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Tilray Brands, Inc. (TLRY)·Q2 2025 Earnings Summary

Executive Summary

  • Record Q2 net revenue of $210.95M (+9% YoY; +10% constant currency) with consolidated gross margin up 500bps YoY to 29%, driven by cost controls and mix optimization .
  • Beverage net revenue rose 36% YoY to $63.08M with adjusted gross margin up 400bps to 42% amid Project 420 synergies ($17M achieved of $25M target) .
  • GAAP net loss widened to $(85.3)M (EPS $(0.10)) largely due to ~$34M FX loss and other non-cash items; adjusted net loss improved to $(2.23)M and adjusted EPS was $0.00 .
  • Reaffirmed FY2025 net revenue guidance of $950M–$1.0B; SKU rationalization expected to reduce FY25 sales by ~$20–25M with innovation offset over ~18 months .
  • S&P Global consensus estimates were unavailable despite attempts; management noted adjusted EPS significantly beat expectations of a $0.30 loss (contextual datapoint) .

What Went Well and What Went Wrong

What Went Well

  • Beverage momentum and margin execution: beverage revenue +36% YoY to $63.08M; adjusted beverage gross margin +400bps to 42% on integration and mix . “Through Project 420, we aim to achieve $25 million in cost savings…we’ve already achieved $17 million” .
  • International cannabis growth: +25% YoY led by Germany (medical flower +55%, extracts +24% post-regulatory changes), with diversified EU GMP supply .
  • Strategic and tech enablement: “We are partnering with Microsoft and their AI platforms on a global scale to…optimize our operations, achieve significant improvements and propel our business forward” .

What Went Wrong

  • GAAP loss and FX drag: net loss of $(85.3)M vs $(46.2)M prior year, including ~$34M FX loss amid USD strength; EPS $(0.10) vs $(0.07) .
  • Cash flow and working capital: cash used in operations −$40.7M with adjusted FCF −$43.6M due to inventory build (Tilray Pharma seasonality, beverages pre-rationalization) .
  • Canada adult-use pressure: Canadian adult-use cannabis revenue down 18% YoY as Tilray prioritized margin/ASP in high excise categories; cannabis net revenue flat ($65.65M) with excise taxes of $21.56M .

Financial Results

Consolidated P&L and Profitability (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$229.88 $200.04 $210.95
Gross Margin %36% 30% 29%
Net Loss ($USD Millions)$(15.38) $(34.65) $(85.28)
GAAP Diluted EPS ($)$(0.04) $(0.04) $(0.10)
Adjusted Net Income (Loss) ($USD Millions)$35.10 $(6.08) $(2.23)
Adjusted EPS ($)$0.04 $(0.01) $0.00
Adjusted EBITDA ($USD Millions)$29.49 $9.33 $9.02

Segment Net Revenue (oldest → newest)

Segment ($USD Millions)Q4 2024Q1 2025Q2 2025
Beverage$76.74 $55.97 $63.08
Cannabis$71.92 $61.25 $65.65
Distribution$65.57 $68.07 $67.61
Wellness$15.66 $14.75 $14.61
Total$229.88 $200.04 $210.95

Segment Margins (gross or adjusted where disclosed; oldest → newest)

Segment Margin %Q4 2024Q1 2025Q2 2025
Beverage Gross Margin %53% 41% 40% (Adj 42%)
Cannabis Gross Margin %40% 40% 35% (Adj 35%)
Distribution Gross Margin %12% 12% 12%
Wellness Gross Margin %31% 32% 31%

KPIs and Cash (oldest → newest)

KPI ($USD Millions unless noted)Q4 2024Q1 2025Q2 2025
Cash + Marketable Securities$260.52 $280.06 $252.25
Working Capital$378.54 $432.33 $428.82
Free Cash Flow$28.34 $(42.02) $(45.56)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net RevenueFY 2025$950M–$1,000M $950M–$1,000M Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/Technology initiativesNot emphasized in Q4/Q1 filingsPartnership with Microsoft AI to optimize operations New focus emerging
Supply chain & integrationQ1: ABI brand integration timing issues; distributor system transitions impacting beverages Integration progressing; SKU rationalization underway; facility optimization improving margins Improving post-integration
Tariffs/macroNot highlighted“Not exposed to meaningful tariff risk in the U.S.”; USD strength drove ~$34M FX loss Mixed: FX headwind; low tariff exposure
Product performance (Beverage)Q1 beverage +132% YoY including acquisitions Beverage +36% YoY; brew pubs contributed ~$10M; innovation pipeline ready for spring resets Sustained growth; mix upgrade
Product performance (Cannabis)Q4 cannabis +12% YoY; margin changes Canada adult-use −18% YoY; regained #1 in flower; THC beverages 45% share Mix shift to margin; leadership in key categories
Regional trends (Germany/EU)Q1: German medical flower +50% post-legalization Germany flower +55% and extracts +24%; EU GMP facilities in Germany/Portugal ramping Strengthening
Regulatory/legalQ1: U.S. candidates support further legalization U.S. HDD9 beverages opportunity; Farm Bill delay viewed as supportive near-term; medical cannabis potential $160–$250M if legalized Constructive optionality
Wellness/HDD9Q1: Alternative beverages launched HDD9 expansion via alcohol distributor networks; brick-and-mortar focus Expanding channels

Management Commentary

  • “In Q2, our beverage business achieved $63 million in net revenue and increased adjusted gross margin by 400 basis points to reach a 42%” (Irwin Simon) .
  • “Through Project 420, we aim to achieve $25 million in cost savings…we’ve already achieved $17 million” (CEO) .
  • “We are partnering with Microsoft and their AI platforms…to optimize our operations” (CEO) .
  • “Adjusted net loss per share coming in at zero, a significant beat to expectations…$0.30 loss” (CFO) .
  • “Reaffirming our guidance for fiscal 2025…net revenues between $950 million and $1 billion” (CFO) ; reiterated in press release .

Q&A Highlights

  • SKU rationalization timeline: majority by FY25 year-end, some into FY26; revenue impact ~$20–25M with innovation offset; cost savings ~$17–18M already realized .
  • Margin drivers: improvements from cost takeout and efficiency, not price; emphasis on gross profit and profitability over share in high excise categories .
  • Beverage innovation & spring resets: robust pipeline across non-alc, energy, waters, HDD9; improved timing and retailer/distributor engagement for spring resets .
  • HDD9 regulatory outlook: Farm Bill delayed; management sees strong brick-and-mortar demand; leveraging alcohol distribution networks .
  • Guidance cadence: seasonal step-up in Q4 (beer resets, CC Pharma summer stocking, cannabis pre-roll/flower seasonality) supports FY target range .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q2 2025 EPS, revenue, and EBITDA, but the request could not be completed (daily limit exceeded). Therefore, Wall Street consensus estimates were unavailable at the time of analysis. Values intended to be pulled from S&P Global were unavailable.
  • Management indicated adjusted EPS of $0.00 significantly beat expectations of a $0.30 loss (contextual, not SPGI) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net RevenueFY 2025$950M–$1,000M $950M–$1,000M Maintained

Key Takeaways for Investors

  • Margin trajectory credible: +500bps YoY gross margin to 29% and segment margin stability reflect integration progress and cost actions; beverage adjusted gross margin at 42% shows structural improvement .
  • Beverage is a growth and synergy engine: 36% YoY revenue growth, $17M of $25M synergies achieved, brew pubs contributing ~$10M, and innovation slated for spring resets support H2 acceleration .
  • Cannabis mix focus: Canadian adult-use revenue down as Tilray prioritizes margins/ASP; counterbalanced by leadership in flower and international growth (Germany) .
  • Near-term revenue drag vs long-term mix: SKU rationalization reduces FY25 sales by ~$20–25M but should improve margins and cash conversion as innovation ramps over ~18 months .
  • Cash and WC watch: adjusted FCF negative and operating cash use driven by inventory positioning; monitor working capital normalization through H2 .
  • Regulatory optionality: HDD9 beverages expanding via alcohol channels; European medical tailwinds post-Germany changes; U.S. medical cannabis opportunity framed at $160–$250M if legalized .
  • FX risk acknowledged: ~$34M FX loss significantly impacted GAAP results; results sensitive to USD strength .