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Date
Monday, July 28, 2025 at 8:30 p.m. ET
Call participants
Chairman and Chief Executive Officer — Irwin Simon
Chief Financial Officer — Carl Merton
Chief Strategy Officer and Head of M&A — Denise Faltischek
President, Tilray Canada — Blair MacNeil
Managing Director, International — Rajnish Ohri
Chief Growth Officer, Tilray Beverages — Ty Gilmore
Chief Corporate Affairs Officer — Berrin Noorata
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Risks
Non-cash impairment charges of approximately $2 billion in fiscal 2025 (ended May 31, 2025), largely attributed to a sustained decline in market capitalization and stagnation in US regulatory progress, resulted in a GAAP net loss of $2.2 billion.
Fiscal fourth quarter fiscal 2025 beverage revenue and gross margin were negatively impacted by softer consumer demand, SKU rationalization, and missed distribution windows, resulting in segment revenue declining to $65.6 million from $76.7 million in the prior year quarter (GAAP).
Strategic efforts to enhance margin included shifting focus away from vape and infused pre-rolls in Canada, resulting in a $15 million decline in cannabis revenue in fiscal 2025 and reflecting broader price compression trends in these categories.
Delayed export permits for international cannabis, especially from Portugal, left approximately $8 million in shipments unfulfilled in the fourth quarter of fiscal 2025, temporarily lowering international cannabis revenue.
Takeaways
Total net revenue: $821.3 million (GAAP) in fiscal 2025, up 4% year-over-year, or $833.7 million on a constant currency basis, with annual revenue growth led by international cannabis and beverage acquisitions.
International cannabis revenue: Grew 71% in the fourth quarter of fiscal 2025 to $22.4 million, with European cannabis revenue (excluding Australia) increasing 112% in the fourth quarter and German revenue expanding 134% in the fourth quarter, accounting for substantial regional growth.
Gross margin: Consolidated gross margin (GAAP) improved 100 basis points year-over-year to 29% in fiscal 2025; cannabis gross margin increased by 700 basis points from 33% in fiscal 2024 to 40% in fiscal 2025, reaching 44% in the fourth quarter.
Beverage segment: Beverage revenue increased 19% year-over-year in fiscal 2025, primarily driven by acquisitions, while fourth quarter net beverage revenue declined to $65.6 million due to industry-wide softness, SKU rationalization, and missed timing on distribution resets.
Adjusted EBITDA: Adjusted EBITDA in fiscal 2025 was $55 million, with fourth quarter adjusted EBITDA at $27.6 million, the company’s second-highest quarterly consolidated adjusted EBITDA, driven by margin initiatives and mix optimization.
Cash and debt position: $256 million in cash as of the end of fiscal 2025; net debt reduced to approximately $19 million as of the end of fiscal 2025 and net debt to adjusted EBITDA leverage ratio improved to 0.3 times from 1.7 in the prior fiscal year.
Impairment charges: Non-cash impairment charges totaling nearly $2 billion were reported in fiscal 2025 (GAAP), including $1.4 billion in non-cash impairment charges (GAAP) in the fourth quarter, predominantly related to intangible assets and goodwill from the Tilray business combination.
Segment performance: Cannabis revenue contributed 30% of total net revenue in fiscal 2025, beverages accounted for 29% of net revenue, wellness accounted for 8% of net revenue, and distribution contributed 33% to total net revenue (GAAP); wellness net revenue grew 9% to over $60 million in fiscal 2025.
Guidance for fiscal 2026: Management guided to adjusted EBITDA of $62 million to $72 million for fiscal 2026.
Cost optimization: Project 420 delivered $24 million in annualized savings out of a $33 million target in fiscal 2025, with further process integration, distributor consolidation, and facility rationalization in progress to lower costs and streamline operations.
Summary
The earnings call detailed a record-setting year forTilray Brands(TLRY 6.88%), with leadership emphasizing international cannabis expansion, margin improvement through product and geographic mix, and deleveraging of the balance sheet. Management highlighted shifting strategic priorities toward higher-margin SKUs in both cannabis and beverages, directly addressing price compression and operational headwinds in both markets. The discussion clarified that exceptionally large non-cash impairment charges, triggered by accounting rules and market capitalization declines, have no bearing on the company’s core tangible assets, ongoing operations, or liquidity.
Chief Executive Officer Simon said, "Despite recording this non-cash accounting charge, it does not change how we feel about the future of our business today, including the intrinsic value of our tangible assets, our liquidity, and, of course, our brand equity."
Chief Financial Officer Merton noted that beverage margin contraction in the fourth quarter of fiscal 2025 stemmed from "decreased demand in beverage revenue during the quarter, impacting overhead absorption combined with investments in the acquired brands."
The company stated that approximately $35 million in revenue was impacted by strategic decisions, including SKU and category rationalization in fiscal 2025, with short-term declines expected in exchange for higher future profitability.
The management signaled that international cannabis operations, centered on Germany and Europe broadly, will remain essential growth engines as supply chain and export permit issues recede.
Operational investments, cost-cutting measures, and a renewed focus on brand innovation are cited as the main drivers for expected margin and adjusted EBITDA growth in fiscal 2026.
Industry glossary
SKU rationalization: The process of reducing the number of individual product lines (SKUs) to eliminate underperforming items, thereby improving operational efficiency and financial performance.
Project 420: Tilray’s internal, multiphase cost optimization initiative focused on integrating acquired beverage operations, streamlining processes, and improving profitability.
Excise tax: A category-specific sales tax, here referring to taxes imposed on cannabis sales in Canada that directly affect product pricing and margins.
EU GMP: European Union Good Manufacturing Practice certification, a regulatory standard for pharmaceutical quality applied to cannabis products destined for European markets.
Full Conference Call Transcript
Berrin Noorata: Thank you, operator, and good afternoon, everyone. By now, you should have access to the earnings press release, which is available on the Investors section of the Tilray Brands website at tilray.com and has been filed with the SEC and SEDAR. Please note that during today's call, we will be referring to various non-GAAP financial measures that can provide useful information for investors. However, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. The earnings press release contains a reconciliation of each non-GAAP financial measure to the most comparable measure prepared in accordance with GAAP.
In addition, we will be making numerous forward-looking statements during our remarks and in response to your questions. These statements are based on our current expectations and beliefs and involve known and unknown risks and uncertainties which may prove to be incorrect. Actual results could differ materially from those described in those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements.
Today, we will be hearing from key members of our senior leadership team, beginning with Irwin Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary, followed by Carl Merton, Chief Financial Officer, who will review our financial results for the fourth quarter and fiscal year 2025. Also joining us for the question and answer segment are Denise Faltischek, Chief Strategy Officer and Head of M&A, Blair MacNeil, President of Tilray Canada, Rajnish Ohri, Managing Director, International, and Ty Gilmore, Chief Growth Officer, Tilray Beverages. And now I'd like to turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon.
Irwin Simon: Thank you, Berrin, and good afternoon, everyone, and thank you for joining us today. In fiscal 2025, we continued to execute on our long-term strategy of solidifying our global leadership in cannabis and expanding our beverage and wellness business, with new innovations, strategic bolt-on acquisitions, and geographic expansion. We are in categories that are emerging quickly, like cannabis, as well as categories that have been around for years but are evolving and changing, like our beer and spirits businesses. As we bring our businesses together, we are creating a unique and scalable global platform while remaining laser-focused on profitability and cash flow. Our strategy is paying off, and I want to start by highlighting three key points.
We reached a record revenue of $22.4 million in the international cannabis business in Q4, up 71% year over year. Total cannabis gross margin increased by 400 basis points and reached 44% in Q4, and cannabis gross margin increased by 700 basis points in the fiscal year. In Q4, we also achieved our second-highest ever quarterly consolidated adjusted EBITDA of almost $28 million. In terms of full-year consolidated fiscal financial metrics, in fiscal 2025, Tilray achieved record annual revenue of $821 million, a 4% increase year over year on a constant currency basis, and $834 million, a 6% increase year over year.
During the fiscal year, we implemented strategic initiatives aimed at enhancing business operations by improving margin and our profitability. However, these decisions impacted our revenue by $35 million. If we eliminated these one-time impacts of these strategic decisions and currency fluctuations, revenue would have been approximately $870 million, or a 10% growth year over year. Importantly, Tilray delivered its highest gross profit to date at $241 million, an 8% increase year over year. All this was achieved while maintaining a strong balance sheet, with approximately $256 million in cash, reducing our debt by approximately $100 million to date, and improving our net debt to EBITDA ratio to 0.3 times from 1.7 last year.
We aim to continue strengthening our balance sheet through further strategic debt restructuring in our fiscal year 2026. Over the past five years, Tilray has experienced significant growth through both organic expansion and strategic acquisitions and geographic expansion. We generated revenues from over 21 countries and operate a portfolio of over 40 brands in four diversified business units. As Carl is going to explain in further detail, we booked a non-cash impairment this quarter. To offer some color, in 2021, when we completed the reverse takeover of Tilray, there was lots of excitement in the market regarding the acquisition and the potential for US cannabis legalization.
The growth in our share price reflected that enthusiasm at the time of the deal closing. Since then, US regulatory changes have not advanced the way we'd hoped, which has impacted our share price and have turned our market cap. From an accounting standpoint, that meant we need to recognize a non-cash impairment charge this quarter. Let me be very clear. Despite recording this non-cash accounting charge, it does not change how we feel about the future of our business today, including the intrinsic value of our tangible assets, our liquidity, and, of course, our brand equity. We remain incredibly optimistic, and we believe we have the right long-term strategy to deliver for our shareholders.
We have transformed Tilray Brands into a company generating nearly $1 billion in annual revenue, establishing ourselves as a leading global cannabis business outside the United States, the fourth-largest craft beer producer in the US, and a dominant force in the global market for high-protein hemp food, snacks, and wellness drinks. Our progress is rooted in a deep understanding of product innovation, evolving consumer needs, shaping offerings that not only reflect but anticipate how people choose to eat, drink, relax, and address their health and well-being. In fiscal 2025, we led the Canadian cannabis market with over $185 million in revenue.
We operate a leading international medical cannabis business outside North America, generating almost $65 million in annual cannabis revenue, totaling to be approximately a quarter of a billion dollars in cannabis sales worldwide, and over $270 million of medical pharma distribution revenue. Our US beverage division generated approximately $240 million in sales, and our wellness division, which continues to dominate the hemp industry with nearly 60% branded market share in the US and 80% in Canada, contributed $60 million in revenue. Now let's look at our performance by divisions. Beginning with our international cannabis business, as a result of our leading international infrastructure, international cannabis revenue grew, and Q4 was up 71% year over year.
Excluding Australia, European cannabis revenue increased organically compared to the prior year's quarter by 112% in Q4. In fiscal year 2025, our international cannabis business revenue grew approximately 20% year over year. This top-line improvement is evidence that our growth in our international markets is accelerating and will continue, particularly in Germany, where we maintain our number one leadership position in the reimbursed market and increased our sales in the self-pay market. Tilray is well-positioned to expand this market share across Europe, supported by vertically integrated operations, EU GMP cultivation facilities in Portugal and Germany, and a comprehensive sales and distribution infrastructure.
Let me take a moment to spotlight our progress in Germany, where in Q4, we achieved revenue growth of 134% over the prior year quarter and 54% revenue growth in fiscal year 2025 when compared with the prior fiscal year. Our wholly-owned subsidiary, Aphria Rx, remains at the forefront as one of just three licensed cultivators of medical cannabis. This license positions us to better serve patients' needs and expand access to the highest quality cannabis products across broader markets. It also serves as a significant competitive advantage as we are not required to procure import and export permits to sell and distribute Aphria Rx products in Germany.
In addition to increasing our revenue in existing markets, we're also laser-focused on entering and expanding developing markets. In June, our wholly-owned subsidiary, FL Group, received from the Ministry of Health an extension to its license to import and distribute three medical cannabis flowers, which are cultivated and produced in our EU GMP certified facility in Portugal. Moving on to our Pharmaceutical Distribution segment in Europe, CC Pharma continues to be a consistent performer and a key enabler of our international cannabis performance. It continues to serve as a competitive differentiator as it allows us to provide excellent service to our customers throughout our order fulfillment and quick delivery to our customers.
The infrastructure we have in place positions us for success as regulations continue to change across Europe. As we look ahead, our experiences, portfolio, and infrastructure keep us exceptionally well-positioned to lead our scale of medical cannabis business, not only across Europe but in every market that regulation evolves. I am confident that our team, our vision, and our execution will continue to drive Tilray's growth and our ability to deliver value for medical cannabis patients worldwide. Turning to our cannabis operations in Canada, after six years, we're seeing stabilization within the Canadian cannabis market, alongside new growth opportunities.
With continued consolidation on both the producer and retail sides, we are starting to see signs of industry normalization and balancing inventories. The Canadian cannabis sector continues to evolve at a rapid pace with a goal of combating the illegal market and putting safe products in the hands of our consumers to meet their needs and wants. Tilray continues to lead revenues as the largest cannabis business in Canada, which remains the largest federally legal cannabis market. In fiscal year 2025, our Canadian cannabis revenue totaled $186 million and $191 million on a constant currency basis. Excluding the impact of strategic decisions made to enhance margin performance, revenue would have reached $206 million when excluding currency fluctuations.
In Q4, Tilray maintained a 9.3% market share in the adult recreational segment, distinguishing itself as the only top five licensed producer to do this. We maintain the number one position in THC beverages, chocolate edibles, oils, and capsules combined, and non-infused pre-rolls. We also held a top 10 position in all other categories in the cannabis flower category. As a result of strong innovation, we regained the number one market share in Q4 and launches under the Redican and Broken Coast brands. Tilray operates as a vertically integrated company, manufacturing 90% of its products internally and maintaining high standards of quality and reliability. Operationally, we remain laser-focused on cost optimization through labor balancing, production improvements, and contract streamlining.
As a result, we continue to improve our cost per unit. On the cultivation side, we have the most flexible footprint in the global cannabis industry, which we have strategically optimized to maximize efficiency. With a facility footprint of approximately 5 million square feet, our value chain and business processes are recognized as an industry-leading business. In fiscal 2025, we put the building blocks in place to transition cultivation from 150 metric tons to over 200 metric tons as a result of an increase in volume demand in Canada and internationally. We have the capacity for continuous growth. We are confident in the industry outlook and the strength of our brands.
Our product portfolio serves a wide range of consumer segments, offering options that appeal to various taste profiles. We sharpen our product mix to focus on higher-margin SKUs, which has had a direct impact on improving gross margins across the board. The strategic shift is yielding real benefits. We're generating more profits per gram while aligning with consumers' preferences for quality and consistency. Those that follow the Hifyre data may have already noticed our double-digit percent gains in revenue per gram in flower. We have great products and major new innovations coming up that will hit every market in Canada in the next three quarters. Globally, the cannabis industry continues to evolve.
Tilray has the cultivation and manufacturing agility at the right cost to compete in the market commercially, both in Canada and around the world, and hopefully one day in the US. With the recent appointment of the new administrator, the USDA, we anticipate he will play a significant role in the potential rescheduling of cannabis in the United States, which should open up new opportunities for Tilray in the US market.
Also in the Canadian market, the future holds significant promise as regulatory reform could bring about pivotal changes, including medical cannabis available one day through pharmacies, enhanced enforcement to reduce the illicit market, authorization for cannabis beverages to be sold outside dispensaries, reformation of excise tax policy, and last but not least, broad accessibility of CBD products and beverages. Turning to our beverage business, fiscal 2025 was a total year of transition and rebuilding for our beverage business, which includes beer and spirits, highlighted by the acquisition of four craft brands from Molson Coors to expand our portfolio and the continued integration of several other beer brands.
We launched Project 420 to integrate operations and optimize processes and revitalize brands, resulting in $24 million in annualized savings towards a $33 million goal, which we will continue to work on. By working closely with our distributors in various markets, we streamlined our to eliminate duplicate and slower growth products and concentrate our brands in the region where they have the most strength. The strategic initiatives impacted revenue to date by approximately $20 million and an adjusted EBITDA of $6 million. We expect the offset to come in future quarters. These efforts also led to a 100 basis point improvement in beverage gross profit for the year.
So while we grew our beverage business 19% in fiscal 2025, like the rest of the beer industry, we were impacted by softer consumer demand. We attribute this to lower demand and short-term influences and broader category-related challenges, including adverse weather, integration process, and delayed innovation. In Q4, the beverage segment reported net revenue of $65.6 million. Q4 traditionally represents the peak sales period for this business. However, this year, outcomes diverged from previous projections. The beer business was primarily affected by SKU rationalization initiatives and generally softer consumer demand observed across the sector due to the factors I just mentioned.
Following our acquisition from ABI, we encountered unexpected distribution headwinds at retail due to missed reset windows that occurred prior to the closing of the acquisition. We also saw a shift in on-premise dynamics. While we introduced new products, not all met our expectations. Additionally, although our SKU rationalization made strategic sense, there's a natural time lag before higher-performing SKUs could replace those phased out. Now with substantially real itemized brands, a refreshed innovation pipeline, and SKU rationalization behind us, we are well-positioned to recapture revenue and secure more points of distribution in the upcoming resets.
During the quarter, we implemented several measures, including leadership changes, restructuring of the sales and marketing teams, and the launch of targeted initiatives to design and reinforce what our beer portfolio is and what it can be. Our beer operations are now under the direction of Tilray's Chief Growth Officer, Ty Gilmore. We are confident that our prompt and strategic corrective actions, which yield improved gross margins year over year, position us favorably for success in fiscal year 2026. Today, Tilray Beverages operates more than 20 beverage brands, including 15 American craft beer brands across eight network manufacturing facilities and 18 brewpubs.
In the spirits category, Breckenridge Distillery has proven its strength in the bourbon sector, experiencing higher depletions compared to others in a declining market. It also made significant progress in the Bakken gin markets, complemented by its world-class restaurant retail operations that provide an immersive brand experience. We've introduced several world-class innovations, including Walk Mach One, our new line of non-alcoholic spirits, and Mountain Shot, which aims to disrupt the shot occasion, and Casabreck in the tequila space. Our national distributor for spirits, R and D C, experienced several changes within the fiscal year. As we have, we maintain and are committed to working in major markets while also working with other distributors in California and additional markets.
Regarding our nonalcoholic beverage portfolio, Runner Assai, our new non-alcoholic beer brand, which we launched in fiscal 2025, is now recognized as the top 15 brand and ranked as the fourth fastest-growing nonalcoholic theater in the Southeast, now sold across 4,500 distribution points. In the fiscal year, within three months, Tilray launched hemp-derived THC beverage sales and expanded the distribution of those drinks to over 1,300 distribution points across 13 states, as well as through online and direct-to-consumer channels. Leveraging our established national beverage distribution network, which spans independent retailers, convenience stores, and package stores, including multistate retailers such as Total Wine and ABC.
We see this category evolving continuously and expect it to be a significant part of our growth in 2026. Unlike other newcomers to the sector, we have an edge with our established peer network. Looking ahead to 2026, we see strong opportunities and anticipate increased demand for beer. Beer is not going away. With continued consolidation in the craft beer industry and excess of smaller craft brewers, and consumer demand continuing, we see opportunities within this business where we have several new exciting innovations planned and are committed to driving Tilray's beverage growth under our new leadership.
Our Tilray wellness business delivered strong financial results in 2025, as consumers continue to seek out better-for-you functional foods and beverages made with clean ingredients. Tilray Wellness had the portfolio of products that meet their needs. Tilray Wellness net revenue was over $60 million in fiscal 2025, representing a 9% growth year over year and 11% growth on a constant currency basis. This growth was driven by continued expansion of our Manitoba Harvest hemp parts and alongside our new super seed innovation, including snacks, breakfast items, and smoothie blends. Tilray Wellness successfully relaunched High Vol Energy on Amazon and at retail at Whole Foods' launched Markets in the fiscal year and experienced a 68% growth.
High Vol Energy is a brand of functional better-for-you energy drinks known for being a premium alternative to traditional energy drinks. It's formulated with clean ingredients and has zero calories, zero sugar, no artificial sweetener, and is packed with vitamin B and tastes great. In addition to delivering strong top-line growth, Tilray Wellness expanded its margins to 32% in fiscal 2025, up from 30% in 2024, driven by favorable sales mix and productivity savings generated in our manufacturing facilities. Tilray will look to expand its wellness segment in fiscal 2026, both in wellness and functional foods and beverages.
We'll continue to diversify and expand the Manitoba Harvest portfolio in the North American area and better-for-you in high-protein categories, beginning to bring the brand into new international markets. We see the success of Highball as a validation that Tilray Wellness has the right infrastructure and experience to build and acquire a more broad-based wellness beverage portfolio. In terms of our management team, we have strengthened our leadership by appointing Rajnish Ohri as a Managing Director of International. Based in London and Dubai, Rajnish will drive growth across international markets in medical cannabis, beverages, and wellness. In regions like Asia, the Middle East, India, and Turkey, we will focus on strategic opportunities in nonalcoholic beer and hemp-based food products.
I am confident that with Rajnish's leadership and deep industry experience, Tilray is strongly positioned to accelerate our international growth and capitalize on emerging opportunities. His innovative mindset and strategic approach perfectly align with our vision for global expansion. I look forward to working closely with Rajnish. I'll close this with fiscal 2025 as a big year for Tilray across the board. It would not have been possible without the tireless work and dedication of our employees around the world, and I want to thank each and every one of you. We've built a unique business at the forefront of the beverage, cannabis, and wellness industries on a global scale. And guess what? We're just getting started.
With that, I will now turn the call over to Carl to discuss our financials in greater detail. Carl, are you ready?
Carl Merton: Thank you, Irwin. Please note that we present our financials in accordance with US GAAP and in US Dollars. Throughout our discussion, we will be referring to both GAAP and non-GAAP adjusted results, and we encourage you to review the reconciliation contained within our press release of our reported results under GAAP with the corresponding non-GAAP measures. Focusing on our fiscal year results first, net revenue for fiscal 2025 grew by 4%, reaching a record $821.3 million or $833.7 million on a constant currency basis. This growth was primarily driven by a 71% increase in international revenue during the fourth quarter.
While this figure represents an improvement over the prior year's $788.9 million, it is below the lower end of our revised guidance of $850 million. This was mainly due to reduced beverage volumes and delayed export permits, which led to lower than expected international revenue in the fourth quarter. Typically, our beverage business sees its highest revenue in Q4, but this year's results did not meet expectations. As Irwin mentioned, we took corrective actions to improve future performance in our beverage business. In response to challenging and evolving market conditions, we took decisive action. Our results reflect an approximate $35 million revenue impact from deliberate strategic decisions.
This includes a $15 million reduction in cannabis revenue due to our decision to scale back in the vape and infused pre-roll categories, which at the time were margin dilutive. Additionally, there was a $20 million impact associated with our beer SKU rationalization initiative aimed at enhancing the long-term performance of our beverage portfolio. Had these actions not been taken, and excluding the effects of currency fluctuations, our revenue would have been approximately $870 million for the year. These were necessary steps to position the business for sustainable, profitable growth.
Although international cannabis saw strong Q4 growth, cannabis net revenue decreased 9% year over year, largely due to our focus on maintaining and growing gross margin and a higher average selling price. Specifically, in Canada, vapes and infused pre-rolls experienced a high degree of price compression, which led to a $15 million reduction in our revenue as we instead focused on maintaining and growing margin. Additionally, we redirected inventories to cannabis markets to capitalize on higher margins abroad, only to have a portion of those inventories trapped due to unexpected regulatory challenges in obtaining export permits.
The resulting impact of this strategic decision caused a temporary decline in gross adult-use cannabis revenue, international cannabis revenue, and cannabis revenue overall until their eventual sale. It should be noted that we have expanded our cultivation footprint for fiscal 2026 to be able to satisfy the growing demand in both Canadian and international cannabis markets in the coming year. Beverage revenue increased 19% year over year, primarily driven by acquisitions. The increase in sales from acquisitions was offset by the SKU rationalization implemented in connection with Project 420, which resulted in a reduction of revenue of $20 million for the year ended May 31, 2025, and an overall softness in consumer demand for craft beer.
Wellness net revenue increased 9% for the year. The increase in revenue was primarily attributable to our strategic focus on continued innovations, including the relaunch of High Vol Energy and organic growth within our branded hemp food business related to higher consumption. Distribution net revenue increased 5%, primarily as a result of a change in product mix. From a revenue contribution perspective, 30% of our net revenue was generated by our cannabis business, 29% was generated by our beverage business, 8% by our wellness business, and 33% by our distribution business. This compares to 35% in cannabis, 25% in beverage, 7% in wellness, and 33% in distribution last fiscal year.
We expect to see continued growth in contribution from our higher-margin segments in future periods. Gross profit for fiscal 2025 increased 8% to $240.6 million compared to the prior year at $223.4 million, also representing our highest level ever. Gross margin increased 100 basis points to 29% from 28% in the prior year.
Turning to our gross margin by segment, cannabis gross margin increased to 40% from 33% in the prior year, which was driven by our increased international cannabis revenue as a proportion of total cannabis revenue given its higher margin, as well as a continued focus on maintaining a higher average selling price and favorable product mix to improve gross margins in Canada, despite lower sales in the Canadian adult-use market. Beverage gross margin was 39% compared to 44% in the prior year.
The decrease in gross margin is primarily a result of the decrease in demand in the fourth quarter and its resultant impact on overhead absorption, as well as the lower margin contribution from our recently acquired brands from Molson Coors. Wellness gross margin increased to 32% from 30% in the prior year. This increase was driven by strong operational efficiencies, lower input costs, and the culmination of a change in sales mix towards higher-margin product offerings, including High Vol energy drinks. Distribution gross margin remained steady at 11%, consistent with the prior year, despite shortages in key pharmaceutical product lines in the third quarter as well as price reductions.
Net loss for fiscal 2025 increased to $2.2 billion or $2.46 per share compared to a loss of approximately $220 million in the prior year or $0.33 per share. From an adjusted perspective, we are reporting adjusted net income of $9 million or 1¢ per share compared to $6.2 million or 1¢ per share in the prior year, an approximate 45% increase. Our net loss was principally driven by non-cash impairment charges of approximately $2 billion in the fiscal year, comprised of almost $700 million in the third quarter and almost $1.4 billion in the fourth quarter.
The non-cash impairment charges during the fourth quarter include $661.3 million of depreciable intangibles, $186.6 million of indefinite-lived intangibles, and $549 million of goodwill. Our consecutive non-cash impairment charges are the result of a combination of factors, including a sustained decline in the company's market capitalization from February 28 to May 31, stemming from the uncertainty around certain changes in US global economic policy, slower-than-anticipated progress in global cannabis regulatory change, and a change in the non-discretionary inputs in the company's discount rate in the latest quarter. The impairments represent numerical calculations based solely on accounting rules related to impairment calculations and do not reflect our views on our business.
We continue to have full confidence in the intrinsic value of these assets, and these non-cash charges do not reflect any change in our long-term strategy for the business. Further, approximately $1.1 billion of the $1.4 billion impairment relates to intangible assets acquired as part of the Tilray business combination in 2021. Under US GAAP accounting rules, the over 50% increase in the value of Aphria shares from the date of announcement of the transaction until the transaction close became part of the accounting purchase price, even though both companies had made the decision to transact at the consideration to be given on the date of announcement.
We believe that increase was caused almost entirely by temporary increased expectation of cannabis legalization in the US as a result of the blue wave in the US Senate by-elections in January 2021. This run-up in our stock price created a purchase price of $3.2 billion or an almost $1.1 billion increase in the purchase price versus if the transaction had occurred on the date of announcement. After recording the impacts of the impairment, we anticipate that our net income will improve by approximately $70 million next year as a result of no longer recording amortization on the impaired intangibles. Adjusted EBITDA for fiscal 2025 was $55 million compared to $60.5 million in the prior year.
For the year ended May 31, 2025, our SKU and geographic rationalization resulted in a reduction in net sales of approximately $20 million and an adjusted EBITDA impact of $6 million. We believe this temporary reduction will be offset by the growth of our new product innovation, including new beverage categories and future brand extensions. Cash flow used in operations in fiscal 2025 was $94.6 million compared to $30.9 million in the prior year. Adjusted free cash flow was negative $114.2 million as compared with $6.6 million in the prior year period.
The $114.2 million includes approximately $63 million of working capital increases, $20 million in CapEx net of growth CapEx, and approximately $31 million of cash losses from operating the businesses. The cash losses from operating the businesses primarily relate to non-recurring restructuring, litigation, and transaction costs, as well as the investments in the beverage business as we rebuild the craft brands purchased from ABI and Molson Coors. The CapEx spends include approximately $7 million on sports sponsorships, reflecting the full multiyear cost of the license agreements, and $6 million in CapEx in the Breckenridge segment as we invested in infrastructure at key facilities to increase production.
The working capital increase relates to increases in accounts receivable late in the year in our International Cannabis and Beverage segments, increases in inventory related to the trapped permit inventory in Portugal, inventory in the wellness segment to manage tariff risks, and to reflect the increased demand on certain products, including High Vol. Over the past fiscal year, we reduced our convertible debt by $67.8 million and reduced it by a further $5 million shortly after year-end. Our intention is to continue lowering our indebtedness, optimize our capital structure, and enhance our financial flexibility.
The net reduction in our convertible debt will decrease our annual interest expense by over $4 million, which flows directly to net income and free cash flow. Switching to our quarterly performance, Q4 total net revenue was $224.5 million compared to $229.9 million in the prior year quarter, with the softness in the beer business offsetting a 71% increase year over year in international cannabis revenue. In Q4, net cannabis revenue was $67.8 million, net beverage revenue was $65.6 million but would have been over $71.6 million if we had not made the strategic decisions previously discussed. Wellness revenue increased to $17 million, and finally, distribution revenue increased to $74.1 million.
Gross profit was $67.6 million compared to $82.4 million in the prior year quarter. Gross margin was 30%, compared to 36% in the prior year quarter. Most of the variance was related to the decreased demand in the beverage revenue in the quarter, impacting overhead absorption combined with investments in the acquired brands. As I previously mentioned, in the fourth quarter, we reported a $1.4 billion non-cash impairment related to the decrease in our share price at May 31. A perception of the reduced likelihood of US and/or cannabis regulatory changes in the short term and an increase in the non-discretionary inputs in our discount rates utilized in the accounting exercise that is impairment.
As a result of this non-cash impairment, we're reporting a net loss of $1.3 billion compared to a net loss of $15.4 million in the prior year quarter. On a per-share basis, this amounted to a net loss of $1.3 per share, compared to $0.4 per share in the prior year quarter. The non-cash impairment charge had no impact on the company's tangible assets, compliance with debt covenants, its cash flows, or available liquidity. Adjusted net income was $20.2 million compared to $35.1 million in the prior year period. On a per-share basis, this resulted in an adjusted EPS of $0.02 as compared to $0.04 in the prior year period.
Adjusted EBITDA was $27.6 million compared to $29.5 million in the prior year quarter. Again, the decline in adjusted EBITDA is a result of our SKU and geographic rationalization efforts. Operating cash flow was negative $12.8 million compared to $30.7 million in the prior year quarter. The decrease in operating cash flow was primarily a function of investments in our beverage segment, combined with investments in working capital associated with demand for our products. Adjusted free cash flow was negative $12.9 million compared to $30.6 million in the prior year quarter, consistent with the changes in operating cash flow.
Moving to our four business segments, gross cannabis revenue of $89.2 million was comprised of $58.4 million in Canadian adult-use revenue, up from $49.3 million in Q3, $22.4 million in international cannabis revenue, up from $13.9 million in Q3 or 60%, $6.2 million in Canadian medical cannabis revenue, and $2.2 million in wholesale revenue. Net cannabis revenue, which excludes $21.4 million in excise taxes, was $67.8 million, down from $71.9 million in the prior year quarter. Again, we want to highlight that international revenues would have been even higher if not for delays in export permits. The year-over-year decline in cannabis revenue was primarily driven by focusing on margin accretive SKUs, which resulted in a temporary drag on revenue.
As mentioned, we paused vape and infused pre-roll categories to focus on improving profitability but are expecting to be able to participate more in this growing category in fiscal year '26, given the improvements in our cost structure. As a result of our efforts, cannabis gross profit increased to $29.6 million, and cannabis gross margin increased to 44%, compared to $28.8 million and 40% in the prior year quarter. Beverage revenue was $65.6 million compared to $76.7 million in the prior year quarter. Beverage gross profit was $25 million compared to $40.8 million. This underperformance was principally due to unusually weak consumer demand in the fourth quarter. The fourth quarter is typically our highest revenue quarter.
However, this year, it did not meet our expectations. While our fourth quarter revenue in beverage did not meet our expectations, our late Q4 launch of new innovations has been stronger than the prior year. Innovation PODs are up over 14% from the prior year. Revenue from innovation is up 50%. And velocity is up over 30%. More specifically, when compared to last year's lead innovation in the Southeast, which was gummies, this year's innovation, Sweetwater Daytrip IPA, is the number one new craft brand in the Southeast, and the number seven new craft brand in all of the US despite only being available in eight states.
Further, we are extremely encouraged by the orders of Breckenridge's new innovation, Mountain Shot, an occasion-centric bourbon and malt-based shot with its own unique packaging. Wellness revenue grew 9% to $17 million from $15.7 million in the prior year quarter. The increase was driven by our strategic focus on targeted advertising campaigns aligned with emerging trends in favor of healthier lifestyles, coupled with our continuous innovation efforts. Wellness gross profit increased to $5.6 million, up from $4.9 million in the prior year quarter, and gross margin rose to 33%, compared to 31%. Distribution revenue, derived predominantly through Tilray Pharma, increased to $74.1 million from $65.6 million in the prior year quarter.
Distribution gross profit was $7.4 million compared to $7.8 million in the prior year quarter, and distribution gross margin was 10%, compared to 12% in the prior year quarter. Our cash and marketable securities balance as of May 31 was $256 million. During the year and through to today, we continue to strengthen our balance sheet, net repaying $22.9 million in our long-term debt and bank indebtedness, and repurchasing $67.8 million in outstanding convertible notes.
After taking into consideration these actions, we reduced our net debt position to approximately $19 million, which, when combined with our trailing twelve months adjusted EBITDA, puts our net debt to adjusted EBITDA leverage ratio at approximately 0.3 times, and should lead to approximately $4.2 million in net interest expense savings next fiscal year. Fiscal year 2025 was a year marked by the strengthening in both Canadian and international cannabis businesses, the continued steady improvement of our wellness business, and headwinds in the beverage business, with the latter a key area of focus under new leadership. Across each of our businesses, we employed a relentless focus on our strategy.
We increased gross profit in each of our businesses year over year, and increased total margin by 100 basis points, albeit with beverages increase tied to acquisitions. As Irwin mentioned, there is a significant opportunity for Tilray in the international market, and the work that we are doing now to improve profitability and streamline our operations will position us well to capture the global opportunity. Finally, we are pleased to provide the following guidance for fiscal 2026. We anticipate adjusted EBITDA between $62 million and $72 million. Let me now conclude our prepared remarks and open the lines for questions.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. One moment please while we poll for questions. Our first question is from Kaumil Gajrawala with Jefferies. Hey, guys. Good evening.
Kaumil Gajrawala: I guess a couple of questions. First, on the timing of the importing rights and some of the delays. Where are we now? Do you have a line of sight on when they come through, and sort of what contribution they're gonna make?
Irwin Simon: So, absolutely, we have a line of sight. And, you know, there were some issues from a legal standpoint in Portugal, and, you know, I'm in the midst of working with the Portuguese government and our legal people there to get meetings. But right now, we're seeing that lightening up, and we're able to start shipping product. The other issue we had was in Spain, in regards to shipping some of our products to Spain and getting permits. So I feel good about that. I feel we'll see the pickup within our first and second quarter. So I feel good. You know, that's mostly behind us now.
But, you know, for the fourth quarter, there was approximately $8 plus million that we just could not get permits for. And when we ship product out of Portugal, we need a Portuguese permit to ship it. And we weren't getting it. But the government is now working with us both in Portugal and Spain, and we see that primarily behind us. Denise, Rajnish Ohri? Yes. Yep.
Kaumil Gajrawala: Okay. Great. And then you mentioned Canada sort of hitting equilibrium, maybe price pressure is starting to abate. Can you just give us some more color on exactly what you're seeing and maybe how you expect it to play out over the course of the year?
Irwin Simon: Well, I think a couple of things happen in Canada. Number one, it's six years into legalization. And I think there are more and more retail stores opening up. I think the consumer now is skewed to going to Canada stores and not buying from the illicit market. And some of the great innovation that's coming out, before it was predominantly flower, where 80% of the market was flower. Now, whether it's pre-rolls and infused pre-rolls, vapes, drinks, and edibles, I also see there's consolidation at retail, more and more stores. The Quebec market is controlled by the government there, has about 110 stores today, more and more stores will open up in Quebec.
So with that, I'm really seeing the market, you're seeing consumers now enjoying more and more cannabis products. You see it cannibalizing some of the beer and the spirits industry up there. Also, originally, there were probably between 1,800 to 2,000 licenses that were given out. You're seeing either consolidation or some of these licenses just folding up. So, you know, you saw my prepared remarks. I see there's some light potentially to lightening up on some of these excise taxes. I see a national stamp, which means you don't have from shipping to each product.
Carl Merton: A province.
Irwin Simon: I see potentially drinks sold not only in cannabis stores, potentially in restaurants and maybe on-premise. And I also see the potential, whether it's CBD products or other products, sold within drugstores. So I'm really seeing a change in the whole regulatory piece in regards to cannabis in Canada. And, you know, after five, six years, it's something that I'm excited to see. Because as you've heard me complain about, you know, in the Canadian market, we pay over $135 plus million just in excise tax. And as price compression happened, and over the five years, we've probably price compression probably cost us about $250 plus million.
So I'm seeing that, and that's why we're taking our grow up from 130 metric tons up to 150 metric tons because of demand. And the team has done a great job in regards to some of the innovation that's coming.
Kaumil Gajrawala: Got it. Thank you.
Operator: Our next question is from Robert Moskow with TD Securities. This is Victor on for Rob. And thanks for taking the question. So a couple of things. The growth in international Q4 was nice to see. But, you know, how should we view the growth next year, understanding that the timing is kind of lumpy, you know, around timing and shipments? And did I hear you correctly that you said $6 million in sales was from trapped shipments in Portugal? So that should be recognized as one key. Right?
Irwin Simon: So it's $8 million, not $6. And it was trapped shipments. And you should see that predominantly in Q1, and also, we'll start to see maybe there's a little in Q2. But, you know, we see tremendous just like I've talked about the Canadian market, as the market continues to evolve and change, and the demand for medical cannabis, you know, in Germany, you saw our growth there. But, you know, in regards to Poland, the UK, the Czech Republic just now announced, you know, Turkey, you know, we're working on some stuff, you know, in India. We think there's some strong opportunities back in Australia, and we're looking at some things in New Zealand. So Italy.
And Italy, we just as we, you know, three licenses or three different Copa bars. Copa Bars That We Just Got In Italy. You know? And, again, as you go back and look, Tilray, from a share standpoint, you know, our 5, 6% share of the market was a smaller share. We provide it. You know, a lot of other companies with products. So we see some big, big opportunities. I will tell you without giving guidance, some pretty big numbers built into our plans for Europe for next year for us. And, you know, that we haven't even ultimately and that is just based on flour.
You know, there's stuff we're doing to see if we could sell pre-rolls there. In regards from the medical standpoint. You gotta remember, everything's sold in Europe. Has to be prescribed by doctors. And it's sold from a medical standpoint. So we have some pretty big plans of how to get to, you know, a good growth number. And the great thing about Europe is we're not paying anywhere near the excise tax. You see what our margins are in our European markets.
Victor: Okay. No. That's helpful. And then just to follow-up, I noticed that you mentioned that the cost savings initiative Project 420 is expected to be completed by fiscal 3Q 26. Can you walk through just some of the different things still need to be done for that program?
Irwin Simon: So number one, you know, we started off with 10, you know, manufacturing facilities. We're now down to seven. So as we consolidate manufacturing facilities, as we consolidate warehouses, we went through a SKU rationalization where we took $20 million of SKUs out and hit us by $6 million in EBITDA, we didn't see the benefits from it. As we looked at replacing them with faster-moving SKUs and some new SKUs. We're also going through some distributor consolidation. We have eight, 900 distributors out there. And from a standpoint of freight, as we brought organizations together, whether it was from the original Molson's organization or the ABI organization, in regards to one Salesforce and marketing force.
We also, as we look at our 18 brewpubs that are out there, how we can make them more efficient from a labor standpoint. We also consolidate procurement agreements, you know, with Cisco in buying our food. So there's multiple things we've put in place. We've really looked at our inventories. We really looked at buying our hops. So there's numerous costs that we've taken out of here. The other thing is, you know, as you heard me say before, talked about timing as we did these acquisitions in regards to the categories being set in May and June as we were in front of the buyers, we lost, you know, distribution. We lost space.
And now that we're in front of these buyers, you know, we're getting a lot of that back. We also did not have the growth and the emphasis could be on convenience stores where convenience stores is one of the biggest sellers of beer out there. So it's, you know, last year was a lot of resets, a lot of things happened. But there's some great plans in place of how to get a lot of this volume back. How to take a lot of cost out of this business. Don't forget, we've been doing this since 2020 in the beer industry. Now we're the fourth-largest craft brewer.
And similar, there's a lot of the smaller craft brewers that have gone to the business. There's a lot of opportunities, and consumers are looking for new unique, you know, beer products out there, whether it's the non-alcoholic, whether it's the light beers. Whether it's some of the flavored stuff we're doing, whether some of the stuff we look to do with protein. So we're pretty excited about our beer business. You know, you heard me talk about consolidating distributor networks. We have a Molson distributor network. We have an ABI distributor network. So we have to look at some things there.
Victor: Got it. Thanks for the color.
Operator: Thank you. Our next question is from Aaron Grey with Alliance Global Partners.
Aaron Grey: Good evening. Thank you for the questions. So first, for the 2026 EBITDA guide, could you maybe offer some color in terms of, you know, how best to think about some of the key drivers there, you know, even if not specific? You know, how much of that's gonna be driven by, you know, sales growth and some SG&A leverage? Gross margin expansion versus cost cuts? And then, also, if it's fair to think about the seasonality to be similar to what we've seen in past years in terms of being somewhat similar with a strong Q4? Thank you.
Carl Merton: So in terms of seasonality, yes, you're gonna we continue to expect to see a stronger Q4 than Q1, Q2, and Q3. Primarily related to the seasonality of our beverages, but also a little bit of seasonality inside of the cannabis business. With respect to the increases in the guide, you know, I think, you know, bigger portions of it are expected from our international business. We see some improvements happening inside of our Canadian business. And beverage as well along with wellness. You know, wellness, I think you're gonna see that driven by some of the new categories and new innovations that they're getting into.
On the beverage side, you're gonna see some of it related to revenue, but, you know, you're also gonna see pieces related to Project 420, the cost savings. Flow through. Remember, a lot of those savings were achieved in '25, but the cash flow impact of them takes longer to work its way through the income statement. You know? But I think this, you know, Carl, I'm sorry.
Irwin Simon: You know, we've done lots of acquisitions. And as we get close to that billion-dollar revenue, it's called scale. So number one, it's a much bigger company. There's more gross margin that will contribute. But just as you look at our businesses, as I said on their cannabis business, you know, we're starting to hit strides. And when you go, you know, from metric tons and the increase of metric tons of a growth, our costs are absolutely going to come down. As you come back with our beer businesses, as we put, you know, the multiple acquisitions together, from a scalable standpoint. And today, you know, we have, you know, close to a $250 million, you know, beverage business.
So I think what we've shown, and this year was a challenging year in our beverage beer business as we put ABI acquisition together, the Molson's acquisitions, and, you know, Sweetwater Montauk. But as we take costs out, as we get efficiencies, as we consolidate facilities. And the good news is 90% of our products today, maybe a little more, come from our own facility, so we control the growth. We can control the cost. You know, we're not necessarily affected by tariffs out there other than maybe buying cans. So, again, after five, six years, as maturation comes into place, I feel good about the top-line growth. We feel good about the top-line growth.
We feel good about the scalability. And one of the things we've always had to deal with is you build up this corporation from a public company standpoint, there's an infrastructure to put in place, whether it's insurance, whether it's public accounting, whether it's legal, that we have to fund. And as we have a bigger business, you know, we can support the overheads to make sure that we have the right processes in place to build, you know, Tilray beyond and then some. And, again, as a company today selling in 21 different countries around the world. Dealing with, you know, multiple currencies. So there's a lot within here, but it's all starting to come together.
Aaron Grey: That's really helpful color there. Thank you. Second quick one for me. I know you guys seem pretty constructive and optimistic on international growth opportunities, good to see that in the fourth quarter. But just if we could dive a little bit into Germany, talk a little bit maybe about the dynamics of supply-demand equilibrium where we are at and any potential impacts you might have on pricing there. I know there's been a lot of, you know, operators in Canada and otherwise kinda allocating more of the product to international markets like Germany because of the higher margin. So just wanna get some color on that.
And then any concerns there potentially with the new government in Germany potentially disrupting the current medical market there? Thank you.
Denise Faltischek: Yeah. Hi. It's Denise. Thanks for the question. So in terms of growth in Germany, what we see is, you know, Irwin talked about enhancing supply chain. So we've ramped up our volumes in Canton Yed, basically, increasing our production about two and a half times what it was in fiscal year 2025. We also have been sourcing from our Canadian facilities in our wind talk about the fact that we're increasing our supply chain there. And then as well, we have Aphria Rx, which is in-country, producing high-quality cannabis from cultivars that we've transferred from Canada. And one of the great things about Aphria Rx is it's already in Germany.
So supply chain and getting that right, having the right product in market. You talked about the price compression. Yes. We are seeing price compression, but that is why we are so focused on our cost. And one of the things we spent a lot of time in 2025, and this shows in our margins, is the fact that we have taken our costs down tremendously. And as Irwin mentioned, as we continuously ramp up, those costs will come down even further. So we're prepared for price compression. And you got to remember, we have built the international business almost from scratch. You know, we acquired the Tilray business. I think it was probably $10 million in size.
And, you know, required that during COVID and couldn't even get the visit. So, again, we're building out, you know, we have one of the largest growth facilities in Canton Yed. And now with the German facility. So we have access to growth. Back to your earlier question, is, you know, shipping product from Canada, which we can do, which is much, much higher. Margin, it's probably 10 times the contribution margin when it's coming from Canada. You know, to the international. So, again, you know, our hope and wish is more and more markets open up.
You know, I'd be excited to see, you know, India, which Rajnish is quite familiar with, you know, markets there opening, and there's some things we're seeing there. I'm excited about some stuff in Turkey. You know, The Czech Republic, I think Italy is gonna be a big market. I think the UK has some big opportunities. And then they continuously expand, you know, expand upon Poland and Germany. And just again with Europe, you know, we think there's tremendous opportunities for our, you know, our hemp business there, our high protein, and which we've talked about is going into The Middle East with our nonalcoholic drinks and Norwegian with our berries business.
So the infrastructure is there to do it, the growth facilities are there to do it, and the investment over the last four, five years is there. And, you know, we have quite a bit of the know-how of how to go about it.
Aaron Grey: That's helpful detail there. Appreciate that. I'll go and jump back in the queue.
Operator: Thank you. Our next question is from Pablo Zuanic with Zuanic and Associates.
Pablo Zuanic: Thank you. Good afternoon, everyone. Irwin, you made mention of rescheduling in the US with the new DEA head. Can you explain to us how would Tilray benefit directly from rescheduling given that you do not have US cannabis operations right now? Thank you.
Irwin Simon: So, you know, again, we could quickly enter that market with our medical business, Pablo. As you know, we sell quite a bit of medical cannabis in Canada, and we have a big, you know, international. So from a standpoint of that, we could ultimately do something from a medical cannabis. But from a rescheduling Pablo, I think the big thing is to get the uncertainty out of the way here. Okay? And from a rescheduling, it would allow institutional investors to come into the market. It would allow in regards to retail banking, you know, come into the market. So it's just not about the sales.
And, ultimately, does it open up the opportunity to sell our, you know, cannabis drinks or our beverage business, our hemp business. So, again, there's not a direct one that I could point to. But I'll tell you what. There's a lot of things that it would do for Tilray. Of rescheduling. If that happens within the US markets. And I think if one thing happens with rescheduling, I think there is a great possibility. Do they move to legalizing, you know, from a medical cannabis standpoint? And there's always would be the opportunities to buy something, you know, Pablo, if that happened. Because right now, we cannot do anything with cannabis in the US.
Pablo Zuanic: Right. No. That's good color. Thank you. Look. And just one on beverages. I guess the big picture question for me in beverages is how much is under your control, and how much is just the industry? Right? So we can make adjustments on a pro forma basis of what the decline might have been in the fourth quarter versus last year. But whatever the numbers are, there seem to be a steep decline. Right? And I'm trying to understand how much of that was, like, own goals versus, you know, just industry challenges? I mean, own goals you can fix. You have new leadership. Industry challenges are tougher. Right?
So I know if you can start to quantify, but if you can just walk us through that in a way.
Irwin Simon: So I would come back and say it was an industry from a craft beer industry. Industry. Is down four to 5%. I think you see, you know, from a craft business, there's a lot of small players out there, there's a lot of them going away. There's a lot of, you know, consolidation. So number one, there's still a big beer business out there. The craft beer business is a good size. And, you know, we're number four. So, you know, and we only got into this business in late 2020, and then you had two years of COVID.
In our in regards to our decline this year, you know, we're up and most of that is coming from acquisitions. But some of that was, you know, self-inflicted with just having, you know, us making some mistakes. Some of that was, as you heard me say, timing. In regards to authorizations and not getting, you know, the placements at supermarket. And some of that was just bringing all this organization together with acquisitions. And some of it was that's why there's leadership change. And that's why, you know, a lot of things happen in place. But again, I will say it. The beverage business as a whole is one of the biggest categories out there.
And what I aim Tilray to be is not just a beer business, it's a beverage business, and you see some of the valuations out there. In regards to what's happening with energy drinks. And High Vol is one example. You know, we acquired it with zero. And this year, the opportunity for growth. I think there is tremendous opportunity in the Delta nine business for us. I think there's opportunities in regards to the non-alcoholic industry for us, whether it's in the US, whether it's in other countries in The Middle East. And I think there's still lots of opportunities, you know, in the cocktail business and the seltzer drinks. And again, beer will not go away.
I think the opportunity is going to be as we'll take share away from some of the smaller craft beer businesses. And if you look at some of the craft beer businesses, Pablo, you know, pasta beer growth is not coming from their beer business. It's coming from their SunCruisers and some of their other drinks. So, you know, again, not a one-trick pony out there, and we're focused on the category in many different ways. But, you know, we're big into Delta nine. We're big into energy drinks. We're gonna be bigger into non-alcoholic. Gonna be bigger into seltzer drinks. We're gonna be bigger into lighter beers. And we'll stay within the craft beer industry.
The other thing is some of the unique stuff that we're coming out with in our spirits business. And some great different drinks that we're coming out with, some of the nonalcoholic drinks. So I think we got some good things, you know, set up within our industry, and it's gonna depend on leadership timing, innovation here. From a standpoint.
Pablo Zuanic: Thank you.
Irwin Simon: Thank you.
Operator: Our next question is from Frederico Gomes with ATB Capital Markets.
Frederico Gomes: Hi, good evening. Thanks for taking my questions. Question, just on the beverage and wellness expansion that you mentioned. International in Europe and Asia, could you talk more about that? Which categories are you most excited about in parts that potentially expansion? What could be the potential timing of that, and, you know, would that happen organically or through M&A?
Irwin Simon: So number one, timing is now. You know, Rajnish, who's sitting in this room with me, you know, who is based today in Dubai and London, knows that market well and has built, you know, businesses in those markets. So that is immediately that we're focused on that. We have a team that's focused on it immediately. We're talking to both manufacturers and distributors. If there is an acquisition, we would look at it. The other thing we're interested in talking to is, you know, with President Trump talking about all his tariffs, and you have a lot of import beers coming in and imports coming in from Europe.
You know, there's potentially we're talking to people today that wanna manufacture their products in the US, and we have capacity to do that on import products. And vice versa, as we look at, you know, potential acquisitions at bringing, whether it's Montauk, and some of our brands into the international market. So that is imminent right now. The other thing is we think, you know, everybody today is into protein. And it's all you hear about protein, protein, protein. And there's a lot of protein within hemp and our hemp food products and our seeds. So there's discussions in looking to bring that into, you know, into The Middle East. You know, rice is a big business.
You know, in India and The Middle East, and what are we doing in regards to, you know, supplementing the rice business with some of our hemp business. So that is a big, big focus for us, you know, as we speak.
Frederico Gomes: Perfect. Thank you. And then just second question on your cultivation expansion in Canada. How far along are you in ramping that and how should we think about, you know, where that product expansion is going to in terms of exports or staying in Canada? Thanks.
Irwin Simon: So some of it, I think it's, what, about two and a half to three metric tons will go internationally. And Blair's on the call on the phone here. But the majority of that will stay within Canada. And the interesting thing is, and you, you know, see, excuse me, you know, our revenue down on cannabis in Canada, and that was mostly us deciding not to sell wholesale. But the majority of that now is going into some of our, you know, new products, whether it's infused pre-rolls or pre-rolls, some of our oils, our vape products, but the majority of that is going in the Canadian market.
And that is expanding our, you know, outdoor grow in Cayuga, and that is expanding, you know, our Maison facility today, which is which we acquired from HEXO. So that's where that grow will come from. And I don't think anybody has anywhere near 5 million square feet within our grow facilities within the Canadian market. And there's, you know, continuously requests from us to buy cannabis from us because, you know, as oversupply happened in the Canadian market, a lot of these facilities have closed and have sold off. So there's demand for us to be a third-party supplier, but that's not what we're interested in.
We're interested in supplying our own facilities, and that's why we've had to increase our growth capabilities in the Canadian market.
Frederico Gomes: Thank you very much.
Operator: Thank you. Our next question is from Bill Kirk with ROTH Capital Partners. Yes. This is Nick on for Bill. Thanks for taking the questions. First one for me. Just wanted to expand on Germany and the potential changes coming over there. It looks like some of the proposed legislation could potentially inhibit the telemedicine opportunity. So I guess just a couple questions there. What do you expect to come of these proposals, and is there anything you can kinda do to prepare for a potentially different selling environment over there? Thank you.
Denise Faltischek: Hi. So in terms of there has been a proposed legislation, but this is simply a proposed legislation. What we at Tilray, we take very seriously is patient safety and, of course, looking at how do we continue to service our patients in the right way. And when we the legislation definitely was a bit of a surprise, and we're taking it very seriously along with our industry group. There's a long way between here and actually looking at what ultimately could be a change in legislation. And through our industry group, we're taking this very seriously. We are putting forward various proposals in terms of how to address it.
And when they talk about the removal of telemedicine and the mail order, we do have to remind government that, in fact, the MedCam GU rule was put in place because they wanted to look after patient safety, patient health, and provide accessibility to patients. And the current legislation accomplishes all of those things. And we believe that by pushing through changes in telemedicine and mail order, essentially, you're just gonna push the patient into the black market. And that is exactly what the German government doesn't want to do.
So we believe that there is plenty of room here and a path forward to negotiate and look at really what is the right thing for German patients and the right thing for industry. We also need to remind the government that many companies have invested very heavily in these new reforms that were put forth. And in essence, by kind of taking a step back, it would really persuade investors in other industries, not just medical cannabis, other industries. Well, why would I invest in Germany if I can't rely on basically legislation that moves forward? So we are very much, very much, very actively going after this.
And working with our government relations group to come out with the right outcome.
Irwin Simon: And I think, as Denise said, it's a long way away from anything being effective there. And it's something that was put out there. It's not anything that's a proposal. It's not any legislation, so it's a long way. Of anything happening. And I think, you know, everybody is out there doing something about it. And I and personally, I think, you know, government put it out there to test it. And I think there will be a lot of pushback on it. So, you know, I would not sit here and say, I don't worry about it. Absolutely. We'll be focused on it. But, you know, it's not something that's happened imminently.
Nick: No. That makes sense. I appreciate that color. Second one for me, just on the US landscape. We've seen discussions kind of picking up here into more news flow. From outside kind of the traditional echo chamber. My question is, you becoming kind of incrementally more bullish on the US reform opportunity, or are you still kind of in wait and see mode? Just how are you evaluating kind of the uptick in news flow US cannabis just over the last month so?
Irwin Simon: Listen. I think some, as I said before, I think, you know, President Trump is about, you know, how we enhance business and what can we do. And as they look, you know, right now, tariffs have sort of taken the time on all of this year. But, you know, the new appointment in regards to rescheduling, I think, is a good step in the right direction. I feel good that, you know, something will happen. But the big thing is, you know, Tilray is so well diversified. It will be a big, you know, lift for Tilray, and it does.
But if it doesn't, you know, we have a lot of, you know, opportunities out there, and we got a lot of things happening. But I think we're hearing more and more, you know, about changes coming in regards to regulatory of cannabis in the US. But I've been there before, so, you know,
Nick: Right.
Irwin Simon: I appreciate the color. But I think we're dealing with a different government today that's interested in business and interested, you know, how to bring more and more jobs and how to get rid of an illicit market.
Nick: Understood. Appreciate the color.
Irwin Simon: Thank you very much. I think that is our last question. So I wanna thank everybody for joining us on this, you know, last or second last, third last day of July. You know, we got a lot happening at Tilray. And as we brought this company together over the last five to six years, as you can see, we are a very well-diversified business. We have a strong balance sheet. We have over 40 brands. We have multiple beverage facilities. We have a distillery. We have within 5 million square feet of grow in Canada. We have two great grow facilities, you know, in Europe. We have great facilities that are producing our wellness products of Manitoba Harvest.
And with that, you know, it's interesting because what holds back our stock price today is very much focused on US legalization in the US. But looking at our growth in regards to being close to a billion dollars, yes. If US cannabis was legalized, you know, as I looked at it four years ago, I expected it to happen and I thought we'd be a lot different. As I've always come back and said, if I could sell cannabis drinks throughout the US today, the sales opportunity that would be. If I could sell drinks in Canada, just in restaurants, the opportunities that would be.
If I could sell medical cannabis in a legalized market in Canada, how big that would be if I could sell, you know, pre-rolls from a medical standpoint in Europe where that would be. We're new within the beer business. And the opportunities there. You know, the spirits business, there will be more consolidation. You've seen some of the things with the bigger spirits companies. And in regards to international and imports, I think there's an opportunity for Tilray to play a role in that.
And I think with our balance sheet, how strong it is, and our free cash flow, I think there's continuous opportunities for us in regards to future acquisitions, and that's something that we will be focused on. And last but not least, geographic expansion. I've been part of growth, you know, in The Middle East. I've been part of growth in India, been part of growth in Europe. And with Rajnish joining the team and rounding that out, and us opening an office in London, and looking to grow in The Middle East, we're well-positioned. Last but not least, we have a team in place that over the last years has been here building that.
And I must tell you, I'm very lucky to get to work with my team, and I wanna thank each and every one for what they contribute. So, you know, I'm glad fiscal 2025 is behind us. It was not one of our easiest years. But there's no years out there that are easy. I think we have a lot of good strategic plans, and we just went through our board meetings and strategic plans for 2026 and a recap of 2025, and I must say, I'm excited about some of the things in front of us. And I will tell you, there'll be some of the great things that'll happen. There will be some challenges.
I never want us to be flatlined because that's not a good place in life to ever be is to be a flatliner place. And I expect growth on the top line, expect growth on the margin, expect growth in EBITDA, and I expect, you know, free cash flows coming from our businesses to offset that. So enjoy the rest of your summer. Be safe out there. On a nice warm day like this here, it's great to enjoy a great cold beer. Thank you very much.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.