure in a minute, But just going to the pharmacy, you know, having CC Pharma, the big part of CC Pharma today's business is not the cannabis business. But there's three things CC Pharma does. It has 16,000 pharmacies, and a lot of these pharmacies are buying medical cannabis. So now they have the ability, and at the end, number two, there's Arma, and that is something that we're working on. And they can do these things for, numerous things with CC Pharma. So today having it worked too with other, you know, CC Pharma types of distributors that we can sell products through them to. So CC Pharma has a relevance to us, and it's a big relevance for us in the cannabis growth market where no one else really has a CC Pharma today. Raj, just in regards to your sales organization.

Yeah, so two things here. So there is a price compression in Germany which is kind of changing the route to market and the route to market is becoming more integrated. The distributor is now getting squeezed out because of the margins, etc. So I think we don't see it now, but we do see it going forward that the route to market will become more direct to pharmacies and to the channels of prescriptions to doctors, etc. So CC Pharma and our medical team there is presently working along with the prescribers and also in the pharmacies to work and build this integrated supply chain to reach the So that's number one. Number two, to your question of what's the feet on the street, we have today two teams which work on the street. One is the one which work with the prescribers. This is a team of about 20-plus people who are medical representatives and medical advisors who work with the prescribers. And then we have a team with CC Pharma, which is also about seven to eight people who are basically telecall services people who continuously work with pharmacies to make sure that the prescriptions which reach there and the stocks are available for them. So there is a twin approach there, both at the pharmacy and at the prescriber level at the ground in Germany. And as we go and see this forward, I think, and these are signs which we see in the market today, that the route to market is going more direct than through the distribution. So with CC Pharma and our telemedical team, I think this change we are seeing, and we also see data coming to us, which is telling us that the pharmacy sales are improving, still small, but improving compared to what the distribution sales have been.

Not only that, I mean, basically we have marketing genetics over there for cancer into the marketplace. We have a team to support, and there's a whole supply team. And the good news is... That's great, Collar. Can I add just one more quickly?

You mentioned that you're keeping an eye on the CMMS program in the U.S. for a full-spectrum CBD. Does that mean that you would be considering or looking at buying a U.S. CBD brand?

So we have in a brand today called Happy Flower, okay? We produce CBD products internationally. So we have formulations. We have products. You know, it's just standards are. That's good.

Thank you.

Our next question is from the line of Kenrick Tai with Canigord Genuity. Please receive your questions.

Thank you, and good morning. The majority of my questions have been asked for just a couple of quick follow-ups. With respect to the beverage segment, you called out trough margins in quarter. Is that including or excluding the BrewDog integration? Just trying to get a handle on whether that's trough on legacy or trough on go forward and how we should think about that evolution of the margins.

No, BrewDog, from these margins, BrewDog was acquired March 2nd, So there's nothing in here in regards to BrewDog, and there's nothing in here in regards to Carlsberg from a margin standpoint. And again, from a procurement, from a sales, from an infrastructure, from a manufacturing, you know, again, I'm not going to be putting volume.

Great. Thank you. And that was the gist of the question was just on that evolution from here forward with Carlsberg and BrewDog. but I can leave it there. Just follow up with respect to the brew pubs and that footprint, just with how consumer trends and consumption patterns have changed, how are you thinking about that footprint going forward, and is it becoming more important to you as a sort of a strategic buffer on the consumption side? Any color around the brew pub footprint would be useful.

Listen, good question. You know, it's something in regards to the U.K., you know, people together. And that's the whole thing on longevity today, to bring people together. Looking at our group of good value, an incentive to, you know, have food out. Is he planning to open up another hundred of those? There's a big part of those to look to upgrade them, to put more TVs, these more interactive types of communications in regards to getting more lead yes from a franchise model as we look to increase the sales with the ones we own. And where do we license the brand today in airports? And that's something that we're looking at too, because there's, you know, with airports today, you license your brand name, you collect a royalty, and you sell product. So that's how we're looking, you know, at these group-ups. Thanks for that insight.

I'll get back in queue. Thank you

Thank you At this time, I'll turn the floor back to management for closing remarks

It's okay Our numbers are some real strong numbers To the team on the growth And, you know, not one of these You know, businesses Nothing has been easy out there In regards to what we deal From a regulatory standpoint What we deal, you know, in regards To pricing In regards to, again, you know, the stock acquisition of BlueDock, it's a very exciting time for us. In regards to 2027, and with two months left in our quarter of 2026, you know, there's a land, as I heard me talk about doing the Canadian market in regards to our genetics, in regards to our strains, in regards to using AI to help us there. In regards to how we modernize those facilities and takeover, Blair and the team have done a tremendous job in doing that. And again, they've converted these facilities to much more economical and dealt with the challenges of the cost of utilities in Ontario. So again, we've accomplished a lot in the Canadian market. in the only market where recreational cannabis is legal in the world and at the same time dealing with and growing our medical market and more patients and consumers of the product. In regards to the U.S., we see some better results coming out of our beverage business. But on the other hand, as you bring everything together, as we are today, I see some good light at the end of the tunnel here of what we're building here and be in the fourth stages in the beer business. The products, right, because we, you know, we brought up a lot of SKUs, team brands. It's on Breckenridge being up. We've applied it by Reyes, which is good news for us, and it's something that we will consolidate. You know, in regards to some other changes in the market, it's something we're going to do. Some of the new stuff that we're really coming out with are drinks with Moonshot, Mountain Shot. It is a Moonshot. Some of our non-out drinks and some of our products there. globalization that's going to happen in regard to the distribution business. This industry is at margins now.

Today's conference. We'll disconnect your lines at this time. Thank you for your participation. Have a wonderful day.