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What changed in Tilray Brands, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Tilray Brands, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+488 added−425 removedSource: 10-K (2024-07-30) vs 10-K (2023-07-26)

Top changes in Tilray Brands, Inc.'s 2024 10-K

488 paragraphs added · 425 removed · 270 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

161 edited+93 added−58 removed301 unchanged
Biggest changeWe report our operating results in four reportable segments: • Cannabis business – Cultivation, production, distribution and sale of both medical and adult-use cannabis products • Distribution business – Purchase and resale of pharmaceutical and wellness products • Beverage alcohol business – Production, marketing and sale of beverage alcohol products • Wellness business – Production, marketing and distribution of hemp-based food and other wellness products Revenue in these four reportable business segments, and the year over year comparison, is as follows: Year Ended % of Total Year Ended % of Total Year Ended % of Total (In thousands of U.S. dollars) May 31, 2023 Revenue May 31, 2022 Revenue May 31, 2021 Revenue Cannabis business $ 220,430 35 % $ 237,522 38 % $ 201,392 39 % Distribution business 258,770 41 % 259,747 41 % 277,300 54 % Beverage alcohol business 95,093 15 % 71,492 11 % 28,599 6 % Wellness business 52,831 9 % 59,611 10 % 5,794 1 % Total net revenue $ 627,124 100 % $ 628,372 100 % $ 513,085 100 % Revenue in these four reportable business segments as reported in constant currency 1 , and the year over year comparison, is as follows: Year Ended Year Ended May 31, 2023 May 31, 2022 (In thousands of U.S. dollars) as reported in constant currency % of Total Revenue as reported in constant currency % of Total Revenue Cannabis business $ 233,227 35 % $ 237,522 38 % Distribution business 285,115 43 % 259,747 41 % Beverage alcohol business 95,093 14 % 71,492 11 % Wellness business 54,429 8 % 59,611 10 % Total net revenue $ 667,864 100 % $ 628,372 100 % Revenue from our cannabis operations from the following sales channel and the year over year comparison is as follows: Year Ended % of Total Year Ended % of Total Year Ended % of Total (In thousands of U.S. dollars) May 31, 2023 Revenue May 31, 2022 Revenue May 31, 2021 Revenue Revenue from Canadian medical cannabis $ 25,000 11 % $ 30,599 13 % $ 25,539 13 % Revenue from Canadian adult-use cannabis 214,319 97 % 209,501 88 % 222,930 110 % Revenue from wholesale cannabis 1,436 1 % 6,904 3 % 6,615 3 % Revenue from international cannabis 43,559 20 % 53,887 23 % 9,250 5 % Less excise taxes (63,884 ) -29 % (63,369 ) -27 % (62,942 ) -31 % Total $ 220,430 100 % $ 237,522 100 % $ 201,392 100 % 6 Revenue from our cannabis operations from the following sales channel as reported in constant currency 1 and the year over year comparison is as follows: Year Ended Year Ended May 31, 2023 May 31, 2022 (In thousands of U.S. dollars) as reported in constant currency % of Total Revenue as reported in constant currency % of Total Revenue Revenue from Canadian medical cannabis $ 26,612 11 % $ 30,599 13 % Revenue from Canadian adult-use cannabis 225,694 97 % 209,501 88 % Revenue from wholesale cannabis 1,529 1 % 6,904 3 % Revenue from international cannabis 47,434 20 % 53,887 23 % Less excise taxes (68,042 ) -29 % (63,369 ) -27 % Total $ 233,227 100 % $ 237,522 100 % (1) The constant currency presentation of our Cannabis revenue based on market channel is a non-GAAP financial measure.
Biggest changeWe report our operating results in four reportable segments: • Beverage alcohol – Production, marketing and sale of beverages • Cannabis – Cultivation, production, distribution and sale of both medical and adult-use cannabis products • Distribution – Purchase, resale and distribution of pharmaceutical and wellness products • Wellness – Production, marketing and distribution of hemp-based food and other wellness products Revenue in these four reportable business segments, and the year over year comparison, is as follows: Year Ended % of Total Year Ended % of Total Year Ended % of Total (In thousands of U.S. dollars) May 31, 2024 Revenue May 31, 2023 Revenue May 31, 2022 Revenue Beverage alcohol business $ 202,094 25 % $ 95,093 15 % $ 71,492 11 % Cannabis business 272,798 35 % 220,430 35 % 237,522 38 % Distribution business 258,740 33 % 258,770 41 % 259,747 41 % Wellness business 55,310 7 % 52,831 9 % 59,611 10 % Total net revenue $ 788,942 100 % $ 627,124 100 % $ 628,372 100 % 6 Revenue in these four reportable business segments as reported in constant currency 1 , and the year over year comparison, is as follows: Year Ended Year Ended May 31, 2024 May 31, 2023 (In thousands of U.S. dollars) as reported in constant currency % of Total Revenue as reported in constant currency % of Total Revenue Beverage alcohol business $ 202,094 25 % $ 95,093 15 % Cannabis business 274,763 35 % 220,430 35 % Distribution business 259,671 33 % 258,770 41 % Wellness business 55,533 7 % 52,831 9 % Total net revenue $ 792,061 100 % $ 627,124 100 % Revenue from our cannabis operations from the following sales channel and the year over year comparison is as follows: Year Ended % of Total Year Ended % of Total Year Ended % of Total (In thousands of U.S. dollars) May 31, 2024 Revenue May 31, 2023 Revenue May 31, 2022 Revenue Revenue from Canadian medical cannabis $ 25,211 9 % $ 25,000 11 % $ 30,599 13 % Revenue from Canadian adult-use cannabis 266,846 98 % 214,319 97 % 209,501 88 % Revenue from wholesale cannabis 25,340 9 % 1,436 1 % 6,904 3 % Revenue from international cannabis 53,295 20 % 43,559 20 % 53,887 23 % Less excise taxes (97,894 ) (36 )% (63,884 ) (29 )% (63,369 ) (27 )% Total $ 272,798 100 % $ 220,430 100 % $ 237,522 100 % Revenue from our cannabis operations from the following sales channel as reported in constant currency 1 and the year over year comparison is as follows: Year Ended Year Ended May 31, 2024 May 31, 2023 (In thousands of U.S. dollars) as reported in constant currency % of Total Revenue as reported in constant currency % of Total Revenue Revenue from Canadian medical cannabis $ 25,441 10 % $ 25,000 11 % Revenue from Canadian adult-use cannabis 269,534 98 % 214,319 97 % Revenue from wholesale cannabis 25,651 9 % 1,436 1 % Revenue from international cannabis 53,036 19 % 43,559 20 % Less excise taxes (98,899 ) (36 )% (63,884 ) (29 )% Total $ 274,763 100 % $ 220,430 100 % (1) The constant currency presentation of our Cannabis revenue based on market channel is a non-GAAP financial measure.
Our medical cannabis brands consist of: • Tilray® - The Tilray brand is a medical cannabis brand designed for prescribers and patients in the global medical market by offering a wide range of high-quality, consistent pharmaceutical-grade medical cannabis and cannabinoid-based products.
Our medical cannabis brands consist of: • Tilray® - The Tilray brand is a medical cannabis brand designed for prescribers and patients in the global medical market by offering a wide range of consistent high-quality, pharmaceutical-grade medical cannabis and cannabinoid-based products.
The market price of our common stock may continue to be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including the following: (i) actual or anticipated fluctuations in our quarterly results of operations; (ii) recommendations by securities research analysts; (iii) changes in the economic performance or market valuations of other issuers that investors deem comparable to us; (iv) the addition or departure of our executive officers or other key personnel; (v) the release or expiration of lock-up or other transfer restrictions on our common stock; (vi) sales or perceived sales, or the expectation of future sales, of our common stock; (vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; (viii) news reports or social media relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the cannabis industry or our target markets; and (ix) the increase in the number of retail investors and their participation in social media platforms targeted at speculative investing. 34 The volatility of our stock and the stockholder base may hinder or prevent us from engaging in beneficial corporate initiatives.
The market price of our common stock may continue to be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including the following: (i) actual or anticipated fluctuations in our quarterly results of operations; (ii) recommendations by securities research analysts; (iii) changes in the economic performance or market valuations of other issuers that investors deem comparable to us; (iv) the addition or departure of our executive officers or other key personnel; (v) the release or expiration of lock-up or other transfer restrictions on our common stock; (vi) sales or perceived sales, or the expectation of future sales, of our common stock; (vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; (viii) news reports or social media relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the cannabis industry or our target markets; and (ix) the increase in the number of retail investors and their participation in social media platforms targeted at speculative investing. 32 The volatility of our stock and the stockholder base may hinder or prevent us from engaging in beneficial corporate initiatives.
In Canada, Tilray has also partnered with Indiva to carry a wider array of product offerings, specifically in the edibles category, through its medical platform to better serve the interests of our patients. • Aphria® - Since 2014, the Aphria brand is a leading, trusted choice for Canadian patients seeking high quality pharmaceutical-grade medical cannabis.
In Canada, Tilray has also partnered with Indiva to carry a wider array of product offerings, specifically in the edibles category, through its medical platform to better serve the interests of our patients. 8 • Aphria® - Since 2014, the Aphria brand is a leading, trusted choice for Canadian patients seeking high quality pharmaceutical-grade medical cannabis.
Competition is also based on product innovation, product quality, price, brand recognition and loyalty, effectiveness of marketing and promotional activity, the ability to identify and satisfy consumer preferences, as well as convenience and service. Internationally, cannabis companies are limited to those countries which have legalized aspects of the cultivation, distribution, sale or use of cannabis.
Competition is also based on product innovation, product quality, price, brand recognition and loyalty, effectiveness of marketing and promotional activity, the ability to identify and satisfy consumer preferences, as well as convenience and service. Internationally, cannabis companies are limited to those countries which have legalized aspects of the cultivation, distribution, sale or use of medical cannabis.
If we change or waive any portion of the Code of Conduct that applies to any of our directors, executive officers or senior financial officers, we will disclose such information. Information on our website is not incorporated by reference into this Form 10-K or any other report filed with the SEC. 17 Item 1A. Risk Factors.
If we change or waive any portion of the Code of Conduct that applies to any of our directors, executive officers or senior financial officers, we will disclose such information. Information on our website is not incorporated by reference into this Form 10-K or any other report filed with the SEC. Item 1A. Risk Factors.
Increased international competition, including competition from suppliers in other countries who may be able to produce at lower cost, and limitations placed on us by Canadian or other regulations, might lower the demand for our cannabis products on a global scale. Competition from the illicit cannabis market could impact our ability to succeed.
Increased international competition, including competition from suppliers in other countries who may be able to produce at lower cost, and limitations placed on us by Canadian or other regulations, might lower the demand for our cannabis products on a global scale. 18 Competition from the illicit cannabis market could impact our ability to succeed.
Moreover, future governmental actions in countries where we operate, or export products, may limit or altogether restrict the import and/or export of cannabis products. Any future cannabis production facilities that we operate in Canada or elsewhere will also be subject to separate licensing requirements under the CR or applicable local requirements.
Moreover, future governmental actions in countries where we operate, or export products, may limit or altogether restrict the import and/or export of cannabis products. 16 Any future cannabis production facilities that we operate in Canada or elsewhere will also be subject to separate licensing requirements under the CR or applicable local requirements.
In particular, each province or territory may adopt its own laws governing the distribution, sale and consumption of cannabis and cannabis accessory products, and those laws may set lower maximum permitted quantities for individuals and higher age requirements; 12 • promotion, packaging and labelling of cannabis is strictly regulated.
In particular, each province or territory may adopt its own laws governing the distribution, sale and consumption of cannabis and cannabis accessory products, and those laws may set lower maximum permitted quantities for individuals and higher age requirements; • promotion, packaging and labelling of cannabis is strictly regulated.
As a result of the 2018 Farm Bill, federal law dictates that CBD derived from Hemp is not a controlled substance; however, CBD derived from Hemp may still be considered a controlled substance under applicable state law. Individual states take varying approaches to regulating the production and sale of Hemp and Hemp-derived CBD.
As a result of the 2018 Farm Bill, federal law dictates that CBD and THC derived from Hemp is not a controlled substance; however, CBD derived from Hemp may still be considered a controlled substance under applicable state law. Individual states take varying approaches to regulating the production and sale of Hemp and Hemp-derived CBD and THC.
We began operating in 2014 and have yet to generate a profit. We intend to continue to expend significant funds to explore potential opportunities and complete strategic mergers and acquisitions, invest in research and development, expand our marketing and sales operations and meet the compliance requirements as a public company.
We began operating in 2014 and have yet to generate a profit. We intend to continue to expend funds to explore potential opportunities and complete strategic mergers and acquisitions, invest in research and development, expand our marketing and sales operations and meet the compliance requirements as a public company.
In addition, copies of our annual report are available, free of charge, on written request to us. We have a Code of Conduct that applies to our Board of Directors (“Board”) and all of our officers and employees, including, without limitation, our Chief Executive Officer and Chief Financial Officer.
In addition, copies of our annual report are available, free of charge, on written request to us. 15 We have a Code of Conduct that applies to our Board of Directors (“Board”) and all of our officers and employees, including, without limitation, our Chief Executive Officer and Chief Financial Officer.
If any of our debt is accelerated, we may not have sufficient funds available to repay it or be able to obtain new financing to refinance the debt. Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
If any of our debt is accelerated, we may not have sufficient funds available to repay it or be able to obtain new financing to refinance the debt. Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt.
Since 2014, we have seen an increase in the demand for medical cannabis from both patients, doctors and governments in conjunction with a shift in the medical community, which is increasingly recognizing medical cannabis as a viable option for the treatment of patients suffering from a variety of health conditions.
Since 2014, we have seen an increase in the demand for medical cannabis from patients, doctors and governments in conjunction with a shift in the medical community, which is increasingly recognizing medical cannabis as a viable option for the treatment of patients suffering from a variety of health conditions.
We believe the SweetWater product offerings, including the new Red White and Blue American Lager resonate across all consumer’s that want to drink flavorful and refreshing products and that it will be a staple at backyard barbecues, tailgates, and get-togethers.
We believe the SweetWater product offerings, including Red White and Blue American Lager resonate across all consumer’s that want to drink flavorful and refreshing products and that it will be a staple at backyard barbecues, tailgates, and get-togethers.
Our brewery operations are subject to audit and inspection by the TTB at any time. In addition, the alcohol industry is subject to substantial federal and state excise taxes. Excise taxes may be increased in the future by the federal government or any state government or both.
Our brewery and distillery operations are subject to audit and inspection by the TTB at any time. In addition, the alcohol industry is subject to substantial federal and state excise taxes. Excise taxes may be increased in the future by the federal government or any state government or both.
See also Risk Factor “ Our vape business is subject to uncertainty in the evolving vape market due to negative public sentiment and regulatory scrutiny. ” Previously unknown adverse reactions resulting from human consumption of cannabis or beverage alcohol products alone or in combination with other medications or substances could also occur. 29 In addition, the manufacture and sale of our products, like the manufacture and sale of any ingested product, involves a risk of injury to consumers due to tampering by unauthorized third parties or product contamination.
See also Risk Factor “ Our vape business is subject to uncertainty in the evolving vape market due to negative public sentiment and regulatory scrutiny. ” Previously unknown adverse reactions resulting from human consumption of cannabis or beverage alcohol products alone or in combination with other medications or substances could also occur. 27 In addition, the manufacture and sale of our products, like the manufacture and sale of any ingested product, involves a risk of injury to consumers due to tampering by unauthorized third parties or product contamination.
Tilray grew from being one of the first companies to become an approved licensed producer of medical cannabis in Canada to building the first GMP-certified cannabis production facilities in Europe, first in Portugal and later in Germany.
Tilray grew from being one of the first companies to become an approved licensed producer of medical cannabis in Canada to building the first GMP-certified cannabis production facilities in Europe; in Portugal and Germany.
Our results of operations and cash flows could be adversely affected by additional taxes imposed on us prospectively or retroactively or additional taxes or penalties resulting from the failure to comply with any collection obligations or failure to provide information for tax reporting purposes to various government agencies. 33 We may not be able to utilize our net operating loss carryforwards which could result in greater than anticipated tax liabilities.
Our results of operations and cash flows could be adversely affected by additional taxes imposed on us prospectively or retroactively or additional taxes or penalties resulting from the failure to comply with any collection obligations or failure to provide information for tax reporting purposes to various government agencies. 31 We may not be able to utilize our net operating loss carryforwards which could result in greater than anticipated tax liabilities.
We may be required to compensate those suffering loss or damage due to our operations and may have civil or criminal fines or penalties imposed for violations of applicable environmental laws or regulations. 30 Changes in applicable safety, health and environmental standards may impose stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees.
We may be required to compensate those suffering loss or damage due to our operations and may have civil or criminal fines or penalties imposed for violations of applicable environmental laws or regulations. 28 Changes in applicable safety, health and environmental standards may impose stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees.
As a result, we may be required to establish facilities in one or more countries in the EU (or elsewhere) where we wish to distribute our products in order to take advantage of the favorable legislation offered to producers in these countries. 25 We are required to comply concurrently with all applicable laws in each jurisdiction where we operate or to which we export our products, and any changes to such laws could adversely impact our business.
As a result, we may be required to establish facilities in one or more countries in the EU (or elsewhere) where we wish to distribute our products in order to take advantage of the favorable legislation offered to producers in these countries. 23 We are required to comply concurrently with all applicable laws in each jurisdiction where we operate or to which we export our products, and any changes to such laws could adversely impact our business.
Although we primarily grow our products indoors under climate-controlled conditions, we also have certain outdoor cultivation capacity and there can be no assurance that natural elements, such as insects, climate change and plant diseases, will not interrupt our production activities or have an adverse effect on our business. 26 We depend on significant customers for a substantial portion of our revenue.
Although we primarily grow our products indoors under climate-controlled conditions, we also have certain outdoor cultivation capacity and there can be no assurance that natural elements, such as insects, climate change and plant diseases, will not interrupt our production activities or have an adverse effect on our business. 24 We depend on significant customers for a substantial portion of our revenue.
If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, we may be exposed to material uninsured liabilities that could diminish our liquidity, profitability or solvency. 37 The financial reporting obligations of being a public company and maintaining a dual listing on the TSX and on NASDAQ requires significant company resources and management attention.
If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, we may be exposed to material uninsured liabilities that could diminish our liquidity, profitability or solvency. 35 The financial reporting obligations of being a public company and maintaining a dual listing on the TSX and on NASDAQ requires significant company resources and management attention.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline. 35 We may not have the ability to raise the funds necessary to settle conversions of the Convertible Securities in cash or to repurchase the Convertible Securities upon a fundamental change.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline. 33 We may not have the ability to raise the funds necessary to settle conversions of the Convertible Securities in cash or to repurchase the Convertible Securities upon a fundamental change.
We leverage our selection of strains to offer each consumer segment a different experience through its product and terpene profiles, while also focusing on the value proposition for each of these segments as it relates to price, potency and product assortment. 8 Each brand is unique to a specific consumer segment and designed to meet the needs of these targeted segments, as described below.
We leverage our selection of strains to offer each consumer segment a different experience through its product and terpene profiles, while also focusing on the value proposition for each of these segments as it relates to price, potency and product assortment. 9 Each brand is unique to a specific consumer segment and designed to meet the needs of these targeted segments, as described below.
If general consumer trends lead to a decrease in the demand for SweetWater’s and Montauk's beers and other alcohol products or Breckenridge’s whiskey products, including craft beer, our sales and results of operations in the beverage alcohol segment may be adversely affected. There is no assurance that the craft brewing segment will experience growth in future periods.
If general consumer trends lead to a decrease in the demand for our beers and other alcohol products or Breckenridge’s whiskey products, including craft beer, our sales and results of operations in the beverage alcohol segment may be adversely affected. There is no assurance that the craft brewing segment will experience growth in future periods.
Significant disruption to our information technology system or breaches of data security could have a material adverse effect on our business, financial condition and results of operations. 31 The cannabis industry continues to face significant funding challenges, and we may not be able to secure adequate or reliable sources of funding, which may impact our operations and potential expansion.
Significant disruption to our information technology system or breaches of data security could have a material adverse effect on our business, financial condition and results of operations. 29 The cannabis industry continues to face significant funding challenges, and we may not be able to secure adequate or reliable sources of funding, which may impact our operations and potential expansion.
Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 32 It is not expected that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud.
Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 30 It is not expected that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud.
The FDA could also issue new regulations that prohibit or limit the sale of hemp-derived CBD products. Such regulatory actions and associated compliance costs may hinder our ability to successfully compete in the market for such products. In addition, such products may be subject to regulation at the state or local levels.
The FDA could also issue new regulations that prohibit or limit the sale of hemp-derived CBD products and delta-9 products. Such regulatory actions and associated compliance costs may hinder our ability to successfully compete in the market for such products. In addition, such products may be subject to regulation at the state or local levels.
While the agency’s enforcement to date has therefore focused on products containing CBD and that make drug-like claims, there is the risk that the FDA could expand its enforcement activities and require us to alter our marketing for our hemp-derived CBD products or cease distributing them altogether.
While the agency’s enforcement to date has therefore focused on products containing CBD and that make drug-like claims, there is the risk that the FDA could expand its enforcement activities and require us to alter our marketing for our hemp-derived CBD products and delta-9 products or cease distributing them altogether.
Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors. 36 Our stockholders may be subject to dilution resulting from future offerings of common stock by us. We may raise additional funds in the future by issuing common stock or equity-linked securities.
Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors. 34 Our stockholders may be subject to dilution resulting from future offerings of common stock by us. We may raise additional funds in the future by issuing common stock or equity-linked securities.
Refer to Part II, Item 8, Note 20, Warrants , of this form 10-K for additional information. If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.
Refer to Part II, Item 8, Note 18, Warrants , of this form 10-K for additional information. If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.
The EU requires adherence to EU-GMP standards for the manufacture of active substances and medicinal products, including cannabis products.
The EU also requires adherence to EU-GMP standards for the manufacture of active substances and medicinal products, including cannabis products.
In addition to acquiring strong brands and profitable businesses, our strategic investments in beverage alcohol and food in the U.S. provides us with a platform and infrastructure within the U.S. to enable us to access the U.S. market more quickly in the event of federal legalization.
In addition to acquiring strong brands and profitable businesses, our strategic investments in beverage and food in the U.S. provides us with a platform and infrastructure to enable us to access the U.S. market more quickly in the event of federal legalization.
In the event of federal legalization in the U.S., we expect to be well-positioned to compete in the U.S. cannabis market given our existing strong brands and distribution system in addition to our track record of growth in consumer-packaged goods and cannabis products.
In the event of federal legalization in the U.S., we expect to be well-positioned to compete in the U.S. cannabis market given our portfolio of strong brands and distribution system in addition to our track record of growth in consumer-packaged goods and cannabis products.
(“High Park”), we maintain supply agreements for adult-use cannabis with all the provinces and territories in Canada. Tilray is party to a distribution agreement with Great North Distributors to provide sales force and wholesale/retail channel expertise required to efficiently distribute our adult-use products through each of the provincial/territorial cannabis control agencies, excluding Quebec.
(“High Park”), we maintain supply agreements for adult-use cannabis with all the provinces and territories in Canada. Tilray is party to a distribution agreements with Great North Distributors and Northern Elements to provide sales force and wholesale/retail channel expertise required to efficiently distribute our adult-use products through each of the provincial/territorial cannabis control agencies, excluding Quebec.
We understand that climate change presents both risks and opportunities to our business. As a global cannabis-lifestyle and consumer packaged goods company, we recognize that climate-related risks may include changing weather patterns, water scarcity, and regulatory developments related to emissions and energy consumption. These risks can affect our supply chain, cultivation processes, and distribution networks, potentially impacting our financial performance.
We understand that climate change presents both risks and opportunities to our business. As a global cannabis-lifestyle and consumer products company, we recognize that climate-related risks may include changing weather patterns, water scarcity, and regulatory developments related to emissions and energy consumption. These risks can affect our supply chain, cultivation processes, and distribution networks, potentially impacting our financial performance.
Today, Tilray Medical is one of the largest suppliers of medical cannabis brands to patients, physicians, hospitals, pharmacies, researchers, and governments, in 21 countries and across five continents.
Today, Tilray Medical is one of the largest suppliers of medical cannabis brands to patients, physicians, hospitals, pharmacies, researchers and governments in countries spanning across five continents.
As long as cannabis remains illegal under U.S. federal law as a Schedule I controlled substance under the CSA, the benefit of certain federal laws and protections that may be available to most businesses, such as federal trademark and patent protection, may not be available to us.
As long as cannabis remains illegal under U.S. federal law as a scheduled controlled substance under the CSA, the benefit of certain federal laws and protections that may be available to most businesses, such as federal trademark and patent protection, may not be available to us.
State and local authorities have issued their own restrictions on the cultivation or sale of hemp or hemp-derived CBD. This includes laws that ban the cultivation or possession of hemp or any other plant of the cannabis genus and derivatives thereof, such as CBD.
State and local authorities have issued their own restrictions on the cultivation or sale of hemp or hemp-derived CBD and delta-9 products. This includes laws that ban the cultivation or possession of hemp or any other plant of the cannabis genus and derivatives thereof, such as CBD.
In the United States, each of SweetWater, Breckenridge and Montauk sells its alcohol beverages to independent distributors for distribution to retailers and, ultimately, to consumers. No assurance can be given that SweetWater, Breckenridge and Montauk will be able to maintain their current distribution networks or secure additional distributors on favorable terms.
In the United States, each of SweetWater, Breckenridge, Montauk and our other craft brands sells its alcohol beverages to independent distributors for distribution to retailers and, ultimately, to consumers. No assurance can be given that SweetWater, Breckenridge, Montauk and our other craft brands will be able to maintain their current distribution networks or secure additional distributors on favorable terms.
In addition, we are relentlessly focused on managing our cost of goods and expenses in order to maintain our strong financial position. Finally, our experienced leadership team provides a strong foundation to accelerate our growth.
In addition, we are relentlessly focused on managing our cost structure and expenses in order to maintain our strong financial position. Finally, our experienced leadership team provides a strong foundation to accelerate our growth.
While outdoor cultivation is almost exclusively extraction grade, its presence in the market will have a negative effect on pricing of extraction grade wholesale cannabis. As of May 31, 2023, Health Canada has issued approximately 980 active licenses to cannabis cultivators, processors and sellers. Health Canada licenses are limited to individual properties.
While outdoor cultivation is almost exclusively extraction grade, its presence in the market will have a negative effect on pricing of extraction grade wholesale cannabis. As of May 31, 2024, Health Canada has issued approximately 1,000 active licenses to cannabis cultivators, processors and sellers. Health Canada licenses are limited to individual properties.
In reaction to these concerns, steps may be taken to restrict advertising, to impose additional cautionary labeling or packaging requirements, or to increase excise or other taxes on beverage alcohol products. Any such developments may have an adverse impact on the financial condition, operating results and cash flows for SweetWater, Montauk and Breckenridge.
In reaction to these concerns, steps may be taken to restrict advertising, to impose additional cautionary labeling or packaging requirements, or to increase excise or other taxes on beverage alcohol products. Any such developments may have an adverse impact on the financial condition, operating results and cash flows for our beverage alcohol businesses.
Until federal legalization, we intend to continue to diversify and grow our businesses while maximizing their profitability. • Expand the availability of high quality, consistent medical cannabis products for patients around the world, wherever they are legal.
Until federal legalization, we intend to continue to diversify and grow our businesses while maximizing their profitability. • Expand the availability of high quality, consistent medical cannabis products for patients around the world, wherever it is legal.
As such, if a licensed producer seeks to commence production at a new site, it must apply to Health Canada for a new license. As of May 31, 2023, approximately 3,700 authorized retail cannabis stores have opened across Canada.
As such, if a licensed producer seeks to commence production at a new site, it must apply to Health Canada for a new license. As of May 31, 2024, approximately 3,615 authorized retail cannabis stores have opened across Canada.
We will continue to invest in innovation in order to continue to provide our patients and consumers with a differentiated portfolio of products that exceeds their expectations and meets their needs. • Grow and leverage our investment in craft beer, spirits and hemp-based food .
We will continue to invest in innovation in order to continue to provide our patients and consumers with a differentiated portfolio of products that exceeds their expectations and meets their needs. • Grow and leverage our investment in beverage and hemp-based food .
If our current designated qualified person in charge fails to maintain their security clearance, or leaves us and we are unable to find a suitable replacement who meets these requirements, we may no longer be able to continue our clinical trial activities. 27 Increased labor costs, potential organization of our workforce, employee strikes, and other labor-related disruption may adversely affect our operations.
If our current designated qualified person in charge fails to maintain their security clearance, or leaves us and we are unable to find a suitable replacement who meets these requirements, we may no longer be able to continue our clinical trial activities. 25 Increased labor costs, potential organization of our workforce, employee strikes, work stoppages, and other labor-related disruption may adversely affect our business, financial conditions and operations.
Outside Portugal, none of our employees are represented by a labor union or subject to a collective bargaining agreement. In Portugal, none of our employees are represented by a labor union or subject to any workforce-initiated labor agreement.
Outside Portugal and Portland, Oregon, none of our employees are represented by a labor union or subject to a collective bargaining agreement. In Portugal, none of our employees are represented by a labor union or subject to any workforce-initiated labor agreement.
The extent and duration of the Russian invasion of Ukraine, resulting sanctions and any related market disruptions are impossible to predict, but could be substantial, particularly if current or new sanctions continue for an extended period of time or if geopolitical tensions result in expanded military operations on a global scale.
The extent and duration of these ongoing conflicts, resulting sanctions and any related market disruptions are impossible to predict, but could be substantial, particularly if current or new sanctions continue for an extended period of time or if geopolitical tensions result in expanded military operations on a global scale.
In order to ensure the long-term sustainable growth of our Company, we continue to focus on developing strong capabilities in consumer insights, drive category management leadership and assess growth opportunities with the introduction of new products and entries into new geographies.
In order to ensure the long-term sustainable growth of our Company, we continue to focus on developing strong capabilities in data analytics and consumer insights, in order to drive category management leadership and assess opportunities for the introduction of new categories, products and entries into new geographies.
To operate their production facilities, SweetWater and Breckenridge must obtain and maintain numerous permits, licenses and approvals from various governmental agencies, including but not limited to, the Alcohol and Tobacco Tax and Trade Bureau (the “TTB”), the FDA, state alcohol regulatory agencies and state and federal environmental agencies.
To operate our production facilities, we must obtain and maintain numerous permits, licenses and approvals from various governmental agencies, including but not limited to, the Alcohol and Tobacco Tax and Trade Bureau (the “TTB”), the FDA, state alcohol regulatory agencies and state and federal environmental agencies.
At Tilray, we recognize that our people are our greatest asset, and we strive to create a workplace that fosters their growth, development, and wellbeing. As of May 31, 2023, we have approximately 1,600 employees worldwide. We consider relations with our employees to be good and have never experienced work stoppages.
At Tilray, we recognize that our people are our greatest asset, and we strive to create a workplace that fosters their growth, development, and wellbeing. As of May 31, 2024, we have approximately 2,650 employees worldwide. We consider relations with our employees to be good and have never experienced work stoppages.
The alcohol industry has seen continued consolidation among producers in order to take advantage of cost savings opportunities for supplies, distribution and operations. Due to the increased leverage that these combined operations have in distribution and sales and marketing expenses, the costs to SweetWater, Montauk and Breckenridge of competing could increase.
The alcohol industry has seen continued consolidation among producers in order to take advantage of cost savings opportunities for supplies, distribution and operations. Due to the increased leverage that these combined operations have in distribution and sales and marketing expenses, the costs to Breckenridge and our other craft brands of competing could increase.
If these disputes or other matters of global concern continue for an extensive period of time, our operations may be adversely affected. In addition, the recent invasion of Ukraine by Russia, and the impact of sanctions against Russia, and the potential for retaliatory acts from Russia, could result in increased cyber-attacks against U.S. companies.
If these disputes or other matters of global concern continue for an extensive period of time, our operations may be adversely affected. In addition, the invasion of Ukraine by Russia, and the impact of sanctions against Russia, and the potential for retaliatory acts from Russia, could result in increased cyber-attacks against U.S. companies. Item 1B. Unresolved Staff Comments. None.
Adverse changes or developments affecting our brewery in Atlanta or our distillery in Breckenridge, including, fire, power failure, natural disaster, public health crisis, or a material failure of our security infrastructure, could reduce or require us to entirely suspend operations.
Adverse changes or developments affecting our beer production sites, or our distillery in Breckenridge, including, fire, power failure, natural disaster, public health crisis, or a material failure of our security infrastructure, could reduce or require us to entirely suspend operations.
Pursuant to the 2018 Farm Bill, “hemp,” or cannabis and cannabis derivatives containing no more than 0.3% of tetrahydrocannabinol, or THC, is now excluded from the statutory definition of “marijuana” and, as such, is no longer a Schedule I controlled substance under the CSA.
Pursuant to the 2018 Farm Bill, “hemp,” or cannabis and cannabis derivatives containing no more than 0.3% of tetrahydrocannabinol, or THC, is as of the date of this Form 10-K excluded from the statutory definition of “marijuana” and, as such, is no longer a Schedule I controlled substance under the CSA.
The continued growth in the sales of hard seltzers, craft-brewed domestic beers and imported beers is expected to increase competition in the market for alcoholic beverages within the United States and, as a result, prices and market share of SweetWater’s, Montauk Brewing's and Breckenridge’s products may fluctuate and possibly decline.
The continued growth in the sales of hard seltzers, craft-brewed domestic beers and imported beers is expected to increase competition in the market for alcoholic beverages within the United States and, as a result, prices and market share of Breckenridge’s and our other craft brands' products may fluctuate and possibly decline.
Promotions that appeal to underage individuals are prohibited; • since the current federal regime came into force on October 17, 2018, certain classes of cannabis, including dried cannabis and oils, have been permitted for sale into the medical and adult-use markets; • following amendments to the CR that came into force on October 17, 2019 (often referred to as Cannabis 2.0 regulations), other non-combustible form-factors, including edibles, topicals, and extracts (both ingested and inhaled), are permitted in the medical and adult-use markets; • export is restricted to medical cannabis, cannabis for scientific purposes, and industrial hemp; and • sale of medical cannabis occurs on a direct-to-patient basis from a federally licensed provider, while sale of adult-use cannabis occurs through retail-distribution models established by provincial and territorial governments.
Promotions that appeal to underage individuals are prohibited; • since the current federal regime came into force on October 17, 2018, certain classes of cannabis, including dried cannabis and oils, have been permitted for sale into the medical and adult-use markets; • following amendments to the CR that came into force on October 17, 2019 (often referred to as Cannabis 2.0 regulations), other non-combustible form-factors, including edibles, topicals, and extracts (both ingested and inhaled), are permitted in the medical and adult-use markets; • export is restricted to medical cannabis, cannabis for scientific purposes, and industrial hemp; and • sale of medical cannabis occurs on a direct-to-patient basis from a federally licensed provider, while sale of adult-use cannabis occurs through retail-distribution models established by provincial and territorial governments. 12 All provincial and territorial governments have, to varying degrees, enacted regulatory regimes for the distribution and sale of recreational adult-use cannabis within their jurisdiction, including minimum age requirements.
If our stock price were to remain below the warrant exercise price of $5.95 per share for an extended time, we may be forced to lower the warrant exercise price at unfavorable terms in order to fund our ongoing operations. As of May 31, 2023, the warrant exercise price was $3.15.
If our stock price were to remain below the warrant exercise price of $5.95 per share for an extended time, we may be forced to lower the warrant exercise price at unfavorable terms in order to fund our ongoing operations. As of May 31, 2024, the warrant exercise price was $1.61.
Although the length and impact of the ongoing military conflict in Ukraine is highly unpredictable, the conflict could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.
Although the length and impact of these ongoing military conflicts is highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.
We seek to continue to invest in the expansion of our global supply chain to address the unmet needs of patients around the world. We currently maintain key international operations in Portugal, Germany, Italy, United Kingdom, Australia, New Zealand and Argentina as well as strategic relationships in Denmark, Luxembourg and Poland.
We seek to continue to invest in the expansion of our global supply chain to address the unmet needs of patients around the world. We currently maintain key international operations in Portugal, Germany, Poland, Italy, United Kingdom, Australia, New Zealand and Argentina.
Tilray Medical is dedicated to transforming lives and fostering dignity for patients in need through safe and reliable access to a global portfolio of medical cannabis brands, including Tilray, Aphria, Broken Coast, Symbios, Navcora, and Charlotte's Web.
Tilray Medical is dedicated to transforming lives and fostering dignity for patients in need through safe and reliable access to a global portfolio of medical cannabis brands, including Tilray, Aphria, Broken Coast, Symbios, Navcora, Charlotte's Web TM , as well as select adult-use brands.
Lastly, in Wellness, we own two BRC accredited facilities located in Manitoba, Canada that are dedicated to hemp processing and packaging Manitoba Harvest, Just Hemp Foods, and Hemp Yeah! Branded products including hulled hemp seeds, hemp oil, and hemp protein.
Our Operations In our Wellness segment, we own two BRC accredited facilities located in Manitoba, Canada that are dedicated to hemp processing and packaging Manitoba Harvest, Just Hemp Foods, and Hemp Yeah! branded products and private label products including hulled hemp seeds, hemp oil, and hemp protein.
Craft Brewing and Craft Distillery Markets Through SweetWater, Montauk and Breckenridge, we compete in the craft brewing and distillery markets, respectively, as well as in the much larger alcohol beverage market, which encompasses domestic and imported beers, flavored alcohol beverages, spirits, wine, hard ciders and hard seltzers.
Competitive Conditions Beverage-Alcohol Markets We compete in the craft brewing and distillery markets, respectively, as well as in the much larger alcohol beverage market, which encompasses domestic and imported beers, flavored alcohol beverages, spirits, wine, hard ciders and hard seltzers.
The successful execution of our business objectives is contingent upon compliance with all applicable laws and regulatory requirements in Canada (including the Cannabis Act and CR), Europe and other jurisdictions, and obtaining all required regulatory approvals for the production, sale, import and export of our cannabis products.
We operate in a highly regulated and rapidly evolving industry. The successful execution of our business objectives is contingent upon compliance with all applicable laws and regulatory requirements in Canada (including the Cannabis Act and CR), Europe and other jurisdictions, and obtaining all required regulatory approvals for the production, sale, import and export of our cannabis products.
We depend on fast, cost-effective, and efficient courier services to distribute our products to both wholesale and retail customers. Any prolonged disruption of third-party transportation services could have a material adverse effect on our sales volumes or satisfaction with our services.
We face risks associated with the transportation of our products to consumers in a safe and efficient manner. We depend on fast, cost-effective, and efficient courier services to distribute our products to both wholesale and retail customers. Any prolonged disruption of third-party transportation services could have a material adverse effect on our sales volumes or satisfaction with our services.
Hemp and marijuana both originate from the Cannabis sativa plant and CBD is a constituent of both. “Marihuana” or “marijuana” is defined in the CSA as a Schedule I controlled substance whereas “hemp” is essentially any parts of the Cannabis sativa plant that has not been determined to be marijuana.
“Marihuana” or “marijuana” is defined in the CSA as a Schedule I controlled substance whereas “hemp” is essentially any parts of the Cannabis sativa plant that has not been determined to be marijuana.
The increase in the number and availability of competing products and brands, the costs to compete and potential decrease in distribution support and opportunities may adversely affect our business and financial results. 23 SweetWater, Breckenridge and Montauk are each dependent on distributors to deliver sustained growth and distribute products.
The increase in the number and availability of competing products and brands, the costs to compete and potential decrease in distribution support and opportunities may adversely affect our business and financial results. 21 Breckenridge and our other craft beverage brands portfolio are each dependent on distributors to deliver sustained growth and distribute products.
If we experience contraction in our sales and production volumes, the excess capacity and unabsorbed overhead may have an adverse effect on gross margins, operating cash flows and overall financial performance of SweetWater, Montauk or Breckenridge.
If we experience contraction in our sales and production volumes, the excess capacity and unabsorbed overhead may have an adverse effect on gross margins, operating cash flows and overall financial performance of our beverage alcohol businesses.
We have also diversified our presence in the beverage alcohol space through the purchase of Breckenridge, known for its award-winning bourbon whiskey collection and innovative craft spirits portfolio.
We have also diversified our presence in the beverage segment through Breckenridge Distillery, known for its award-winning bourbon whiskey collection and innovative craft spirits portfolio.
Wave Chaser IPA is a staple of Montauk and has expanded into The Surf Beer, a Golden Ale, Tropical IPA, Juicy IPA and Eastern Haze a Hazy IPA. We have also launched Project 4:20, a terpene flavored beer with earthy aromas which is focused on giving back to local green charities.
Wave Chaser IPA is a staple of Montauk and has expanded into Surf Beer, a Golden Ale, Tropical IPA, Juicy IPA and most recently NA IPA, a non-alcoholic offering. We have also launched Project 4:20, a terpene flavored beer with earthy aromas which is focused on giving back to local green charities.
As a result of our operations, we are exposed to various levels of political, economic, legal and other risks and uncertainties associated with operating in or exporting to these jurisdictions.
We currently conduct operations in multiple countries and plan to expand these international operations. As a result of our operations, we are exposed to various levels of political, economic, legal and other risks and uncertainties associated with operating in or exporting to these jurisdictions.
As a result, our activity in the United States is limited to (a) certain corporate and administrative services, including accounting, legal and creative services, (b) supply of study drug for clinical trials under DEA and FDA authorization, and (c) participation in the market for hemp and hemp-derived products containing CBD in compliance with the 2018 Farm Bill. 19 There can be no assurance that the United States will implement federal legalization of cannabis.
As a result, our activity in the United States is limited to (a) certain corporate and administrative services, including accounting, legal and creative services, (b) supply of study drug for clinical trials under DEA and FDA authorization, and (c) participation in the market for hemp and hemp-derived products containing CBD in compliance with the 2018 Farm Bill.
SweetWater, Breckenridge and Montauk each face substantial competition in the beer industry and the broader market for alcoholic beverage products which could impact our business and financial results.
Breckenridge and our other craft beverage brands portfolio each face substantial competition in the beer industry and the broader market for alcoholic beverage products which could impact our business and financial results.
Developments affecting production at our brewery in Atlanta or our distillery in Breckenridge could negatively impact financial results for our beverage alcohol business segment.
Developments affecting production sites, including at our breweries or our distillery in Breckenridge, could negatively impact financial results for our beverage alcohol business segment.
The invasion of Ukraine by Russia and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union and other countries have created global security concerns that could have a lasting impact on regional and global economies.
The invasion of Ukraine by Russia and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, as well as the ongoing conflict between Israel and Hamas, have created global security concerns that could have a lasting impact on regional and global economies.
United States Regulation of Hemp-Based CBD Hemp products are subject to state and federal regulation in respect to the production, distribution and sale of products intended for human ingestion or topical application. Hemp is categorized as Cannabis sativa L., a subspecies of the cannabis genus. Numerous unique, chemical compounds are extractable from Hemp, including CBD.
Regulatory Environment United States Regulation of Hemp-Based CBD & THC Hemp products are subject to state and federal regulation in respect to the production, distribution and sale of products intended for human ingestion or topical application. Hemp is categorized as Cannabis sativa L., a subspecies of the cannabis genus.
By building on this foundation, we strive to maintain our leadership position in the international cannabis industry. • Optimize and drive efficiencies in our global operations with a relentless focus on cost reduction and cash generation. In each of our pillars, we continuously evaluate our cost structure for efficiencies and synergies and eliminate cost when warranted.
By leveraging our existing foundation, we plan to grow our leadership position in the evolving global cannabis industry. 5 • Optimize and drive efficiencies in our global operations with a relentless focus on cost reduction and cash generation. In each of our pillars, we continuously evaluate our cost structure for efficiencies and synergies and eliminate cost when warranted.
Similarly, we cannot predict how long it will take to secure all appropriate regulatory approvals for our products, or the extent of testing and documentation that may be required by governmental authorities.
We cannot predict the impact of the compliance regime that governmental authorities may implement to regulate the adult-use or medical cannabis industry. Similarly, we cannot predict how long it will take to secure all appropriate regulatory approvals for our products, or the extent of testing and documentation that may be required by governmental authorities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSee “ Reconciliation of Non-GAAP Financial Measures to GAAP Measures ” below for a reconciliation of these Non-GAAP Measures to our most comparable GAAP measure. 50 Segment Reporting Our reportable segments revenue is primarily comprised of revenues from our cannabis, distribution, wellness and beverage alcohol operations, as follows: For the year ended May 31, Change Change (in thousands of U.S. dollars) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Cannabis business $ 220,430 $ 237,522 $ 201,392 $ (17,092 ) (7 )% $ 36,130 18 % Distribution business 258,770 259,747 277,300 (977 ) 0 % (17,553 ) (6 )% Beverage alcohol business 95,093 71,492 28,599 23,601 33 % 42,893 150 % Wellness business 52,831 59,611 5,794 (6,780 ) (11 )% 53,817 929 % Total net revenue $ 627,124 $ 628,372 $ 513,085 $ (1,248 ) 0 % $ 115,287 22 % Our reportable segments revenue reported in constant currency (1) are as follows: For the year ended May 31, Change as reported in constant currency Change % Change (in thousands of U.S. dollars) 2023 2022 2023 vs. 2022 Cannabis business $ 233,227 $ 237,522 $ (4,295 ) (2 )% Distribution business 285,115 259,747 25,368 10 % Beverage alcohol business 95,093 71,492 23,601 33 % Wellness business 54,429 59,611 (5,182 ) (9 )% Total net revenue $ 667,864 $ 628,372 $ 39,492 6 % Our geographic revenue is, as follows: For the year ended May 31, Change Change (in thousands of U.S. dollars) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 North America $ 324,645 $ 314,132 $ 229,120 $ 10,513 3 % $ 85,012 37 % EMEA 284,567 296,911 279,062 (12,344 ) (4 )% 17,849 6 % Rest of World 17,912 17,329 4,903 583 3 % 12,426 253 % Total net revenue $ 627,124 $ 628,372 $ 513,085 $ (1,248 ) 0 % $ 115,287 22 % Our geographic revenue in constant currency (1) is, as follows: For the year ended May 31, Change as reported in constant currency Change % Change (in thousands of U.S. dollars) 2023 2022 2023 vs. 2022 North America $ 335,243 $ 314,132 $ 21,111 7 % EMEA 309,152 296,911 12,241 4 % Rest of World 23,469 17,329 6,140 35 % Total net revenue $ 667,864 $ 628,372 $ 39,492 6 % 51 Our geographic capital assets are, as follows: For the year ended May 31, Change (in thousands of U.S. dollars) 2023 2022 2023 vs. 2022 North America $ 319,173 $ 464,370 $ (145,197 ) (31 )% EMEA 107,131 119,409 (12,278 ) (10 )% Rest of World 3,363 3,720 (357 ) (10 )% Total capital assets $ 429,667 $ 587,499 $ (157,832 ) (27 )% Cannabis revenue Cannabis revenue based on market channel is, as follows: For the year ended May 31, Change Change (in thousands of US dollars) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Revenue from Canadian medical cannabis $ 25,000 $ 30,599 $ 25,539 $ (5,599 ) (18 )% $ 5,060 20 % Revenue from Canadian adult-use cannabis 214,319 209,501 222,930 4,818 2 % (13,429 ) (6 )% Revenue from wholesale cannabis 1,436 6,904 6,615 (5,468 ) (79 )% 289 4 % Revenue from international cannabis 43,559 53,887 9,250 (10,328 ) (19 )% 44,637 483 % Total cannabis revenue 284,314 300,891 264,334 (16,577 ) (6 )% 36,557 14 % Excise taxes (63,884 ) (63,369 ) (62,942 ) (515 ) 1 % (427 ) 1 % Total cannabis net revenue $ 220,430 $ 237,522 $ 201,392 $ (17,092 ) (7 )% $ 36,130 18 % Cannabis revenue based on market channel in constant currency (1) is, as follows: For the year ended May 31, Change as reported in constant currency Change % Change (in thousands of US dollars) 2023 2022 2023 vs. 2022 Revenue from Canadian medical cannabis $ 26,612 $ 30,599 $ (3,987 ) (13 )% Revenue from Canadian adult-use cannabis 225,694 209,501 16,193 8 % Revenue from wholesale cannabis 1,529 6,904 (5,375 ) (78 )% Revenue from international cannabis 47,434 53,887 (6,453 ) (12 )% Total cannabis revenue 301,269 300,891 378 0 % Excise taxes (68,042 ) (63,369 ) (4,673 ) 7 % Total cannabis net revenue $ 233,227 $ 237,522 $ (4,295 ) (2 )% (1) The constant currency presentation of our Cannabis revenue based on market channel is a non-GAAP financial measure.
Biggest changeSee “ Reconciliation of Non-GAAP Financial Measures to GAAP Measures ” below for a reconciliation of these Non-GAAP Measures to our most comparable GAAP measure and the discussion above captioned "Cash and Marketable Securities." 50 Segment Reporting Our reportable segments revenue is primarily comprised of revenues from our beverage alcohol, cannabis, distribution, and wellness operations, as follows: For the year ended May 31, Change Change (in thousands of U.S. dollars) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Beverage alcohol business $ 202,094 $ 95,093 $ 71,492 $ 107,001 113 % $ 23,601 33 % Cannabis business 272,798 220,430 237,522 52,368 24 % (17,092 ) (7 )% Distribution business 258,740 258,770 259,747 (30 ) (0 )% (977 ) (0 )% Wellness business 55,310 52,831 59,611 2,479 5 % (6,780 ) (11 )% Total net revenue $ 788,942 $ 627,124 $ 628,372 $ 161,818 26 % $ (1,248 ) (0 )% Our reportable segments revenue reported in constant currency (1) are as follows: For the year ended May 31, Change as reported in constant currency Change % Change (in thousands of U.S. dollars) 2024 2023 2024 vs. 2023 Beverage alcohol business 202,094 $ 95,093 $ 107,001 113 % Cannabis business 274,763 220,430 54,333 25 % Distribution business 259,671 258,770 901 0 % Wellness business 55,533 52,831 2,702 5 % Total net revenue $ 792,061 $ 627,124 $ 164,937 26 % Our geographic revenue is, as follows: For the year ended May 31, Change Change (in thousands of U.S. dollars) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 USA $ 233,141 $ 123,284 $ 103,991 $ 109,857 89 % $ 19,293 19 % Canada 243,722 201,361 210,141 42,361 21 % (8,780 ) (4 )% EMEA 296,450 284,567 296,911 11,883 4 % (12,344 ) (4 )% Rest of World 15,629 17,912 17,329 (2,283 ) (13 )% 583 3 % Total net revenue $ 788,942 $ 627,124 $ 628,372 $ 161,818 26 % $ (1,248 ) (0 )% Our geographic revenue in constant currency (1) is, as follows: For the year ended May 31, Change as reported in constant currency Change % Change (in thousands of U.S. dollars) 2024 2023 2024 vs. 2023 USA $ 233,141 $ 123,284 $ 109,857 89 % Canada 246,156 201,361 44,795 22 % EMEA 286,174 284,567 1,607 1 % Rest of World 26,590 17,912 8,678 48 % Total net revenue $ 792,061 $ 627,124 $ 164,937 26 % 51 Our geographic capital assets are, as follows: For the year ended May 31, Change (in thousands of U.S. dollars) 2024 2023 2024 vs. 2023 USA $ 141,314 $ 63,925 $ 77,389 121 % Canada 313,359 255,248 58,111 23 % EMEA 99,921 107,131 (7,210 ) (7 )% Rest of World 3,653 3,363 290 9 % Total capital assets $ 558,247 $ 429,667 $ 128,580 30 % Beverage alcohol revenue Revenue from our Beverage operations increased to $202.1 million the year ended May 31, 2024, compared to revenue of $95.1 million for the prior year same period.
We do not consider adjusted gross profit and adjusted gross margin in isolation or as an alternative to financial measures determined in accordance with GAAP. 54 Adjusted Gross Profit and Adjusted Gross Margin Adjusted gross profit and adjusted gross margin are non-GAAP financial measures and may not be comparable to similar measures presented by other companies.
We do not consider adjusted gross profit and adjusted gross margin in isolation or as an alternative to financial measures determined in accordance with GAAP. Adjusted Gross Profit and Adjusted Gross Margin Adjusted gross profit and adjusted gross margin are non-GAAP financial measures and may not be comparable to similar measures presented by other companies.
Operating expenses are comprised of general and administrative, share-based compensation, selling, amortization, marketing and promotion, research and development, change in fair value of contingent consideration, impairments, litigation (recovery) costs, restructuring costs and transaction (income) costs.
Operating expenses are comprised of general and administrative, share-based compensation, selling, amortization, marketing and promotion, research and development, change in fair value of contingent consideration, impairments, litigation (recovery) costs, restructuring costs and transaction (income) costs, net.
Liquidity and Capital Resources We actively manage our cash and investments in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, and make acquisitions.
Liquidity and Capital Resources We actively manage our cash and investments in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, and complete acquisitions.
New Standards and Interpretations Applicable Effective June 1, 2022 Refer to Part II, Item 8, Note 3, Significant Accounting Policies, of this Form 10-K for additional information on changes in accounting policies. There have been no new standards or interpretations applicable to the Company during the year.
New Standards and Interpretations Applicable Effective June 1, 2023 Refer to Part II, Item 8, Note 3, Significant Accounting Policies, of this Form 10-K for additional information on changes in accounting policies. There have been no new standards or interpretations applicable to the Company during the year.
The cannabis industry in Europe is in its early stages of development whereby countries within Europe are at different stages of legalization of medical and adult-use cannabis as some countries have expressed a clear political ambition to legalize adult-use cannabis (Germany, Portugal, Luxembourg and Czech Republic), some are engaging in an experiment for adult-use (Netherlands, Switzerland) and some are debating regulations for cannabinoid-based medicine (France, Spain, Italy, and the United Kingdom).
The cannabis industry in Europe is in its early stages of development whereby countries within Europe are at different stages of legalization of medical and adult-use cannabis as some countries have expressed a clear political ambition to legalize adult-use cannabis (Germany, Portugal, Luxembourg and Czech Republic), some are engaging in an experiment for adult-use (Germany, Netherlands and Switzerland) and some are debating regulations for cannabinoid-based medicine (France and Spain).
Item 1A. Risk Factors ” and the financial information and the notes thereto included in Part II, Item 8 of this Form 10-K in this Annual Report for the fiscal year ended May 31, 2023 ( “ Annual Report ” ).
Item 1A. Risk Factors ” and the financial information and the notes thereto included in Part II, Item 8 of this Form 10-K in this Annual Report for the fiscal year ended May 31, 2024 ( “ Annual Report ” ).
(vi) Convertible notes receivable Convertible notes receivables include various investments in which the Company has the right, or potential right to convert the indenture into common stock shares of the investee and are classified as available-for-sale and are recorded at fair value.
(v) Convertible notes receivable Convertible notes receivables include investments in which the Company has the right, or potential right to convert the indenture into common stock shares of the investee and are classified as available-for-sale and are recorded at fair value.
Cash resources and working capital requirements The Company constantly monitors and manages its cash flows to assess the liquidity necessary to fund operations. As of May 31, 2023, the Company maintained $448.5 million of cash and cash equivalents on hand and marketable securities, compared to $415.9 million in cash and cash equivalents at May 31, 2022.
Cash resources and working capital requirements The Company constantly monitors and manages its cash flows to assess the liquidity necessary to fund operations. As of May 31, 2024, the Company maintained $260.5 million of cash and cash equivalents on hand and marketable securities, compared to $448.5 million in cash and cash equivalents at May 31, 2023.
In order to ensure the long-term sustainable growth of our Company, we continue to focus on developing strong capabilities in consumer insights, drive category management leadership and assess growth opportunities with the introduction of new products and entries into new geographies.
In order to ensure the long-term sustainable growth of our Company, we continue to focus on developing strong capabilities in data analytics and consumer insights in order to drive category management leadership and assess opportunities for the introduction of new categories, products and entries into new geographies.
Adjusted EBITDA excludes: • Non-cash inventory valuation adjustments; • Non-cash amortization expenses, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future; • Stock-based compensation expenses, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy; • Non-cash impairment charges, as the charges are not expected to be a recurring business activity; • Non-cash other than temporary write-down of convertible notes receivable, as the charges are not expected to be a recurring business activity; • Non-cash foreign exchange gains or losses, which accounts for the effect of both realized and unrealized foreign exchange transactions.
Adjusted EBITDA adjusts for the following: • Non-cash amortization expenses and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future; • Stock-based compensation expenses, a non-cash expenses and are an important part of our compensation strategy; • Non-cash impairment charges, as the charges are not expected to be a recurring business activity; • Non-cash inventory valuation adjustments; • Non-cash other than temporary write-down of convertible notes receivable, as the charges are not expected to be a recurring business activity; • Non-cash foreign exchange gains or losses, which accounts for the effect of both realized and unrealized foreign exchange transactions.
Furthermore, for the year ended May 31, 2023, the Company recognized a loss of ($25.5) million, resulting from the changes in foreign exchange rates during the period, compared to a loss of ($28.4) million for the prior year, largely associated with the strengthening of the US dollar against the Canadian dollar.
Furthermore, for the year ended May 31, 2024, the Company recognized a loss of ($4.1) million, resulting from the changes in foreign exchange rates during the period, compared to a loss of ($25.5) million for the prior year, largely associated with the strengthening of the US dollar from the prior year.
Working capital provides funds for the Company to meet its operational and capital requirements. As of May 31, 2023, the Company maintained working capital of $340.1 million. We historically financed our operations through the issuance of common stock, sale of convertible notes and revenue generating activities.
Working capital provides funds for the Company to meet its operational and capital requirements. As of May 31, 2024, the Company maintained working capital of $378.5 million. We historically financed our operations through the issuance of common stock, sale of convertible notes and revenue generating activities.
Restructuring costs In connection with executing our acquisition strategy and strategic transactions, the Company incurred non-recurring restructuring and exit costs associated with the integration efforts of these transactions. For the year ended May 31, 2023 and May 31, 2022 respectively, the Company incurred $9.2 million and $0.8 million of restructuring costs.
Restructuring costs In connection with executing our acquisition strategy and strategic transactions, the Company incurred restructuring and exit costs associated with the integration efforts of these non-recurring transactions. For the year ended May 31, 2024 and May 31, 2023 respectively, the Company incurred $15.6 million and $9.2 million of restructuring costs.
Contingencies In the normal course of business, we may receive inquiries or become involved in legal disputes regarding various litigation matters. In the opinion of management, any potential liabilities resulting from such claims would not have a material adverse effect on our consolidated financial statements.
Contingencies In the normal course of business, we may receive inquiries or become involved in legal disputes regarding various litigation matters. In the opinion of management, any potential liabilities resulting from such claims would not have a material adverse effect on our consolidated financial statements. See Note 28 (Commitments and contingencies) for additional details.
Selling costs For the year ended May 31, 2023, the Company incurred selling costs of $34.8 million or 5.6% of revenue as compared to $34.9 or 5.6% of revenue in the prior year. These costs relate to third-party distributor commissions, shipping costs, Health Canada cannabis fees, and patient acquisition and maintenance costs.
Selling costs For the year ended May 31, 2024, the Company incurred selling costs of $37.2 million or 4.7% of revenue as compared to $34.8 or 5.5% of revenue in the prior year. These costs relate to third-party distributor commissions, shipping costs, Health Canada cannabis fees, and patient acquisition and maintenance costs.
We also continue to believe that Tilray remains uniquely positioned to maintain and gain significant market share in these markets with its infrastructure and its investments, which is comprised of two EU-GMP cultivation facilities within Europe located in Portugal and Germany, our distribution network and our demonstrated commitment to the availability, quality and safety of our cannabinoid-based medical products.
We also continue to believe that Tilray remains uniquely positioned to maintain and gain significant market share in these markets with our vertically-integrated infrastructure and well-placed investments, which is comprised of two EU-GMP cultivation facilities within Europe located in Portugal and Germany, our distribution network and our demonstrated commitment to the availability, quality and safety of our cannabinoid-based medical products. 44 The following is a summary of the state of cannabis legalization within Europe: Germany .
Actual results could differ materially from these estimates. 61 (i) Revenue recognition Revenue is recognized when the control of the promised goods, through performance obligation, is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for the performance obligations or as advisory services are provided.
(i) Revenue recognition Revenue is recognized when the control of the promised goods, through performance obligation, is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for the performance obligations or as advisory services are provided.
We believe that the estimates, judgments and assumptions made when accounting for the items described below were reasonable, based on information available at the time they were made.
We believe that the estimates, judgments and assumptions made when accounting for the items described below were reasonable, based on information available at the time they were made. Actual results could differ materially from these estimates.
See “ Use of Non-GAAP Measures – Constant Currency Presentation ” above for a discussion of these Non-GAAP Measures. 52 Revenue from medical cannabis: Revenue from Canadian medical cannabis decreased 18% to $25.0 million for the year ended May 31, 2023 , compared to revenue of $30.6 million for the year ended May 31, 2022.
See “ Use of Non-GAAP Measures – Constant Currency Presentation ” above for a discussion of these Non-GAAP Measures. 52 Revenue from medical cannabis: Revenue from Canadian medical cannabis increased 1% to $25.2 million for the fiscal year ended May 31, 2024 , compared to revenue of $25.0 million for the fiscal year ended May 31, 2023.
However, throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K, we discuss non-GAAP financial measures, including reference to: • adjusted gross profit (excluding purchase price allocation (“PPA”) step up and inventory valuation allowance) for each reporting segment (Cannabis, Beverage alcohol, Distribution and Wellness), • adjusted gross margin (excluding purchase price allocation (“PPA”) step up and inventory valuation allowance) for each reporting segment (Cannabis, Beverage alcohol, Distribution and Wellness), • adjusted EBITDA, • cash and marketable securities, and • constant currency presentation of net revenue. 49 All these non-GAAP financial measures should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America, (“GAAP”).
However, throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K, we discuss non-GAAP financial measures, including reference to: • adjusted gross profit (excluding purchase price allocation (“PPA”) step up and inventory valuation allowance) consolidated and for each reporting segment (Cannabis, Beverage alcohol, Distribution and Wellness), • adjusted gross margin (excluding (“PPA”) step up and inventory valuation allowance) consolidated and for each reporting segment (Cannabis, Beverage alcohol, Distribution and Wellness), • adjusted EBITDA, • cash and marketable securities, and • constant currency presentation of net revenue.
We do not consider adjusted gross profit and adjusted gross margin percentage in isolation or as an alternative to financial measures determined in accordance with GAAP. Cannabis gross margin: Gross margin increased during the year ended May 31, 2023, to 26% from 18% for the prior year same periods.
We do not consider adjusted gross profit and adjusted gross margin percentage in isolation or as an alternative to financial measures determined in accordance with GAAP. Beverage alcohol gross margin: Gross margin of 44% for the year ended May 31, 2024, decreased from 49% the prior year ended May 31, 2023.
(viii) Convertible debentures The Company accounts for its convertible debentures in accordance with ASC 470-20 Debt with Conversion and Other Options , whereby the convertible instrument is initially accounted for as a single unit of account, unless it contains a derivative that must be bifurcated from the host contract in accordance with ASC 815-15 Derivatives and Hedging – Embedded Derivatives or the substantial premium model in ASC 470-20 Debt – Debt with Conversion and Other Options applies.
If neither of the conditions exist, then only the portion of the impairment loss attributable to credit loss is recorded in the statements of net loss and the remaining amount is recorded in other comprehensive income (loss). 64 (vi) Convertible debentures The Company accounts for its convertible debentures in accordance with ASC 470-20 Debt with Conversion and Other Options , whereby the convertible instrument is initially accounted for as a single unit of account, unless it contains a derivative that must be bifurcated from the host contract in accordance with ASC 815-15 Derivatives and Hedging – Embedded Derivatives or the substantial premium model in ASC 470-20 Debt – Debt with Conversion and Other Options applies.
Other companies, including companies in our industry, may calculate non-GAAP measures and operating metrics with similar names differently which may reduce their usefulness as comparative measures.
Other companies, including companies in our industry, may calculate operating metrics and non-GAAP measures with similar names differently which may reduce their usefulness as comparative measures. Certain variances are labeled as not meaningful ("NM") throughout management's discussion and analysis.
Wellness revenue Our Wellness revenue from Manitoba Harvest decreased to $52.8 million for the year ended May 31, 2023 compared to $59.6 million for the prior year same period. On a constant currency basis for the year ended May 31, 2023, Wellness revenue decreased to $54.4 million from $59.6 million.
Wellness revenue Our Wellness revenue from Manitoba Harvest increased to $55.3 million for the fiscal year ended May 31, 2024 compared to $52.8 million for the prior year same period. On a constant currency basis for the fiscal year ended May 31, 2024, Wellness revenue increased to $55.5 million from $52.8 million.
Litigation costs include fees and expenses incurred in connection with defending and settling ongoing litigation matters, net of any judgments or settlement recoveries received from third parties. See Note 27 (Commitments and Contingencies) for additional information on significant litigation matters.
Litigation costs include fees and expenses incurred in connection with defending and settling ongoing legacy inherited litigation matters, net of any judgments or settlement recoveries received from third parties.
The remaining other losses relate to changes in fair value in the Company’s convertible notes receivable and long-term investments. Reconciliation of Non-GAAP Financial Measures to GAAP Measures Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that does not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies.
Reconciliation of Non-GAAP Financial Measures to GAAP Measures Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that does not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies.
Non-operating income (expense), net For the year ended May 31, Change Change (in thousands of US dollars) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Change in fair value of convertible debenture payable $ (43,651 ) $ 163,670 $ (170,453 ) $ (207,321 ) (127 )% $ 334,123 (196 )% Change in fair value of warrant liability 12,438 63,913 1,234 (51,475 ) (81 )% 62,679 5,079 % Foreign exchange loss (25,535 ) (28,383 ) (22,347 ) 2,848 (10 )% (6,036 ) 27 % Loss on long-term investments (2,190 ) (6,737 ) (2,352 ) 4,547 (67 )% (4,385 ) 186 % Other non-operating (losses) gains, net (7,971 ) 5,208 9,080 (13,179 ) (253 )% (3,872 ) (43 )% Total non-operating income (expense) $ (66,909 ) $ 197,671 $ (184,838 ) $ (264,580 ) (134 )% $ 382,509 (207 )% 59 For the year ended May 31, 2023, the Company recognized a gain on the change in fair value of its APHA 24 convertible debentures of ($43.7) million, compared to a loss on the change in fair value of $163.7 million for the prior year.
Non-operating income (expense), net For the year ended May 31, Change Change (in thousands of US dollars) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Change in fair value of convertible debenture payable $ (19,736 ) $ (43,651 ) $ 163,670 $ 23,915 (55 )% $ (207,321 ) (127 )% Change in fair value of warrant liability (1,436 ) 12,438 63,913 (13,874 ) (112 )% (51,475 ) (81 )% Foreign exchange (loss) gain (4,086 ) (25,535 ) (28,383 ) 21,449 (84 )% 2,848 (10 )% Loss on long-term investments (217 ) (2,190 ) (6,737 ) 1,973 (90 )% 4,547 (67 )% Other non-operating (losses) gains, net (12,367 ) (7,971 ) 5,208 (4,396 ) 55 % (13,179 ) (253 )% Total non-operating income (expense) $ (37,842 ) $ (66,909 ) $ 197,671 $ 29,067 (43 )% $ (264,580 ) (134 )% For the year ended May 31, 2024, the Company recognized a loss on the change in fair value of its APHA 24 convertible debentures of ($19.7) million, compared to a loss on the change in fair value of ($43.7) million for the prior year.
Actual inventory losses may differ from management’s estimates and such differences could be material to the Company’s statements of financial position, statements of loss and comprehensive loss and statements of cash flows. Changes in the regulatory structure, lack of retail distribution locations or lack of consumer demand could result in future inventory reserves.
Actual inventory losses may differ from management’s estimates and such differences could be material to the Company’s statements of financial position, statements of loss and comprehensive loss and statements of cash flows.
Unrealized gains or losses represent foreign exchange revaluation of foreign denominated monetary assets and liabilities; • Non-cash change in fair value of warrant liability; • Interest expense, net; • Costs incurred to start up new facilities such as Sweetwater Colorado, and to fund emerging market operations such as Malta and our German cultivation facilities and closure costs to run facilities through the wind-down of operations; • Lease expense, to conform with competitors who report under IFRS; • Transaction costs includes acquisition related expenses, which vary significantly by transactions and are excluded to evaluate ongoing operating results; • Litigation (recovery) costs includes costs related to ongoing litigations, legal settlements and recoveries which are excluded to evaluate ongoing operating results; • Restructuring costs; • Amortization of purchase accounting step-up in inventory value included in costs of sales - product costs; and • Current and deferred income tax expenses and recoveries, which are a significant recurring expense or recovery in our business in the future and reduce or increase cash available to us.
Unrealized gains or losses represent foreign exchange revaluation of foreign denominated monetary assets and liabilities; • Non-cash change in fair value of warrant liability; • Interest expense, net; • Costs incurred to start up new facilities, and to fund emerging market operations; • Transaction (income) costs, net, which includes acquisition related income and expenses, related legal, financial advisor and due diligence cost and expenses and transaction related compensation, which vary significantly by transaction and are excluded to evaluate ongoing operating results; • Restructuring charges; • Litigation costs, net of favorable recoveries and the third party fees associated with defending these claims, includes costs related to legacy and non-operational litigation matters, legal settlements and recoveries; • Amortization of purchase accounting fair value step-up in inventory value included in costs of goods sold; and • Current and deferred income tax expenses and recoveries, which could be a significant recurring expense or recovery in our business in the future and reduce or increase cash available to us.
We believe that existing cash, cash equivalents, short-term investments and cash generated by operations, together with received proceeds from the ATM Program and access to external sources of funds, will be sufficient to meet our domestic and foreign capital needs for a short and long term outlook.
We believe that existing cash, cash equivalents, marketable securities and cash generated by operations, together with access to external sources of funds, will be sufficient to meet our domestic and foreign capital needs for a short and long term outlook. 65 For the Company's short-term liquidity requirements, we are focused on generating positive cash flows from operations and being free cash flow positive.
In Europe, we believe that, despite continuing recessionary economic conditions and the Russian conflict with Ukraine, cannabis legalization (both medicinal and adult-use) will continue to gain traction albeit more slowly than originally expected.
In Europe, we believe that, despite continuing recessionary economic conditions and the Russian conflict with Ukraine, cannabis legalization (both medicinal and adult-use) will continue to gain traction albeit more slowly than originally expected. This is evidenced by the recently adopted cannabis regulations in Germany, which we believe will serve as a catalyst for continued changes in drug policy throughout Europe.
The amount has remained consistent as a percentage of revenue on a year over year basis. 57 Amortization The Company incurred non-production related amortization charges of $93.5 million for the year ended May 31, 2023 compared to $115.2 million in 2022. The decreased amortization is a result of the reduced intangible asset levels.
Amortization The Company incurred non-production related amortization charges of $84.8 million for the year ended May 31, 2024 compared to $93.5 million in 2023. The decreased amortization is a result of the reduced intangible asset levels, as a result of prior year impairments.
We have identified certain policies and estimates as critical to our business operations and the understanding of our past or present results of operations related to (i) long-term investments and convertible notes receivable, (ii) estimated useful lives, impairment consideration and amortization of capital and intangible assets, (iii) stock-based compensation, (iv) business combinations, (v) convertible debentures and (vi) warrant liability.
We have identified certain policies and estimates as critical to our business operations and the understanding of our past or present results of operations related to (i) Revenue recognition, (ii) valuation of inventory (iii) impairment of goodwill and indefinite-lived intangible assets, (iv) business combinations and goodwill, (v) convertible notes receivable and (vi) convertible debentures.
The resulting debt discount is amortized over the period during which the convertible notes are expected to be outstanding as additional non-cash interest expenses. 63 Upon repurchase of convertible debt instruments, ASC 470-20 requires the issuer to allocate total settlement consideration, inclusive of transaction costs, amongst the liability and equity components of the instrument based on the fair value of the liability component immediately prior to repurchase.
Upon repurchase of convertible debt instruments, ASC 470-20 requires the issuer to allocate total settlement consideration, inclusive of transaction costs, amongst the liability and equity components of the instrument based on the fair value of the liability component immediately prior to repurchase.
Revenue from adult-use cannabis: During the year ended, May 31, 2023, our revenue from Canadian adult-use cannabis product increased 2% to $214.3 million compared to revenue of $209.5 million for the prior year.
Revenue from adult-use cannabis: During the fiscal year ended, May 31, 2024, our revenue from Canadian adult-use cannabis product increased 25% to $266.8 million compared to revenue of $214.3 million for the prior year. On a constant currency basis, our revenue from Canadian adult-use cannabis increased 26% to $269.5 million for the fiscal year ended May 31, 2024.
For the year ended May 31, 2023, we incurred $1.6 million of transaction costs, net of recoveries. Our acquisition and wind down strategy has had a material impact on the Company’s results in the current quarter and we expect will continue to persist into future periods generating accretive impacts for our stockholders.
For the year ended May 31, 2024, we incurred $15.5 million of transaction expenses, discussed further below. Our acquisition strategy has had a material impact on the Company’s results, which we expect will continue into future periods, generating accretive impacts for our stockholders.
The Company calculates adjusted EBITDA as net (loss) income before income taxes, interest expense, net, non-operating expense (income), net, amortization, stock-based compensation, change in fair value of contingent consideration, impairment, inventory valuation adjustments, purchase price accounting step up, facility start-up and closure costs, lease expense, litigation costs and transaction costs.
The Company calculates adjusted EBITDA as net loss/net income before income taxes, net interest expense, depreciation and amortization, equity in net loss of equity-method investees, purchase price accounting step-up on inventory, stock-based compensation, inventory valuation adjustments, impairments, other than temporary change in fair value of convertible notes receivable, restructuring costs, transaction (income) costs, net, litigation costs net of recoveries, change in fair value of contingent consideration, unrealized currency gains and losses and other adjustments.
For the years ended May 31, (in thousands of U.S. dollars) 2023 2022 2021 Net cannabis revenue $ 220,430 $ 237,522 $ 201,392 Net beverage alcohol revenue 95,093 71,492 28,599 Distribution Revenue 258,770 259,747 277,300 Wellness revenue 52,831 59,611 5,794 Cannabis costs 162,755 194,834 130,511 Beverage alcohol costs 48,770 32,033 12,687 Distribution costs 231,309 243,231 242,472 Wellness costs 37,330 41,457 4,233 Total adjusted gross profit (excluding PPA step-up and inventory valuation adjustments) 206,442 186,031 143,936 Cannabis adjusted gross margin (excluding inventory valuation adjustments) 51 % 43 % 45 % Beverage alcohol adjusted gross margin (excluding PPA step-up) 53 % 58 % 59 % Distribution gross margin (excluding inventory valuation adjustments) 11 % 9 % 13 % Wellness gross margin 29 % 30 % 27 % Adjusted EBITDA $ 61,479 $ 48,047 $ 40,771 Cash and marketable securities 448,529 415,909 488,466 Working capital $ 340,050 $ 523,161 $ 482,368 (1) Adjusted EBITDA, adjusted gross profit and adjusted gross margin for each of our segments are non-GAAP financial measures.
For the year ended May 31, (in thousands of U.S. dollars) 2024 2023 2022 Net beverage alcohol revenue $ 202,094 $ 95,093 $ 71,492 Net cannabis revenue 272,798 220,430 237,522 Distribution revenue 258,740 258,770 259,747 Wellness revenue 55,310 52,831 59,611 Beverage alcohol costs 113,522 48,770 32,033 Cannabis costs 182,594 162,755 194,834 Distribution costs 230,596 231,309 243,231 Wellness costs 38,879 37,330 41,457 Adjusted gross profit (excluding PPA step-up) (1) 235,581 206,442 186,031 Beverage alcohol adjusted gross margin (excluding PPA step-up) (1) 46 % 53 % 58 % Cannabis adjusted gross margin (excluding PPA step-up) (1) 36 % 51 % 43 % Distribution gross margin 11 % 11 % 9 % Wellness gross margin 30 % 29 % 30 % Adjusted EBITDA (1) $ 60,465 $ 58,679 $ 44,947 Cash and marketable securities (1) as at the year ended: 260,522 448,529 415,909 Working capital as at the year ended: $ 378,540 $ 340,050 $ 523,161 (1) Adjusted EBITDA, adjusted gross profit, adjusted gross margin for each of our segments are non-GAAP financial measures, and cash and marketable securities.
For the year ended May 31, Change Change Adjusted EBITDA reconciliation: 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net (loss) income $ (1,443,000 ) $ (434,132 ) $ (336,014 ) $ (1,008,868 ) 232 % $ (98,118 ) 29 % Income tax benefits, net (7,181 ) (6,542 ) (8,972 ) (639 ) 10 % 2,430 (27 )% Interest expense, net 13,587 27,944 27,977 (14,357 ) (51 )% (33 ) (0 )% Non-operating income (expense), net 66,909 (197,671 ) 184,838 264,580 (134 )% (382,509 ) (207 )% Amortization 130,149 154,592 67,832 (24,443 ) (16 )% 86,760 128 % Stock-based compensation 39,595 35,994 17,351 3,601 10 % 18,643 107 % Change in fair value of contingent consideration 855 (44,650 ) — 45,505 (102 )% (44,650 ) NM Impairments 934,000 378,241 — 555,759 147 % 378,241 NM Other than temporary change in fair value of convertible notes receivable 246,330 — — 246,330 NM — NM Inventory valuation adjustments 55,000 67,000 19,919 (12,000 ) (18 )% 47,081 236 % Purchase price accounting step-up 4,482 2,214 835 2,268 102 % 1,379 165 % Facility start-up and closure costs 7,600 13,700 2,056 (6,100 ) (45 )% 11,644 566 % Lease expense 2,800 3,100 1,337 (300 ) (10 )% 1,763 132 % Litigation (recovery) costs (505 ) 16,518 3,251 (17,023 ) (103 )% 13,267 408 % Restructuring costs 9,245 795 — 8,450 1,063 % 795 NM Transaction costs 1,613 30,944 60,361 (29,331 ) (95 )% (29,417 ) (49 )% Adjusted EBITDA $ 61,479 $ 48,047 $ 40,771 $ 13,432 28 % $ 7,276 18 % 60 Adjusted EBITDA should not be considered in isolation from, or as a substitute for, net loss.
For the year ended May 31, Change Change Adjusted EBITDA reconciliation: 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Net loss $ (222,404 ) $ (1,443,000 ) $ (434,132 ) $ 1,220,596 (85 )% $ (1,008,868 ) 232 % Income tax (recovery) expense (26,616 ) (7,181 ) (6,542 ) (19,435 ) 271 % (639 ) 10 % Interest expense, net 36,433 13,587 27,944 22,846 168 % (14,357 ) (51 )% Non-operating income (expense), net 37,842 66,909 (197,671 ) (29,067 ) (43 )% 264,580 (134 )% Amortization 126,913 130,149 154,592 (3,236 ) (2 )% (24,443 ) (16 )% Stock-based compensation 31,769 39,595 35,994 (7,826 ) (20 )% 3,601 10 % Change in fair value of contingent consideration (15,790 ) 855 (44,650 ) (16,645 ) (1,947 )% 45,505 (102 )% Impairments — 934,000 378,241 (934,000 ) (100 )% 555,759 147 % Other than temporary change in fair value of convertible notes receivable 42,681 246,330 — (203,649 ) (83 )% 246,330 NM Inventory valuation adjustments — 55,000 67,000 (55,000 ) (100 )% (12,000 ) (18 )% (Gain) loss on sale of capital assets - non-operating facility (3,987 ) — — (3,987 ) NM — NM Purchase price accounting step-up 12,230 4,482 2,214 7,748 173 % 2,268 102 % Facility start-up and closure costs 2,100 7,600 13,700 (5,500 ) (72 )% (6,100 ) (45 )% Litigation costs, net of recoveries 8,251 (505 ) 16,518 8,756 (1,734 )% (17,023 ) (103 )% Restructuring costs 15,581 9,245 795 6,336 69 % 8,450 1,063 % Transaction costs (income), net 15,462 1,613 30,944 13,849 859 % (29,331 ) (95 )% Adjusted EBITDA $ 60,465 $ 58,679 $ 44,947 $ 1,786 3 % $ 13,732 31 % 61 Adjusted EBITDA should not be considered in isolation from, or as a substitute for, net loss.
The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its short-term liquidity position by combing these two GAAP metrics.
The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its short-term liquidity position by combing these two GAAP metrics. 49 Operating Metrics and Non-GAAP Measures We use the operating metrics and non-GAAP measures set forth in the table below to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions.
Marketing and promotion cost For the year ended May 31, 2023, the Company incurred marketing and promotion costs of $30.9 million, as compared to $30.9 in the prior year. This amount has remained consistent period over period as marketing is not directly proportionate to sales and is discretionary.
Marketing and promotion cost For the year ended May 31, 2024, the Company incurred marketing and promotion costs of $41.9 million, as compared to $30.9 in the prior year.
General and administrative costs For the year ended May 31, Change Change (in thousands of US dollars) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Executive compensation $ 13,655 $ 14,128 $ 8,645 $ (473 ) (3 )% $ 5,483 63 % Office and general 27,845 27,153 19,503 692 3 % 7,650 39 % Salaries and wages 57,228 51,693 37,126 5,535 11 % 14,567 39 % Stock-based compensation 39,595 35,994 17,351 3,601 10 % 18,643 107 % Insurance 12,033 17,536 12,257 (5,503 ) (31 )% 5,279 43 % Professional fees 7,166 13,047 11,779 (5,881 ) (45 )% 1,268 11 % Gain on sale of capital assets (48 ) (682 ) — 634 (93 )% (682 ) NM Insurance proceeds — (4,032 ) — 4,032 (100 )% (4,032 ) NM Travel and accommodation 4,530 4,203 2,711 327 8 % 1,492 55 % Rent 3,155 3,761 2,203 (606 ) (16 )% 1,558 71 % Total general and administrative costs $ 165,159 $ 162,801 $ 111,575 $ 2,358 1 % $ 51,226 46 % Executive compensation decreased by 3% in the year ended May 31, 2023 compared to $14.1 the prior year, primarily due to a minor changes in the executive team structure and otherwise remained consistent. 56 Office and general increased by 3% in the year ended May 31, 2023 compared to $27.2 the prior year, primarily due to the acquisition of Montauk, increased operations and some reclassification of other expenses during the period.
General and administrative costs For the year ended May 31, Change Change (in thousands of US dollars) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Executive compensation $ 15,597 $ 13,655 $ 14,128 $ 1,942 14 % $ (473 ) (3 )% Office and general 28,460 27,845 27,153 615 2 % 692 3 % Salaries and wages 68,076 57,228 51,693 10,848 19 % 5,535 11 % Stock-based compensation 31,769 39,595 35,994 (7,826 ) (20 )% 3,601 10 % Insurance 12,586 12,033 17,536 553 5 % (5,503 ) (31 )% Professional fees 5,345 7,166 13,047 (1,821 ) (25 )% (5,881 ) (45 )% Gain on sale of capital assets (4,198 ) (48 ) (682 ) (4,150 ) 8,646 % 634 (93 )% Insurance proceeds — — (4,032 ) — — 4,032 (100 )% Travel and accommodation 5,138 4,530 4,203 608 13 % 327 8 % Rent 4,585 3,155 3,761 1,430 45 % (606 ) (16 )% Total general and administrative costs $ 167,358 $ 165,159 $ 162,801 $ 2,199 1 % $ 2,358 1 % 56 Executive compensation increased by 14% in the year ended May 31, 2024 compared to $13.7 the prior year, primarily as a result of changes in estimates related to timing of compensation accruals.
Tilray continues to maintain its market leadership position in Canada and we experienced an increase in share from 8.1% to an 8.3% market share, from the immediately preceding quarter, as reported by Hifyre data for all provinces excluding Quebec where Weedcrawler was deemed more accurate.
However, during the quarter, we experienced a marginal dip in market share in Canada from 11.6% to 10.4% from the immediately preceding quarter, as reported by Hifyre data for all provinces excluding Quebec where Weedcrawler was deemed more accurate.
Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
We do not consider adjusted gross profit and adjusted gross margin percentage in isolation or as an alternative to financial measures determined in accordance with GAAP. 62 Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
In addition, adjusted EBITDA is subject to inherent limitations as this metric reflects the exercise of judgment by management about which expenses and income are excluded or included in determining adjusted EBITDA. In order to compensate for these limitations, management presents adjusted EBITDA in connection with GAAP results.
The principal limitation of adjusted EBITDA is that it excludes certain expenses and income that are required by U.S. GAAP to be recorded in our consolidated financial statements. In addition, adjusted EBITDA is subject to inherent limitations as this metric reflects the exercise of judgment by management about which expenses and income are excluded or included in determining adjusted EBITDA.
The change is driven primarily by the changes in the Company’s share price and the change in the trading price of the convertible debentures. For the year ended May 31, 2023, the Company recognized a change in fair value of its warrants of $12.4 million compared to a change in fair value of $63.9 million for the prior year.
For the year ended May 31, 2024, the Company recognized a change in fair value of its warrants of ($1.4) million compared to a change in fair value of $12.4 million for the prior year.
This distribution network is part of Tilray’s strategy to leverage our growing portfolio of CPG brands and ultimately to launch THC-based product adjacencies upon federal legalization in the U.S. 48 Results of Operations Our consolidated results, in millions except for per share data, are as follows: For the year ended May 31, Change Change (in thousands of U.S. dollars) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net revenue $ 627,124 $ 628,372 $ 513,085 (1,248 ) (0 )% 115,287 22 % Cost of goods sold 480,164 511,555 389,903 (31,391 ) (6 )% 121,652 31 % Gross profit 146,960 116,817 123,182 30,143 26 % (6,365 ) (5 )% Operating expenses: General and administrative 165,159 162,801 111,575 2,358 1 % 51,226 46 % Selling 34,840 34,926 26,576 (86 ) (0 )% 8,350 31 % Amortization 93,489 115,191 35,221 (21,702 ) (19 )% 79,970 227 % Marketing and promotion 30,937 30,934 17,539 3 0 % 13,395 76 % Research and development 682 1,518 830 (836 ) (55 )% 688 83 % Change in fair value of contingent consideration 855 (44,650 ) — 45,505 (102 )% (44,650 ) 0 % Impairments 934,000 378,241 — 555,759 147 % 378,241 0 % Other than temporary change in fair value of convertible notes receivable 246,330 — — 246,330 0 % - 0 % Litigation (recovery) costs (505 ) 16,518 3,251 (17,023 ) (103 )% 13,267 408 % Restructuring costs 9,245 795 — 8,450 1,063 % 795 0 % Transaction costs 1,613 30,944 60,361 (29,331 ) (95 )% (29,417 ) (49 )% Total operating expenses 1,516,645 727,218 255,353 789,427 109 % 471,865 185 % Operating loss (1,369,685 ) (610,401 ) (132,171 ) (759,284 ) 124 % (478,230 ) 362 % Interest expense, net (13,587 ) (27,944 ) (27,977 ) 14,357 (51 )% 33 (0 )% Non-operating (expense) income, net (66,909 ) 197,671 (184,838 ) (264,580 ) (134 )% 382,509 (207 )% Loss before income taxes (1,450,181 ) (440,674 ) (344,986 ) (1,009,507 ) 229 % (95,688 ) 28 % Income tax benefits, net (7,181 ) (6,542 ) (8,972 ) (639 ) 10 % 2,430 (27 )% Net loss $ (1,443,000 ) $ (434,132 ) $ (336,014 ) (1,008,868 ) 232 % (98,118 ) 29 % Use of Non-GAAP Measures The Company reports its financial results in accordance with U.S.
Additional cost savings were identified in order to offset the unrealized savings associated with the planned furlough. 47 Results of Operations Our consolidated results, in millions except for per share data, are as follows: For the year ended May 31, Change Change (in thousands of U.S. dollars) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Net revenue $ 788,942 $ 627,124 $ 628,372 $ 161,818 26 % $ (1,248 ) (0 )% Cost of goods sold 565,591 480,164 511,555 85,427 18 % (31,391 ) (6 )% Gross profit 223,351 146,960 116,817 76,391 52 % 30,143 26 % Operating expenses: 0 % General and administrative 167,358 165,159 162,801 2,199 1 % 2,358 1 % Selling 37,233 34,840 34,926 2,393 7 % (86 ) (0 )% Amortization 84,752 93,489 115,191 (8,737 ) (9 )% (21,702 ) (19 )% Marketing and promotion 41,933 30,937 30,934 10,996 36 % 3 0 % Research and development 635 682 1,518 (47 ) (7 )% (836 ) (55 )% Change in fair value of contingent consideration (15,790 ) 855 (44,650 ) (16,645 ) (1,947 )% 45,505 (102 )% Impairments — 934,000 378,241 (934,000 ) (100 )% 555,759 147 % Other than temporary change in fair value of convertible notes receivable 42,681 246,330 — (203,649 ) (83 )% 246,330 0 % Litigation costs, net of recoveries 8,251 (505 ) 16,518 8,756 (1,734 )% (17,023 ) (103 )% Restructuring costs 15,581 9,245 795 6,336 69 % 8,450 1,063 % Transaction costs (income), net 15,462 1,613 30,944 13,849 859 % (29,331 ) (95 )% Total operating expenses 398,096 1,516,645 727,218 (1,118,549 ) (74 )% 789,427 109 % Operating loss (174,745 ) (1,369,685 ) (610,401 ) 1,194,940 (87 )% (759,284 ) 124 % Interest expense, net (36,433 ) (13,587 ) (27,944 ) (22,846 ) 168 % 14,357 (51 )% Non-operating (expense) income, net (37,842 ) (66,909 ) 197,671 29,067 (43 )% (264,580 ) (134 )% Loss before income taxes (249,020 ) (1,450,181 ) (440,674 ) 1,201,161 (83 )% (1,009,507 ) 229 % Income tax expense (26,616 ) (7,181 ) (6,542 ) (19,435 ) 271 % (639 ) 10 % Net loss $ (222,404 ) $ (1,443,000 ) $ (434,132 ) $ 1,220,596 (85 )% $ (1,008,868 ) 232 % 48 Use of Non-GAAP Measures The Company reports its financial results in accordance with U.S.
Adjusted gross margin of 53% decreased in the year ended May 31, 2023, from 58% in the year ended May 31, 2022. The adjusted gross margin for Beverage alcohol was 53% in the year compared to 58% for the prior year.
Adjusted gross margin of 46% decreased in the year ended May 31, 2024, from 53% in the year ended May 31, 2023.
The Company increased prices in the second quarter to combat the impacts of this inflation and as a result the gross margin has remained overall consistent. 55 Operating expenses For the year ended May 31, Change Change (in thousands of US dollars) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 General and administrative $ 165,159 $ 162,801 $ 111,575 $ 2,358 1 % $ 51,226 46 % Selling 34,840 34,926 26,576 (86 ) (0 )% 8,350 31 % Amortization 93,489 115,191 35,221 (21,702 ) (19 )% 79,970 227 % Marketing and promotion 30,937 30,934 17,539 3 0 % 13,395 76 % Research and development 682 1,518 830 (836 ) (55 )% 688 83 % Change in fair value of contingent consideration 855 (44,650 ) — 45,505 (102 )% (44,650 ) NM Impairments 934,000 378,241 — 555,759 147 % 378,241 NM Other than temporary change in fair value of convertible notes receivable 246,330 — — 246,330 NM — NM Litigation (recovery) costs (505 ) 16,518 3,251 (17,023 ) (103 )% 13,267 408 % Restructuring costs 9,245 795 — 8,450 1,063 % 795 NM Transaction costs 1,613 30,944 60,361 (29,331 ) (95 )% (29,417 ) (49 )% Total operating expenses $ 1,516,645 $ 727,218 $ 255,353 $ 789,427 109 % $ 471,865 185 % Total operating expenses for the year ended May 31, 2023, increased by $789.4 million to $1,516.6 million from $727.2 million as compared to prior year.
The increase in Wellness gross margin was driven by lower material cost and overhead optimization. 55 Operating expenses For the year ended May 31, Change Change (in thousands of US dollars) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 General and administrative $ 167,358 $ 165,159 $ 162,801 $ 2,199 1 % $ 2,358 1 % Selling 37,233 34,840 34,926 2,393 7 % (86 ) (0 )% Amortization 84,752 93,489 115,191 (8,737 ) (9 )% (21,702 ) (19 )% Marketing and promotion 41,933 30,937 30,934 10,996 36 % 3 0 % Research and development 635 682 1,518 (47 ) (7 )% (836 ) (55 )% Change in fair value of contingent consideration (15,790 ) 855 (44,650 ) (16,645 ) (1,947 )% 45,505 (102 )% Impairments — 934,000 378,241 (934,000 ) (100 )% 555,759 147 % Other than temporary change in fair value of convertible notes receivable 42,681 246,330 — (203,649 ) (83 )% 246,330 NM Litigation costs, net of recoveries 8,251 (505 ) 16,518 8,756 (1,734 )% (17,023 ) (103 )% Restructuring costs 15,581 9,245 795 6,336 69 % 8,450 1,063 % Transaction costs (income), net 15,462 1,613 30,944 13,849 859 % (29,331 ) (95 )% Total operating expenses $ 398,096 $ 1,516,645 $ 727,218 $ (1,118,549 ) (74 )% $ 789,427 109 % Total operating expenses for the year ended May 31, 2024, decreased by $1,118.5 million to $398.1 million from $1,516.6 million as compared to prior year.
Given the deterioration of the Euro against the U.S. Dollar in the quarter, on a constant currency basis, revenue from international cannabis decreased to $47.4 million from $53.9 million in the prior year same period. During the year, the Company recognized a one-time return adjustment of $3.1 million related to a customer in Israel.
On a constant currency basis, revenue from international cannabis increased to $53.0 million from $43.6 million in the prior year same period (during the fiscal year ended May 31, 2023, the Company recognized a one-time return adjustment of $3.1 million related to a former customer in Israel that commenced bankruptcy proceedings).
Change Change Cannabis 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net revenue $ 220,430 $ 237,522 $ 201,392 $ (17,092 ) $ 36,130 Cost of goods sold 162,755 194,834 130,511 (32,079 ) 64,323 Gross profit (loss) 57,675 42,688 70,881 14,987 (28,193 ) Gross margin 26 % 18 % 35 % 8 % -17 % Inventory valuation adjustments 55,000 59,500 19,919 (4,500 ) 39,581 Adjusted gross profit (1) 112,675 102,188 90,800 10,487 11,388 Adjusted gross margin (1) 51 % 43 % 45 % 8 % -2 % Distribution Net revenue 258,770 259,747 277,300 (977 ) (17,553 ) Cost of goods sold 231,309 243,231 242,472 (11,922 ) 759 Gross profit 27,461 16,516 34,828 10,945 (18,312 ) Gross margin 11 % 6 % 13 % 5 % (7 %) Inventory valuation adjustments — 7,500 — (7,500 ) 7,500 Adjusted gross profit (1) 27,461 24,016 34,828 3,445 (10,812 ) Adjusted gross margin (1) 11 % 9 % 13 % 2 % -4 % Beverage alcohol Net revenue 95,093 71,492 28,599 23,601 42,893 Cost of goods sold 48,770 32,033 12,687 16,737 19,346 Gross profit 46,323 39,459 15,912 6,864 23,547 Gross margin 49 % 55 % 56 % (6 %) (1 %) Purchase price accounting step-up 4,482 2,214 835 2,268 1,379 Adjusted gross profit (1) 50,805 41,673 16,747 9,132 24,926 Adjusted gross margin (1) 53 % 58 % 59 % -5 % -1 % Wellness Net revenue 52,831 59,611 5,794 (6,780 ) 53,817 Cost of goods sold 37,330 41,457 4,233 (4,127 ) 37,224 Gross profit 15,501 18,154 1,561 (2,653 ) 16,593 Gross margin 29 % 30 % 27 % (1 %) 3 % Total Net revenue 627,124 628,372 513,085 (1,248 ) 115,287 Cost of goods sold 480,164 511,555 389,903 (31,391 ) 121,652 Gross profit (loss) 146,960 116,817 123,182 30,143 (6,365 ) Gross margin 23 % 19 % 24 % 4 % -5 % Inventory valuation adjustments 55,000 67,000 19,919 (12,000 ) 47,081 Purchase price accounting step-up 4,482 2,214 835 2,268 1,379 Adjusted gross profit (1) $ 206,442 $ 186,031 $ 143,936 $ 20,411 $ 42,095 Adjusted gross margin (1) 33 % 30 % 28 % 3 % 2 % (1) Adjusted gross profit is our Gross profit (adjusted to exclude inventory valuation adjustment and purchase price accounting valuation step-up) and adjusted gross margin is our Gross margin (adjusted to exclude inventory valuation adjustment and purchase price accounting valuation step-up) and are non-GAAP financial measures.
The increase in revenue for the year was driven by strong organic growth within our branded hemp business related to higher consumption. 53 Gross profit and gross margin Our gross profit and gross margin for the years ended May 31, 2024, 2023 and 2022, is as follows, for our each of our operating segments: (in thousands of U.S. dollars) For the year ended May 31, Change % Change Change % Change Beverage alcohol 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Net revenue $ 202,094 $ 95,093 $ 71,492 $ 107,001 113 % $ 23,601 33 % Cost of goods sold 113,522 48,770 32,033 64,752 133 % 16,737 52 % Gross profit 88,572 46,323 39,459 42,249 91 % 6,864 17 % Gross margin 44 % 49 % 55 % (5 )% (10 )% (6 )% (11 )% Purchase price accounting step-up 4,602 4,482 2,214 120 3 % 2,268 102 % Adjusted gross profit (1) 93,174 50,805 41,673 42,369 83 % 9,132 22 % Adjusted gross margin (1) 46 % 53 % 58 % (7 %) (13 %) (5 %) (9 %) Cannabis Net revenue 272,798 220,430 237,522 52,368 24 % (17,092 ) (7 )% Cost of goods sold 182,594 162,755 194,834 19,839 12 % (32,079 ) (16 )% Gross profit 90,204 57,675 42,688 32,529 56 % 14,987 35 % Gross margin 33 % 26 % 18 % 7 % 27 % 8 % 44 % Purchase price accounting step-up 7,628 — — 7,628 NM — — Inventory valuation adjustments — 55,000 59,500 (55,000 ) (100 )% (4,500 ) (8 )% Adjusted gross profit (1) 97,832 112,675 102,188 (14,843 ) (13 )% 10,487 10 % Adjusted gross margin (1) 36 % 51 % 43 % (15 )% (29 )% 8 % 19 % Distribution Net revenue 258,740 258,770 259,747 (30 ) (0 )% (977 ) (0 )% Cost of goods sold 230,596 231,309 243,231 (713 ) (0 )% (11,922 ) (5 )% Gross profit 28,144 27,461 16,516 683 2 % 10,945 66 % Gross margin 11 % 11 % 6 % 0 % 0 % 5 % 83 % Inventory valuation adjustments — — 7,500 — NM (7,500 ) (100 %) Adjusted gross profit (1) 28,144 27,461 24,016 683 2 % 3,445 14 % Adjusted gross margin (1) 11 % 11 % 9 % 0 % 0 % 2 % 22 % Wellness Net revenue 55,310 52,831 59,611 2,479 5 % (6,780 ) (11 )% Cost of goods sold 38,879 37,330 41,457 1,549 4 % (4,127 ) (10 )% Gross profit 16,431 15,501 18,154 930 6 % (2,653 ) (15 )% Gross margin 30 % 29 % 30 % 1 % 3 % (1 )% (3 )% Total Net revenue 788,942 627,124 628,372 161,818 26 % (1,248 ) (0 )% Cost of goods sold 565,591 480,164 511,555 85,427 18 % (31,391 ) (6 )% Gross profit 223,351 146,960 116,817 76,391 52 % 30,143 26 % Gross margin 28 % 23 % 19 % 5 % 22 % 4 % 21 % Inventory valuation adjustments — 55,000 67,000 (55,000 ) (100 )% (12,000 ) (18 )% Purchase price accounting step-up 12,230 4,482 2,214 7,748 173 % 2,268 102 % Adjusted gross profit (1) 235,581 206,442 186,031 29,139 14 % 20,411 11 % Adjusted gross margin (1) 30 % 33 % 30 % (3 )% (9 )% 3 % 10 % 54 (1) Adjusted gross profit is our Gross profit (adjusted to exclude inventory valuation adjustment and purchase price accounting valuation step-up) and adjusted gross margin is our Gross margin (adjusted to exclude inventory valuation adjustment and purchase price accounting valuation step-up) and are non-GAAP financial measures.
Our overall strategy is to leverage our brands, infrastructure, expertise and capabilities to drive market share in the industries in which we compete, achieve industry-leading, profitable growth and build sustainable, long-term shareholder value.
Tilray’s mission is to be a leading premium lifestyle company with a house of brands and innovative products that inspire joy, wellness and create memorable experiences. Our overall strategy is to leverage our brands, infrastructure, expertise and capabilities to drive revenue growth in the industries in which we compete, achieve industry-leading profitability and build sustainable, long-term shareholder value.
Dollar, which when the impacts are eliminated on a constant currency basis, revenue increased to $285.1 million for the year ended May 31, 2023 when compared to prior year same period.
Wholesale cannabis revenue: Revenue from wholesale cannabis increased to $25.3 million for the fiscal year ended May 31, 2024, compared to revenue of $1.4 million for the prior year same period which is consistent on a constant currency basis.
Impairment Based upon a combination of factors including a sustained decline in the Company’s market capitalization below the Company’s carrying value, coupled with challenging macro-economic conditions, most particularly the rising interest rate environment and slower than anticipated progress in global cannabis legalization, the Company concluded that it is more likely than not that indicators of impairment were present in the Company's third quarter ended February 28, 2023.
Comparatively in the prior year period ended May 31, 2023, $934.0 million of non-cash impairment expense was recognized as a result of a combination of factors including a sustained decline in the Company’s market capitalization below the Company’s carrying value, coupled with challenging macro-economic conditions, most particularly the rising interest rate environment and slower than anticipated progress in global cannabis legalization.
The company expects to realize $25 million of additional synergies over the first two years from the transaction close date. • Canadian Cannabis business cost reduction plan: During our fourth quarter of our fiscal year ended May 31, 2022, the Company launched a $30 million cost optimization plan of our existing cannabis business to solidify our position as an industry leading low-cost producer.
In addition to acquisitions completed above, the Company has also completed the following cost saving strategies during the year which impact results for the year ended May 31, 2024: • Cannabis business cost reduction plan: During the fourth quarter of our fiscal year ended May 31, 2022, the Company launched a $30 million cost optimization plan of our existing cannabis business to solidify our position as an industry leading low-cost producer.
In 2021, became the first country in the European Union to legalize personal possession of the drug and permit private “cannabis clubs,” where members can grow and share the drug. 45 Beverage alcohol market trends. The beverage alcohol category, while more established, continues to shift with changes in consumer trends for the craft industry.
In 2021, became the first country in the European Union to legalize personal possession of the drug and permit private “cannabis clubs,” where members can grow and share the drug. 45 Netherlands. The Netherlands launched a pilot program involving the cultivation of cannabis for adult-use.
On a constant currency basis revenue from Canadian medical cannabis decreased to $26.6 million from $30.6 million for the year ended May 31, 2022. This decrease in revenue from medical cannabis is primarily driven by increased competition from the adult-use recreational market and its related price compression impacting the medical cannabis market.
On a constant currency basis revenue from Canadian medical cannabis increased to $25.4 million from $25.0 million for the fiscal year ended May 31, 2024. This increase in revenue from medical cannabis is primarily driven by growth in the insured patients category exceeding the decline in un-insured patients attrition to the adult-use recreational market.
Company Overview We are a leading global cannabis-lifestyle and consumer packaged goods company headquartered in Leamington and New York, with operations in Canada, the United States, Europe, Australia, and Latin America that is changing people’s lives for the better – one person at a time – by inspiring and empowering a worldwide community to live their very best life, enhanced by moments of connection and wellbeing.
Company Overview We are a leading global lifestyle consumer products company headquartered in Leamington and New York, with operations in Canada, the United States, Europe, Australia, New Zealand and Latin America that is leading as a transformative force at the nexus of cannabis, beverage, wellness, and entertainment, elevating lives through moments of connection. .
During the year ended May 31, 2023, we have achieved $22 million of our cost optimization plan on an annualized run-rate basis of which $18.5 million represented actual cost savings during the period. The amount achieved is comprised of the following items: - Optimizing cultivation .
During the year ended May 31, 2024, we exceeded our synergy plan by achieving $35.4 million of savings on an annualized run-rate basis, of which $26.2 million represented actual cost savings during the period.
We make estimates in determining the future cash flows and discount rates in the quantitative impairment test to compare the fair value to the carrying value.
We make estimates in determining the future cash flows and discount rates in the quantitative impairment test to compare the fair value to the carrying value. (iv) Business combinations and goodwill We use judgement in applying the acquisition method of accounting for business combinations and estimates to value contingent consideration, identifiable assets and liabilities assumed at the acquisition date.
The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its consolidated results of operations and financial condition before non-controlling interests. In addition, management uses this measure for reviewing the financial results of the Company and as a component of performance-based executive compensation.
We believe that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition.
Operating Metrics and Non-GAAP Measures We use the following operating metrics and non-GAAP measures to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions.
The Company’s management believes that adjusted gross profit and adjusted gross margin are useful to our management to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions.
During the year, the Company achieved an annualized run-rate basis of $6.2 million of cost savings.
As of the date of the conclusion of the plan, we achieved an annualized run-rate basis of $7.6 million of cost savings. The Company concluded this savings plan as of November 30, 2023.
(iii) Impairment of goodwill and indefinite-lived intangible assets Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently when events or circumstances indicate that impairment may have occurred. As part of the impairment evaluation, we may elect to perform an assessment of qualitative factors.
Changes in the regulatory structure, lack of retail distribution locations or lack of consumer demand could result in future inventory reserves. 63 (iii) Impairment of goodwill and indefinite-lived intangible assets Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently when events or circumstances indicate that impairment may have occurred.
The largest impact in the change in cannabis gross margin was related to the non-cash inventory valuation adjustments that occurred in the current year which was higher in the prior year. Excluding these valuation adjustments, adjusted gross margin during the year ended May 31, 2023, increased to 51% from 43% when comparing the same prior year period.
Excluding the purchase price accounting step-up in the year ended May 31, 2024 and the inventory valuation adjustments in the year ended May 31, 2023, adjusted gross margin during the year ended May 31, 2024, decreased to 36% from 51% when comparing the same prior year period.
Professional fees decreased by 45% to $7.2 million in the year ended May 31, 2023 from $13.0 when compared to the prior year. This item was a target of the Tilray-Aphria Arrangement Agreement synergies which drove the large decrease in the year. As well, some of our charter amendment costs were recorded in transactions costs during the period.
Professional fees decreased by 25% to $5.3 million in the year ended May 31, 2024 from $7.2 million when compared to the prior year as this item was a target of our cost savings initiatives.
The adjusted year over year increase relates to a change in product mix as the Company continues to focus on higher margin sales in the current year. Beverage alcohol gross margin: Gross margin of 49% for the year ended May 31, 2023, decreased from 55% the prior year ended May 31, 2022.
Distribution gross margin is expected to continue to fluctuate with changes in product mix as the Company continues to focus on higher margin sales in future periods. Wellness gross margin: Gross margin of 30% for the year ended May 31, 2024, increased from a gross margin of 29% for the year ended May 31, 2023.
We may need to take on additional debt or equity financing arrangements in order to achieve these ambitions on a long-term basis. 64 The following table sets forth the major components of our statements of cash flows for the periods presented: For the Year ended May 31, Change Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net cash provided by (used in) operating activities $ 7,906 $ (177,262 ) $ (44,717 ) $ 185,168 (104 )% $ (132,545 ) 296 % Net cash (used in) provided by investing activities (285,111 ) (21,533 ) 46,105 (263,578 ) 1,224 % (67,638 ) (147 )% Net cash provided by financing activities 70,158 128,196 124,308 (58,038 ) (45 )% 3,888 3 % Effect on cash of foreign currency translation (2,230 ) (1,958 ) 2,124 (272 ) 14 % (4,082 ) (192 )% Cash and cash equivalents, beginning of period 415,909 488,466 360,646 (72,557 ) (15 )% 127,820 (176 )% Cash and cash equivalents, end of period $ 206,632 $ 415,909 $ 488,466 $ (209,277 ) -50 % $ (72,557 ) 35 % Marketable securities 241,897 - - 241,897 NM - NM Cash and marketable securities $ 448,529 $ 415,909 $ 488,466 $ 32,620 8 % $ (72,557 ) (222 )% Cash flows from operating activities The improvement in net cash provided by operating activities of $7.9 million during the year ended May 31, 2023, compared to the net cash used in operating activities of $177.3 million in the prior year same period is primarily related to improved operating efficiencies realized through our synergy and cost optimization programs, improved management of our working capital requirements, the $18.3 million of the cash collected from the HTI Share Consideration’s purchase price derivative and the $33.0 million of cash received from the SLC Settlement.
The following table sets forth the major components of our statements of cash flows for the periods presented: For the year ended May 31, Change Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Net cash provided by (used in) operating activities $ (30,905 ) $ 7,906 $ (177,262 ) $ (38,811 ) (491 )% $ 185,168 (104 )% Net cash provided by (used in) investing activities 128,349 (285,111 ) (21,533 ) 413,460 (145 )% (263,578 ) 1,224 % Net cash (used in) provided by financing activities (75,187 ) 70,158 128,196 (145,345 ) (207 )% (58,038 ) (45 )% Effect on cash of foreign currency translation (549 ) (2,230 ) (1,958 ) 1,681 (75 )% (272 ) 14 % Cash and cash equivalents, beginning of period 206,632 415,909 488,466 (209,277 ) (50 )% (72,557 ) (15 )% Cash and cash equivalents, end of period $ 228,340 $ 206,632 $ 415,909 $ 21,708 11 % $ (209,277 ) (50 )% Marketable securities 32,182 241,897 - (209,715 ) (87 )% 241,897 NM Cash and marketable securities (1) $ 260,522 $ 448,529 $ 415,909 $ (188,007 ) (42 )% $ 32,620 8 % (1) The cash and marketable securities presentation of our cash flows is a non-GAAP financial measure.
For the Company's short-term liquidity requirements, we are focused on generating positive cash flows from operations and being free cash flow positive. As a result of delays in legalization across multiple markets, management continues to reduce operations, headcount, as well as the elimination of other discretionary operational costs.
As a result of delays in legalization across multiple markets, management continues to optimize our operating structure, headcount, as well as the elimination of other discretionary operational costs.
We plan to further automate processes, reducing outside spend where efficient, and ensuring we are obtaining competitive pricing on our administrative services. • International Cannabis business cost reduction plan: During our fiscal year ended May 31 2023, the Company launched an $8.0 million cost optimization plan for our international cannabis business to adapt to changing market dynamics and slower than anticipated legalization in Europe.
The Company's original targets involved repurposing our beverage facility; however, this initiative was altered following the Truss acquisition, which allowed us to leverage and effectively utilize additional capacity from our existing facility and infrastructure. • International Cannabis business cost reduction plan: During our fiscal year ended May 31, 2023, the Company launched an $8.0 million cost optimization plan for our international cannabis business to adapt to changing market dynamics and slower than anticipated legalization in Europe.
The Company recognized stock-based compensation expense of $39.6 million in the year ended May 31, 2023 compared to $36.0 million to the prior year. The increase is primarily driven by the increased number of employees and the accelerated vesting of certain elements of our stock-based compensation awards.
The increase is primarily due to the inclusion of newly acquired employees from the beverage alcohol business portfolio and HEXO acquisitions, which were not in the prior period. The Company recognized stock-based compensation expense of $31.8 million in the year ended May 31, 2024 compared to $39.6 million to the prior year.
Through analysis of the current market conditions, the following key trends have emerged and are anticipated to influence the near-term future in the industry: - Price compression. We have historically seen price compression in the market, when compared to the prior fiscal year, which was driven by intense competition from the approximately 1,000 Licensed Producers in Canada.
Through analysis of the current market conditions, the following key trends have emerged and are anticipated to influence the near-term future in the industry: - Market share . Tilray continues to maintain its market leadership position in Canada.
Distribution revenue Revenue from Distribution operations decreased to $258.8 million for the year ended May 31, 2023 compared to revenue of $259.7 million for the prior year same period. Revenue was negatively impacted during year from the deterioration of the Euro against the U.S.
On a constant currency basis, given the change in the Euro and Argentine Peso against the U.S. Dollar in the quarter, revenue from Distribution was $259.7 million for the fiscal year ended May 31, 2024 when compared to prior year period.
For the year ended May 31, 2023, adjusted EBITDA increased by $13.5 million to $61.5 million compared to $48.0 in the prior year.
In order to compensate for these limitations, management presents adjusted EBITDA in connection with GAAP results. For the year ended May 31, 2024, adjusted EBITDA increased by $1.8 million to $60.5 million compared to $58.7 in the prior year.
In the meantime, a three-year pilot project commenced on January 30, 2023, which permits selected participants to purchase cannabis for adult-use in various pharmacies in Basel, and more recently in Zurich, to conduct studies on the cannabis market and its impact on Swiss society. It is the first trial for the legal distribution of adult-use cannabis containing THC in Europe.
In October 2021, Switzerland announced its intention to legalize cannabis by allowing production, cultivation, trade, and consumption, and in the meantime, it is commencing pilot projects in various cities, which permits selected participants to purchase cannabis for adult-use in various pharmacies in order to conduct studies on the cannabis market and its impact on Swiss society.
While we believe we have sufficient cash to meet existing working capital requirements in the short term, we may need additional sources of capital and/or financing, to meet our U.S. growth ambitions, expansion of our international operations and other strategic transactions. 65 Contractual obligations We lease various facilities, under non-cancelable operating leases, which expire at various dates through September 2040: Operating leases 2024 $ 4,106 2025 3,295 2026 3,486 2027 3,412 Thereafter 4,012 Total minimum lease payments $ 18,311 Imputed interest (7,952 ) Obligations recognized $ 10,359 Purchase and other commitments The Company has payments for long-term debt, convertible debentures, material purchase commitments and constructions commitments, as follows: Total 2024 2025 2026 2027 Thereafter Long-term debt repayment $ 161,707 $ 24,080 $ 14,208 $ 41,798 $ 10,522 $ 71,099 Convertible notes payable 464,070 177,330 136,740 — — 150,000 Material purchase obligations 24,468 18,726 5,140 602 — — Construction commitments 8,410 8,410 — — — — Total $ 658,655 $ 228,546 $ 156,088 $ 42,400 $ 10,522 $ 221,099 Except as disclosed elsewhere in this Part II, Item 7, Management ’ s Discussion and Analysis of Financial Condition and Results of Operations , there have been no material changes with respect to the contractual obligations of the Company during the year-to-date period except for those related to the Company’s acquisitions.
Contractual obligations We lease various facilities, under non-cancelable operating leases, which expire at various dates through September 2040: Operating Finance leases leases 2025 $ 5,821 $ 4,036 2026 5,540 4,036 2027 4,893 4,036 2028 3,997 4,036 Thereafter 6,101 79,993 Total minimum lease payments $ 26,352 $ 96,137 Imputed interest (5,879 ) (51,097 ) Obligations recognized $ 20,473 $ 45,040 Purchase and other commitments The Company has payments on long-term debt, refer to Note 16 (Long-term debt), convertible notes, refer to Note 17 (Convertible debentures payable), material purchase commitments and construction commitments as follows: Total 2025 2026 2027 2028 Thereafter Long-term debt repayment $ 174,666 $ 15,507 $ 43,232 $ 11,764 $ 68,672 $ 35,491 Convertible debentures payable 172,830 330 — 172,500 — — Material purchase obligations 59,959 26,410 33,549 — — — Construction commitments 575 575 — — — — Total $ 408,030 $ 42,822 $ 76,781 $ 184,264 $ 68,672 $ 35,491 67 Except as disclosed elsewhere in this Part II, Item 7, Management ’ s Discussion and Analysis of Financial Condition and Results of Operations , there have been no material changes with respect to the contractual obligations of the Company during the year-to-date period except for those related to the Company’s acquisitions.
In addition, we are relentlessly focused on managing our cost of goods and expenses in order to maintain our strong financial position. Trends and Other Factors Affecting Our Business Canadian cannabis market trends. The cannabis industry in Canada continues to evolve at a rapid pace during the early periods following the federal legalization of adult-use cannabis.
Despite prevailing challenges within the overall spirits market, our focus on whiskey—a resilient segment— we believe positions us for continued growth fueled by innovative product introductions and expanded market presence. Canadian cannabis market trends. The cannabis industry in Canada continues to evolve at a rapid pace during the early periods following the federal legalization of adult-use cannabis.
Subsequent to year-end, the Company converted the HEXO Convertible Notes Receivable and acquired all the outstanding shares of HEXO, see Note 30 (Subsequent events). 58 Litigation costs Litigation costs of ($0.5) million were expensed during the year ended May 31, 2023 compared to $16.5 million in the prior year.
Additionally, the Company recognized $nil and $128.6 million of non-cash other-than-temporary change in fair value on the HEXO Convertible Notes Receivable for the period ended May 31, 2024 and May 31, 2023, respectively, as a result of completing the HEXO acquisition, Note 9 (Business Acquisitions). 58 Litigation costs Litigation costs of $8.3 million were expensed during the year ended May 31, 2024 compared to a recovery of ($0.5) million in the prior year.
The Company continues to believe that wholesale cannabis revenue will remain subject to quarter-to-quarter variability and is based on opportunistic sales. International cannabis revenue: Revenue from international cannabis decreased to $43.6 million for the year ended May 31, 2023, compared to revenue of $53.9 million for the year ended May 31, 2022.
In the near-term future, we anticipate continued volatility and fluctuation in the wholesale market, and we will assess market conditions on a quarterly basis. International cannabis revenue: Revenue from international cannabis increased to $53.3 million for the year ended May 31, 2024, compared to revenue of $43.6 million for the fiscal year ended May 31, 2023.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAgathe, MB Wellness Owned 35,000 United States: SweetWater Brewery (Craft Brewery) Atlanta, GA Beverage Alcohol Owned 3 158,000 SweetWater Colorado (Craft Brewery) Fort Collins, CO Beverage Alcohol Owned 33,000 Breckenridge Distillery Breckenridge, CO Beverage Alcohol Owned 23,000 Breckenridge Distillery Warehouse Denver, CO Beverage Alcohol Owned 75,000 Montauk Brewing Company Montauk, NY Beverage Alcohol Owned 4,000 Fort Collins (CBD extraction site) Fort Collins, CO Cannabis Owned 50,000 International: Tilray EU Campus and Cultivation Site (Cannabis Cultivation and Processing) Cantanhede, Portugal Cannabis Owned 4 3,300,000 CC Pharma (Distribution Operations) Densborn, Germany Distribution Owned 70,000 Aphria RX (Cannabis Cultivation) Neumünster, Germany Cannabis Owned 65,000 FL Group Srl (Distribution Operations) Vado Ligure, Italy Cannabis Leased 4,700 ABP (Distribution Operations) Buenos Aires, Argentina Distribution Leased 10,000 1 Aphria Diamond is a 51% majority-owned subsidiary of Aphria, Inc.
Biggest change(Storage) Patchogue, NY Beverage Alcohol Leased 20,000 10 Barrel Brewing (Brewpub) Bend, OR Beverage Alcohol Leased 4,000 10 Barrel Brewing, LLC (Brewpub) Portland, OR Beverage Alcohol Leased 8,000 10 Barrel Brewing, LLC (Storage) Bend, OR Beverage Alcohol Leased 4,000 10 Barrel Brewing, LLC (Storage) Bend, OR Beverage Alcohol Leased 1,930 10 Barrel Brewing, LLC (Processing / Pub facility) Bend, OR Beverage Alcohol Leased 69,000 10 Barrel Brewing, LLC (Craft Brewery) Bend, OR Beverage Alcohol Leased 25,000 10 Barrel Brewing Idaho, LLC (Brewpub) Boise, ID Beverage Alcohol Leased 9,000 Redhook (Brewery/Pub facility) Seattle, WA Beverage Alcohol Leased 13,000 Widmer (Craft Brewery) Portland, OR Beverage Alcohol Leased 3,000 International: Tilray EU Campus and Cultivation Site (Cannabis Cultivation and Processing) Cantanhede, Portugal Cannabis Owned 3 3,300,000 CC Pharma (Distribution Operations) Densborn, Germany Distribution Owned 70,000 Aphria RX (Cannabis Cultivation) Neumünster, Germany Cannabis Owned 65,000 FL Group Srl (Distribution Operations) Vado Ligure, Italy Cannabis Leased 4,700 ABP (Distribution Operations) Buenos Aires, Argentina Distribution Leased 10,000 38 1 Aphria Diamond is a 51% majority-owned subsidiary of Aphria, Inc.
Item 2. Properties. The following outlines our principal cultivation, manufacturing and storage facilities by reporting segment as of May 31, 2023: Facility and Primary Use Location Reporting Segment Owned/ Leased Approximate Square Footage Canada: Aphria One (Cannabis Cultivation and Processing) Leamington, ON Cannabis Owned 1,400,000 1974568 Ontario Ltd.
Item 2. Properties. The following outlines our principal cultivation, manufacturing, storage facilities and brewpub by reporting segment as of May 31, 2024: Facility and Primary Use Location Reporting Segment Owned/ Leased Approximate Square Footage Canada: Aphria One (Cannabis Cultivation and Processing) Leamington, ON Cannabis Owned 1,400,000 Aphria Diamond Ltd.
(operating as “Aphria Diamond”) (Cannabis Cultivation) Leamington, ON Cannabis Owned 1 1,500,000 Broken Coast (Cannabis Cultivation and Processing) Vancouver Island, BC Cannabis Owned 47,000 Avanti (EU-GMP Cannabis Processing and Lab) Brampton, ON Cannabis Owned 18,000 Tilray North America Campus (EU-GMP Cannabis Cultivation and Processing) Nanaimo, BC Cannabis Owned 2 60,000 High Park Farms (Cannabis Cultivation and Processing) Enniskillen, ON Cannabis Leased 2 626,000 High Park Holdings (Cannabis 2.0 Processing) London, ON Cannabis Leased 134,000 Manitoba Harvest (Hemp Processing) Winnipeg, MB Wellness Leased 15,000 Manitoba Harvest (Hemp Processing) St.
(Cannabis Cultivation) Leamington, ON Cannabis Owned 1 1,500,000 Broken Coast (Cannabis Cultivation) Duncan, BC Cannabis Owned 4 47,000 Avanti (EU-GMP Cannabis Processing and Lab) Brampton, ON Cannabis Owned 18,000 Broken Coast (Cannabis Cultivation) Nanaimo, BC Cannabis Owned 2 60,000 High Park Holdings (Cannabis 2.0 Processing) London, ON Cannabis Leased 134,000 Manitoba Harvest (Hemp Processing) Winnipeg, MB Wellness Leased 15,000 Manitoba Harvest (Hemp Processing) St.
We believe our facilities and committed leased space are currently adequate to meet our needs. As we continue to expand our operations, we may need to acquire or lease additional facilities or dispose of existing facilities. 40
We also lease space for other smaller offices in the United States, Canada, Europe and other parts of the world. We believe our facilities and committed leased space are currently adequate to meet our needs. As we continue to expand our operations, we may need to acquire or lease additional facilities or dispose of existing facilities. 39
Aphria Diamond is a strategic venture with Double Diamond Farms. 2 We announced our decision to close these facilities in Enniskillen, ON and Nanaimo, BC.
Aphria Diamond is a strategic venture with Double Diamond Farms. 2 We announced our decision to relocate operation from Duncan BC facility to Nanaimo facility.
These facilities have ceased operations. 3 We purchased the building during the year. 4 In Cantanhede, Portugal, we own one cultivation and manufacturing location used for medical cannabis and land adjacent to this facility for future expansion. We also lease space for other smaller offices in the United States, Canada, Europe and other parts of the world.
Duncan BC facility is recognized as an asset held for sale for the year ended May 31, 2024. 3 In Cantanhede, Portugal, we own one cultivation and manufacturing location used for medical cannabis and land adjacent to this facility for future expansion. 4 We recognize the property as an asset held for sale for the year ended May 31, 2024. 5 This facility is an outdoor growing facility.
Added
Agathe, MB Wellness Owned 35,000 Hexo Operations Inc.
Added
(Cannabis Cultivation and Processing) Gatineau, QC Cannabis Owned 4 1,292,000 Redecan (Cannabis Cultivation and Processing) Fenwick, ON Cannabis Owned 400,000 Redecan (Cannabis Cultivation and Processing) Cayuga, ON Cannabis Owned 1,644,000 5 United States: SweetWater Brewery (Craft Brewery) Atlanta, GA Beverage Alcohol Owned 158,000 SweetWater Colorado (Craft Brewery) Fort Collins, CO Beverage Alcohol Owned 33,000 Breckenridge Distillery (Craft Distillery) Breckenridge, CO Beverage Alcohol Owned 23,000 Breckenridge Distillery Warehouse (Storage) Denver, CO Beverage Alcohol Owned 75,000 Montauk Brewing Company (Brewery/Pub facility) Montauk, NY Beverage Alcohol Leased 4,000 Fort Collins (Warehouse - Inactive) Fort Collins, CO N/A Owned 4 50,000 Breckenridge Brewery, LLC (Brewery/Pub facility) Littleton, CO Beverage Alcohol Owned 450,000 Breckenridge Brewery, LLC (Brewpub) Littleton, CO Beverage Alcohol Owned 2,500 Craft Brew Alliance, Inc.
Added
(Craft Brewery) Portland, OR Beverage Alcohol Owned 82,000 BBI Acquisition Co. (Brewpub) Breckenridge, CO Beverage Alcohol Leased 8,000 Blue Point Brewing Company, Inc. (Distribution) Patchogue, NY Beverage Alcohol Leased 54,000 Blue Point Brewing Company, Inc.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. The information called for by this item is incorporated herein by reference to Note 27, Commitments and Contingencies , in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. 41 PART II
Biggest changeItem 3. Legal Proceedings. The information called for by this item is incorporated herein by reference to Note 28, Commitments and Contingencies , in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. 40 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 41 PART II Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 42 Item 6. [Reserved] 43 Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations 44 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 66 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 40 PART II Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 41 Item 6. [Reserved] 42 Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations 43 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 68 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn June 9, 2023, the Company issued an additional $22.5 million of unsecured convertible senior notes by way of overallotment bringing the outstanding balance to $172.5 million as described in Note 30 (Subsequent events). 42 Stock Performance Graph The following graph compares the performance of our common stock to the Nasdaq Composite and the Horizons Marijuana Life Sciences Index for the period from July 18, 2018, date of initial public offering, through May 31, 2023 in comparison to the indicated indexes.
Biggest changeStock Performance Graph The following graph compares the performance of our common stock to the Nasdaq Composite and the Horizons Marijuana Life Sciences Index for the period from July 18, 2018, date of initial public offering, through May 31, 2024 in comparison to the indicated indexes.
July 18, May 31, 2018 2019 2020 2021 2022 2023 Tilray Brands, Inc. $ 100.00 $ 169.76 $ 43.99 $ 74.45 $ 18.50 $ 6.88 Nasdaq Composite $ 100.00 $ 95.24 $ 121.27 $ 175.70 $ 154.86 $ 165.81 Horizons Marijuana Life Sciences Index $ 100.00 $ 110.97 $ 44.93 $ 62.28 $ 23.71 $ 12.65 This information under “Stock Performance Graph” is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference in any filing of Tilray under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in those filings.
May 31, 2019 2020 2021 2022 2023 2024 Tilray Brands, Inc. $ 169.76 $ 43.99 $ 74.45 $ 18.50 $ 6.88 $ 7.42 Nasdaq Composite $ 95.24 $ 121.27 $ 175.70 $ 154.86 $ 165.81 $ 214.51 Horizons Marijuana Life Sciences Index $ 110.97 $ 44.93 $ 62.28 $ 23.71 $ 12.65 $ 9.97 This information under “Stock Performance Graph” is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference in any filing of Tilray under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in those filings.
Each issuance of common stock described below, unless otherwise noted, were exempt from registration under Section 4(2) of the Securities Act 1933 in transactions by an issuer not involving a public offering and no underwriter participated in the offer and sale of the shares issued pursuant to the foregoing issuances, and no commission or other remuneration was paid or given directly or indirectly in connection therewith.
Each issuance of securities described below, unless otherwise noted, were exempt from registration under Section 4(2) of the Securities Act 1933, as amended in transactions by an issuer not involving a public offering and no underwriter participated in the offer and sale of the securities issued pursuant to the following issuances, and no commission or other remuneration was paid or given directly or indirectly in connection therewith.
On June 30, 2022, Tilray entered into an assignment and assumption agreement with Double Diamond Holdings Ltd. (“DDH”), an Ontario corporation, pursuant to which, among other things, Tilray acquired from DDH a promissory note in the amount of $5,063,709 (the “Note”) payable by 1974568 Ontario Limited (“Aphria Diamond”). DDH is a joint venturer with Aphria Inc.
On June 30, 2023, Tilray entered into an assignment and assumption agreement with Double Diamond Holdings Ltd. (“DDH”), an Ontario corporation, pursuant to which, among other things, Tilray acquired from DDH a promissory note in the amount of $8,058 (the “Note”) payable by 1974568 Ontario Limited (“Aphria Diamond”). DDH is a joint venturer with Aphria Inc.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is traded on the Nasdaq Global Select Market under the symbol “TLRY.” Holders As of July 24, 2023, there were approximately 703,257,224 holders of record of our common stock.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is traded on the Nasdaq Global Select Market under the symbol “TLRY.” Holders As of July 25, 2024, there were approximately 900 holders of record of our common stock.
(Tilray’s wholly-owned subsidiary) in Aphria Diamond. As consideration for the Note, Tilray issued 1,529,821 shares of its common stock to DDH. On July 12, 2022, Tilray acquired from HT Investments MA LLC (“HTI”) all of the outstanding principal and interest under a secured convertible note (the “HEXO Note”) issued by HEXO Corp.
(Tilray’s wholly-owned subsidiary) in Aphria Diamond. As consideration for the Note, Tilray issued 5,004,735 shares of its common stock to DDH. On September 12, 2023, Tilray repurchased $20,000 of its TLRY 23 Notes for cancellation by issuing 7,000,000 shares and paying $610 of cash to settle both principal and accrued interest.
Removed
(“HEXO”) with certain amendments, pursuant to the amended and restated assignment and assumption agreement, dated as of June 14, 2022.
Added
After cancellation, the outstanding principal balance of the TLRY 23 Notes was $107,331.
Removed
As consideration for the acquisition of the HEXO Note, Tilray paid a purchase price in an aggregate amount equal to $155 million, which purchase price was satisfied through the issuance to HTI of 33,314,412 shares of Tilray’s common stock and the issuance of a newly issued $50 million convertible promissory note.
Added
On September 29, 2023, Tilray issued 1,032,616 shares of its common stock to HTI Investments MA LLC pursuant to the terms of a $50.0 million convertible promissory note originally issued by Tilray to HTI on July 12, 2022 and which was settled at maturity on August 31, 2023 as previously disclosed.
Removed
On September 1, 2022, the Company issued 10,276,305 shares of Tilray's common stock to DDH in connection with the assignment from DDH to the Company of a promissory note payable by 1974568 Ontario Limited.
Added
On October 4, 2023, Tilray entered into an arrangement with MediPharm Labs Inc. (“MediPharm”) to acquire 100% ownership of 1000652011 Ontario Inc.. As consideration for such acquisition, Tilray issued 1,371,157 shares of its common stock to MediPharm.
Removed
On December 5, 2022, the Company issued 1,979,541 shares of Tilray's common stock to DDH in connection with the assignment from DDH to the Company of a promissory note payable by 1974568 Ontario Limited.
Added
On October 13, 2023, Tilray issued an additional 201,995 shares of its common stock to MediPharm to satisfy certain obligations under the acquisition arrangement. From December 15, 2023 to December 21, 2023, the Company exchanged $18,500 aggregate principal of its APHA 24 Notes for cancellation by issuing 9,601,538 shares.
Removed
On February 21, 2023, the Company issued 2,328,739 shares of Tilray's common stock to DDH in connection with the assignment from DDH to the Company of a promissory note payable by 1974568 Ontario Limited.
Added
On January 9, 2024, Tilray, entered into an assignment and assumption agreement with Double Diamond Holdings Ltd. (“DDH”) pursuant to which, among other things, Tilray acquired from DDH a promissory note in the amount of $26,135 payable by 1974568 Ontario Limited (“Aphria Diamond”).
Removed
On May 30, 2023, the Company issued 38,500,000 shares of Tilray's common stock as part of a share lending agreement with an affiliate of Jefferies LLC in connection with the registered offering of $150 million of unsecured convertible senior notes.
Added
As consideration for such note, Tilray issued 13,627,391 shares of its common stock to DDH, including any shares issued for downside protection provisions.
Removed
The net proceeds from this offering were used to finance the concurrent repurchase of a portion of its outstanding 5.00% Convertible Senior Notes due 2023 (TLRY 23) and 5.25% Convertible Senior Notes due 2024 (APHA 24), as described in Note 17 (Convertible debentures payable).
Added
From January 10, 2024 to February 26, 2024, the Company exchanged $32,210 aggregate principal of its APHA 24 Notes for cancellation by issuing 17,626,714 shares. 41 On April 30, 2024, Tilray, entered into an assignment and assumption agreement with Double Diamond Holdings Ltd.
Added
(“DDH”) pursuant to which, among other things, Tilray acquired from DDH a promissory note in the amount of $10,883 payable by 1974568 Ontario Limited (“Aphria Diamond”). As consideration for such note, Tilray issued 6,148,868 shares of its common stock to DDH, including any shares issued for downside protection provisions.
Added
Between April 11, 2024 to May 17, 2024, the Company exchanged $85,700 aggregate principal of its APHA 24 Notes for cancellation by issuing 46,255,895 shares. Each of the foregoing issuances of securities was reported on a Form 8-K filed by the Company with the U.S. Securities and Exchange Commission.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeItem 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations. The following Management ’ s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand our operations and our present business environment from the perspective of management.
Biggest changeItem 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations. The following Management ’ s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand our results of operations and our present business environment from the perspective of management.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAccounts receivable are unsecured, and the Company does not require collateral from its customers. 66 (b) Liquidity risk As at May 31, 2023, the Company’s financial liabilities consist of bank indebtedness and accounts payable and accrued liabilities, which have contractual maturity dates within one-year, long-term debt, and convertible debentures which have contractual maturities over the next five years.
Biggest change(b) Liquidity risk As at May 31, 2024, the Company’s financial liabilities consist of bank indebtedness and accounts payable and accrued liabilities, which have contractual maturity dates within one-year, long-term debt, and convertible debentures which are due in 2027.
The maximum credit exposure at May 31, 2023, is the carrying amount of cash and cash equivalents, accounts receivable, prepaids and other current assets and convertible notes receivable. All cash and cash equivalents are placed with major financial institutions in Canada, Australia, Portugal, Germany, Colombia, Argentina and the United States.
The maximum credit exposure at May 31, 2024, is the carrying amount of cash and cash equivalents, accounts receivable, prepaids and other current assets and convertible notes receivable. All cash and cash equivalents are placed with major financial institutions in Canada, Australia, Portugal, Germany, Colombia, Argentina and the United States.
(c) Currency rate risk As at May 31, 2023, a portion of the Company’s financial assets and liabilities held in Canadian dollars and Euros consist of cash and cash equivalents, convertible notes receivable, and long-term investments.
(c) Currency rate risk As at May 31, 2024, a portion of the Company’s financial assets and liabilities held in Canadian dollars and Euros consist of cash and cash equivalents, convertible notes receivable, and long-term investments.
The Company maintains debt service charge and leverage covenants on certain loans secured by its Aphria Diamond facilities and 420 that are measured quarterly. The Company believes that it has sufficient operating room with respect to its financial covenants for the next fiscal year and does not anticipate being in breach of any of its financial covenants.
The Company maintains debt service charge and leverage covenants on certain loans secured by its Aphria Diamond facilities and ABC Group that are measured quarterly. The Company believes that it has sufficient operating room with respect to its financial covenants for the next fiscal year and does not anticipate being in breach of any of its financial covenants.
The Company manages its liquidity risk by reviewing its capital requirements on an ongoing basis. Based on the Company’s working capital position at May 31, 2023, management regards liquidity risk to be low.
The Company manages its liquidity risk by reviewing its capital requirements on an ongoing basis. Based on the Company’s working capital position at May 31, 2024, management regards liquidity risk to be low.
The Company manages interest rate risk by restricting the type of investments and varying the terms of maturity and issuers of marketable securities. Varying the terms to maturity reduces the sensitivity of the portfolio to the impact of interest rate fluctuations. 67
The Company manages interest rate risk by restricting the type of investments and varying the terms of maturity and issuers of marketable securities. Varying the terms to maturity reduces the sensitivity of the portfolio to the impact of interest rate fluctuations. 68
The Company does not currently use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined that this risk is not significant at this point in time. (d) Interest rate price risk The Company’s exposure to changes in interest rates relates primarily to the Company’s outstanding debt.
The Company does not as of the date of this Form 10-K use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined that this risk is not significant at this point in time. (d) Interest rate risk The Company’s exposure to changes in interest rates relates primarily to the Company’s outstanding debt.
To date, the Company has not experienced any losses on its cash deposits.
To date, the Company has not experienced any losses on its cash deposits. Accounts receivable are unsecured, and the Company does not require collateral from its customers.

Other TLRY 10-K year-over-year comparisons