Tilray Brands, Inc. (NASDAQ:TLRY) Q2 2023 Earnings Call Transcript

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Carl Merton: Thanks, Andrew. Just trying to walk through as many of those pieces as I can. There was about $3.1 million impact on sales in the quarter related to the return. We had about $4.2 million that was came out in my script on the slowdown in production, which is the — effectively unabsorbed overhead. And then we see all of the optimization plans, the majority of those benefits are coming late in Q3 and Q4. And so, we had the $100 million from the Aphria-Tilray optimization plan. I think we’ve got about another $20 million of that that has to hit the income statement still. It’s been achieved just the full year savings hasn’t flowed through on the Aphria One optimization plan or the Canadian cannabis optimization plan that’s $25 million in total. The vast majority of that was back-end loaded as we got systems in place to be able to realize those savings. And then, we have the continued impacts of HEXO.

Irwin Simon: And Andrew, I think the big thing is, as Carl was saying is a lot of our cost savings are back-end loaded. There’s additional cost savings coming out of Europe. In regards to beverage alcohol, our beer business is back end in regards to sales there and same with our bourbon business with RNDC, now getting into distribution expansion in more and more states. But back to your point, we talked about it before, Canada has a major plan in place with a lot of innovation, a lot of growth in its back half, and that’s a big part of it. So, it’s about growing our volumes, growing our distribution, managing our costs. And I can tell you, we’ve done a great job of taking our costs out of the business with the free Tilray was over $100-plus million.

We’ve stepped up again as we look at Europe right now and taken out another $7-plus million. We’ve taken out other costs in the Company, getting cost savings working with HEXO, but the key is getting that growth in these marketplaces and volume is ultimately what’s doing that. And being that low-cost producer in our growth facilities is very, very important. So, it’s a combination of all those — as you know, things do happen up there. But as we look into our crystal ball, that’s what we see today.

Operator: The next question is from the line of Aaron Grey with Alliance Global Partners. Please proceed with your question.

Aaron Grey: So just for me, I want to talk a bit on M&A opportunities available to you, specifically in Canada, as you mentioned, you’re getting back to double-digit share in your prepared remarks. You talked about the tough market doing business there for excise tax, obviously impacting a lot of the smaller players in addition to yourself. So just want to know if there’s any more attractive opportunities that you’ve seen come up in the market. There appear to be an increase in CCAA. So from your standpoint, are you starting to see somewhat of a shakeout come for you guys might have more M&A opportunities available and then maybe different parts in the supply chain that you might see those in the Canadian sector? Thank you.

Irwin Simon: So, in the Canadian sector, absolutely, I think we have two major facilities in Leamington, Ontario. And what you heard us say before, it affected us from an absorption standpoint, there’s a cash benefit to it, but bringing more and more grow into our facilities is absolutely very much accretive to our gross margins and accretive to our earnings. It also — as competitors come out of the marketplace, there’s less competitors out there and it also helps with some of the price compression. So absolutely, it’s got to make sense. It’s got to fit within our growth facilities and it’s got to be accretive to Tilray and its Tilray shareholders. So we’re very interested. Listen, the Canadian market is the only market out there.

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