Prepared remarks
Thank you for joining today's conference call to discuss Tilray Brands' financial results for the second quarter of fiscal year 2026, which ended on November 30, 2025. Now I'll turn the call over to Ms. Berrin Noorata, Tilray Brands' Chief Corporate Affairs and Communications Officer. Thank you. You may begin.
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 second quarter of fiscal year 2026. And now I'd like to turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon.
Thank you very much, Berrin, and good afternoon, everyone, and happy new year. Thank you so much for joining us today. We delivered a strong second quarter marked by record results and a beat against analyst expectations in the face of strong headwinds. We recorded our highest-ever Q2 net revenue of $218 million, achieved an adjusted EBITDA of $8.4 million, and reported a reverse stock split with adjusted EPS loss of $0.02, all while generating an adjusted cash operating income of $6 million. More importantly, the quality of our performance continues to improve. Highlights this quarter include a 51% sequential growth in international cannabis revenue and a meaningful year-over-year improvement in both net income and free cash flow. We also continue to strengthen our balance sheet. We ended the quarter with approximately $292 million in cash and marketable securities and reduced our debt by approximately $4 million during Q2, leading to a strong net cash position exceeding our debt by almost $30 million. In a rapidly evolving global cannabis regulatory environment, particularly in the U.S., our liquidity and balance sheet strength remain a clear strategic advantage. Today, Tilray operates more than 40 brands in more than 20 countries. We are a global leader in cannabis trusted by patients, healthcare professionals, and regulators worldwide. We are the #1 cannabis producer in Canada by revenue, the fourth largest craft beer brewer in the United States, and a market leader in branded hemp wellness products across North America, where our high-protein hemp food portfolio holds a nearly 60% market share. Our Q2 results reinforce the momentum we discussed last quarter, improving fundamentals, sharper execution, and increasing leverage from our diversified global platform across cannabis, beverage, and wellness. Let's turn to our cannabis business, which is strategically positioned for its next phase of growth. While global cannabis markets continue to evolve, we believe the industry remains early in its long-term development cycle. The decision by President Trump to federally reschedule cannabis in the U.S. represents one of the most consequential regulatory shifts that the industry has seen in decades. Thank you, President Trump, if you're listening today. This is a moment Tilray has been preparing for methodically for years. And guess what? We are ready to go. We believe that cannabis rescheduling to Schedule III will lead the U.S. towards a federally compliant medical cannabis framework consistent with our other developed international markets. Tilray is positioned to act immediately. We already have the platform, regulatory experience, operating capabilities, and leadership team in place with Tilray Medical U.S. to execute responsibly and to scale. Globally, Tilray Medical is expected to generate approximately $150 million in revenue on an annual run rate. We offer over 200 medical cannabis products, serving more than 500,000 registered patients worldwide. We have participated in more than 25 medical cannabis studies and clinical trials conducted in the U.S., Canada, Australia, Argentina, and across Europe with leading hospitals and physicians addressing conditions such as pediatric epilepsy, cancer-related nausea, PTSD, chronic pain, anxiety, essential tremors, alcohol use disorders, glioblastomas, cannabinoid impairment, and driving performance. These initiatives reinforce Tilray's reputation as a science-driven, evidence-based medical cannabis company and underscore the trust placed in us by healthcare professionals, patients, and regulators globally. We also possess one of the largest banks of cannabis genetics, which we intend to study in order to support research on the endocannabinoid system and advance medical cannabis science further. Now let's turn to Q2 cannabis performance. Global cannabis revenue increased to $68 million, our high-margin international cannabis business led the growth, increasing 36% year-over-year and substantially to $20 million, marking one of our strongest international quarters to date, and we fully expect this momentum to continue as we expand our global footprint. This performance is particularly notable given ongoing permit challenges, regulatory transitions in Portugal and Germany, and continued price compression, especially in flower. I'd like to acknowledge and thank the international team for their focused execution under these circumstances. I also want to recognize our Canadian cannabis team for their expertise, support, and supply contribution. Additionally, I appreciate the cooperation of Infarmed and the Portuguese regulators for facilitating improvements to permitting approval timelines. Looking ahead, Europe, particularly Germany, the U.K., and Poland, represents a significant growth opportunity for us. Execution will be driven by operational disciplines, including process improvement, automation, cross-functional coordination, and increased utilization at our cultivation facilities in Portugal and Germany, utilizing our Canadian facilities. Tilray operates one of the largest cannabis footprints in Europe which we're continuing to expand, and our advantage lies in scale, speed to market, data-driven decision-making, and experience gained from our Canadian operation. Moving on to Tilray Pharma and our distribution business. As discussed last quarter, we're expanding our pharmacy reach in Germany, utilizing Tilray's Pharma expansive pharmacy network and salespeople, and expect to triple our medical cannabis distribution footprint in fiscal 2026. We remain on track to achieve these objectives. In terms of Q2 performance, revenue grew by 26% year-over-year and 15% sequentially to $85 million, making it our biggest quarter ever, while improving our gross margins. The increase in distribution revenue in the period was driven by competitive pricing, portfolio optimization, and increased focus on medical device sales. Looking ahead, Tilray Pharma is laser-focused on enhancing operational efficiency to support its commercial expansion into 3,000 additional pharmacies through strategic partnerships. As medical cannabis continues to expand globally, Tilray Pharma is positioned to play a significant role in our overall growth, utilizing insights gained through integrating our medical operations. Tilray Pharma aims to strengthen its business value and create new growth opportunities within both the European medical market and the U.S. International markets remain one of Tilray's most compelling long-term growth drivers as we expect market opportunities, revenue, and profitability are set to grow. In Canada, our cannabis business continues to reinforce its leadership position. During Q2, our adult-use medical sales channel, net of excise tax, grew to $46 million with recreational cannabis growing 6% in the quarter. Tilray continues to hold a leading market position in dried flower, non-infused pre-rolls, beverages, oils, and chocolate edibles. Our disciplined approach to product mix, margin management, and premium pricing has supported our strategic reentry into the high-growth segments such as vapes and infused pre-rolls, focusing on accretive margins. In Q2, we advanced our innovation pipeline with the launch of Redecan Amped Live Resin Liquid Diamond vapes, addressing consumers' demand for the full spectrum of cannabinoids and strain-specific terpenes that deliver an authentic plant profile. This product combines 80% of live resin with 20% of liquid diamonds, maximizing potency while maintaining natural flavor integrity. In addition, we entered the Quebec market with vapes under the Good Supply brand, rapidly achieving top 3 SKU positions in the province while underscoring effective execution and strong consumer uptake. Operationally, we hit our highest quarterly volume in 2 years with over 5.5 million units shipped in Canada in Q2. We also completed our first harvest from our restarted outdoor cannabis grow in Cayuga, Ontario, exceeding expectations on the THC content. With this extra biomass, our cannabis cultivation capacity rises to 200 metric tons annually, but this boost not only allows us to provide high-quality products at reduced costs and improve our profit margin but also helps us expand into fast-growing markets, supplying both Canadian and international customers, including those in Europe to meet increasing global demand. The positive momentum of the past two quarters reflects the trajectory of our Canadian cannabis business. With the right product mix and healthy margins, we're well positioned to elevate this business in the second half of 2026 and beyond. With the reschedule of cannabis in the U.S., now is the time for Canada to modernize its regulation and secure its position as a global cannabis leader, including excise tax reform, marketing flexibility, healthcare integration, and on-premise consumption. Without modernization, Canada risks becoming an exporter of raw products while value creation, intellectual property, and long-term economic growth move elsewhere. As global policy accelerates, the choice is clear: modernize Canada's cannabis regulation to support economic competitiveness, consumer education, sustainable growth, or risk being left behind in an industry that Canada helped to create. Prime Minister Carney, I hope you're listening to this call; the Canadian cannabis industry has generated a significant amount of jobs and contributed billions of dollars in tax revenues to both federal and provincial governments. However, the lack of regulatory reform is resulting in Canadian producers redirecting their investments and attention toward international markets where excise tax can be circumvented. Given the declining spirits industry in Canada, the excise tax should be reduced, cannabis drinks should be permitted in liquor stores and on-premise locations, and medical cannabis sales in drug stores with a lower excise tax burden while boosting overall tax revenues as the industry grows. Turning to our beverage business in Q2, beverage revenue totaled $50 million. We continue to make progress executing our integration and optimization strategy. We delivered $27 million in annualized cost savings in the first half of the year and remain on track towards our $33 million target. We're making meaningful progress in improving performance; however, there is more to be done as we continue to integrate our brands, streamline operations, and optimize processes. We acquired brands with the understanding that significant improvements and comprehensive turnaround would be necessary, a process that is currently underway through our integration plan. We recognize this transformation will take time, and while we have not achieved all our objectives, we are on track and encouraged by the positive momentum gained so far. We look forward to the upcoming spring product resets with our retail partners and the introduction of some of the new innovations in the market. These changes are anticipated to have a positive impact on revenue in the fourth quarter. Our outlook may seem bullish, but conviction is essential for success, which remains our primary focus: revitalizing the craft beer category, making beer fun again, bringing people together, fostering meaningful connections, and generating long-term value for our shareholders. We've established brands, breweries, and a major distribution system. Tilray is here to stay and not going anywhere. Tilray aims to expand its regional, national, and global presence through strategic partnerships with leading U.S. and international brands. We expect to share more about this in the future, but we believe these partnerships validate the strength of our platform and our strategic vision. This approach also positions us for future opportunities, should cannabis THC drinks become federally legal in the U.S. We're ready to produce and sell as we're currently operating a leading THC beverage operation across Canada with over 45% of the THC beverage market share. Regarding our U.S. hemp-derived THC business, we continue to offer Fizzy Jane's and Happy Flower hemp-derived THC beverages with 5-milligram and 10-milligram formats through nationwide retailer partnerships. Distribution includes, nature wine, liquor, and grocery outlets across the country. While regulatory changes may affect HDD9 products after 2026, we anticipate compliant participation under new federal laws, if it happens. We're also pursuing international growth by expanding our beverage business into new markets worldwide, and we expect to leverage our future strategic partnerships. Our strategy for beverage abroad is evolving with an emphasis on craft beer and nonalcoholic drinks, including energy beverages that meet the demands of consumers in this expanding sector, where brands such as HiBall, our clean energy drink, and Liquid Love, our sparkling water brand. HiBall is set to launch in the U.K. in Q4, with expansion plans also underway for the Middle East and Africa. Beyond nonalcoholic beverages and the energy drinks, we continue to explore opportunities to build on our global craft beer segment. Tilray recently participated in the American Craft Beer Expo in Japan and gained valuable insights which the team will pursue in the future. Rounding out our beverage strategy, we're also focused on expanding our nonalcoholic beverages in the U.S. and across international markets. Our recent innovations, including non-alc beers under Montauk, 10 Barrel, and our non-alc ready-to-drink canned beverages and distilled spirits, including Mock One. Within the spirits category, despite market challenges in Q2, we focus on enhancing our commercial strategy, resulting in a 9.2% increase in depletions across vodka, bourbon, and gin, with vodka leading by double digits for the quarter. While the Broncos seasonal release sold out rapidly, our ongoing efforts to remain focused on expanding product distribution to additional states and beyond. With 5 years of experience in the beverage alcohol industry, we remain confident in our future trajectory as we continue to enhance operational efficiency. Now turning to our wellness business. We generated revenue of $14.6 million, driven by a strategic focus on value-added innovation including high-protein, superseeds, better-for-you breakfast products, better-for-you snacking, and the continued success of our HiBall clean energy drinks. Within our ingredient sales business, we've expanded our range of offerings in hemp protein and hemp oil, helping us further develop our business in North America and Asia. Our hemp food business remains fully insulated from proposed hemp THC regulation as these products contain zero THC and are broadly distributed across mainstream retail. In closing, we are confident in Tilray's trajectories for the second half of fiscal 2026 and beyond. With a diversified, scalable platform, improving fundamentals, strong liquidity, and regulatory tailwinds developing globally, Tilray is well positioned to capitalize on the next phase of growth across cannabis, beverage, and wellness products. Thank you to our shareholders for your continued support and confidence in Tilray's long-term strategy. I will now turn the call over to Carl to walk through our financial results in more detail. Carl, are you ready?
Thank you, Irwin. Before I begin, please note that we present our financials in accordance with U.S. GAAP and in U.S. dollars. Throughout our discussions, we will be referring to both GAAP and non-GAAP adjusted results and we encourage you to review the reconciliation contained within the press release of our reported results under GAAP with the corresponding non-GAAP measures. This quarter, we are reporting record second quarter net revenue and strong year-over-year improvements in profitability, and we are reaffirming our full year 2026 adjusted EBITDA guidance. Net revenue for the quarter was a record $217.5 million. Revenue growth was primarily driven by strong results in our international operations, both international cannabis and Tilray Pharma. Additionally, Canadian adult-use revenue grew year-over-year. Cannabis net revenue increased year-over-year to $67.5 million during the quarter, driven by a strong 36% increase in revenue from international cannabis and a 6% increase in Canadian adult-use cannabis. The continued year-over-year growth in our international cannabis business reinforces our view that Q1 results were temporarily affected by the timing of import and export permits. As a result, Q4 2025 and Q2 of this year provide a more accurate reflection of our ongoing performance expectations for the duration of the fiscal year. With the continued growth of international cannabis, we deliberately chose to scale back supply into the Canadian wholesale market in the quarter and redeploy that supply, along with new growth, into the higher-margin international cannabis markets over the remainder of the year. Beverage net revenue for the quarter was $50.1 million. Beverage revenue was impacted by category-wide headwinds in the craft beer segment and our own portfolio optimization efforts under Project 420, where SKU rationalization and margin-focused initiatives continue to impact revenue. However, we expect spring retailer product resets to help mitigate industry trends. These upcoming changes should improve brand visibility and align product mix with consumer preferences, which we expect to benefit better revenue and gross margins in the fourth fiscal quarter. Wellness net revenue was flat year-over-year at $14.6 million based on our strategic focus on value-added innovation and continued growth in HiBall and the ingredient channel. Results were offset by challenges in the club retail channel, which we are addressing through targeted initiatives. Distribution net revenue increased 26% year-over-year to $85.3 million based on our focus on competitive pricing, the prioritization of high-margin SKUs and favorable impacts from foreign exchange. We believe our distribution business will continue to complement and strengthen our international cannabis segment as we grow both in tandem. In terms of contribution, cannabis revenue accounted for 31% of revenue, beverage revenue was 23%, distribution was 39%, and wellness accounted for the final 7%. Gross profit during the quarter was $57.5 million, and gross margin for the quarter was 26%, while margins increased in cannabis, distribution, and wellness. Margin construction in the beverage segment negatively impacted the gross margin for the quarter. By segment, beverage gross margin reached 31% this quarter. While this represents a temporary decrease from last year, we are confident that the ongoing implementation of Project 420 will deliver significant improvements while also actively working on additional cost savings to improve overhead utilization as well as SG&A. As these initiatives progress and sales volumes recover, we anticipate stronger overhead utilization and a return to higher margins. Importantly, we remain on track to achieve $33 million in annualized cost savings from Project 420 by the fourth quarter of 2026, positioning our beverage segment for long-term success. Cannabis gross margin increased to 39% compared to 35% last year. The increase was due to a greater proportion of sales being generated in the higher-margin international markets but was offset by increased sales in lower margin, price-competitive categories in the Canadian adult-use market like vapes and pre-rolls. Distribution gross margin increased to 13%, up from 12% last year, while continuing to grow top line revenue. In wellness, gross margin rose to 32% from 31% as we successfully managed input costs and enhanced operational efficiencies. Our adjusted cash operating income for the quarter was positive $6 million, which excludes the noncash impacts of amortization and stock-based compensation. Net loss for the quarter was $43.5 million, a 49% improvement year-over-year compared to $85.3 million or $0.41 per share compared to $0.99 per share. It should be noted that EPS was impacted tenfold by the reverse stock split and has been reflected in both periods. Adjusted EBITDA for the quarter was $8.4 million compared to $9 million last year. Cash flow used in operations was down to $8.5 million compared to $40.7 million last year. The $32.2 million improvement in cash used in operations was almost entirely related to reductions in working capital. We ended the quarter with cash and cash equivalents and marketable securities of $291.6 million, $0.8 million in digital assets, and improved from a net debt position of approximately $4 million in the prior quarter to a net cash position of almost $30 million at the end of the period. Additionally, during the quarter, we also completed our ATM program in the market. Our strong cash position provides us with the flexibility we need to execute on strategic opportunities and take advantage of the changing regulatory landscape, and we intend to work to further strengthen our balance sheet throughout the remainder of the year. Finally, we remain confident in our business, our strategy, and our opportunity, and we are reaffirming our 2026 adjusted EBITDA guidance of $62 million to $72 million. We can now open the call for Q&A.
Questions and answers
The first question comes from Bill Kirk with ROTH Capital Partners.
On the intoxicating hemp bans for November implementation, is there anything, Irwin, that the industry can do to try to help improve the regulatory outcome? Is there any way to kind of extend the grace period, reverse the ban, or carve out particular categories? Like what can you do or what can the industry do to get a better outcome there?
Thank you, Bill. Great question. As you know, this, for us, was a growing business and there is a lot of demand for these products. And we are working with some congressmen, senators, and lobbyists to either extend the deadline or to change some of the regulations that would have a regulated amount of milligrams, whether it's 5 or 10 milligrams, and to be sold on a national basis. And I'll tell you, so far, I have a really good feeling because we're talking to the different associations; other than Senator McConnell and those who backed him, there's no one out here against this and thinks this is something that should be banned. The other thing, Bill, is that there are a lot of jobs that will be lost if this happens, which is something very important too.
For sure. Carl, you had some comments about holding back supply and shifting it into international markets. Am I hearing that right that that would mean sales that could have been in this quarter simply come later? And is there a way to quantify how much was held back?
So what I said was that we held back from the Canadian wholesale market at lower pricing than what we did in the prior year. And so last year, we did about $5 million. We obviously have the inventory levels that we have that we could have redeployed into European markets over the next 6 months of this year.
So it's just redeploying better margin sales, Bill, where we can sell it into Europe and get much higher margins than selling it into the wholesale market where we don't get the margins. In some cases, we're even selling to a competitor. So that's what it is.
Our next question comes from the line of Robert Moskow with TD Securities.
This is Victor Ma on for Rob Moskow. Two for me, please. First, I wanted to ask about Canadian adult-use cannabis. Growth in the quarter was about 6%. How much of that was volume growth versus price mix? Did you gain market share in the quarter? And then second, can you give a little more color on what drove the substantial increase in distribution sales? Was there any timing benefit that was realized in the quarter?
So number one, absolutely, there was no price increase. Some of it came from new distribution, if anything. A strike in British Columbia ultimately hurt us. And we did gain a little bit of share, not a lot, in the quarter. So it's demand. I think there's a lot we did in different markets. A lot of our new products started to roll out. And so that was the big reason for our growth: having supply. And I think just the team has done a great job. This is the highest quarter we have had, selling 5.5 million units in the quarter. So again, if anything, throughout the rest of the prior years, we saw lots of price compression. I think the good news is we're not seeing that price compression right now. But we're seeing demand continuously growing, and we're seeing all the Tilray different brands growing in the marketplace. And again, what I'm talking about is all our products: it's our flowers, our pre-rolls, our edibles, our vapes, our infused vapes, and our drinks. Sorry, in regards to CC Pharma, listen, I think CC Pharma has been part of Tilray since 2019, and trying to figure out what is the right position is one of our largest business. And we have the European team, and the growth and the opportunities in Germany have realized a couple of things. Number one, they're selling into pharmacies today. We're using the CC Pharma team to sell cannabis also to the pharmacy and also to deliver. The other thing is here, we're able, from our buying power, to get better margins and demand for regular medicines, and we're seeing some great growth. It's the biggest quarter we've ever had with CC Pharma and some of the most profitable quarters we've ever had. So we're looking at how we really take this business online. We're looking at how we're going to expand this business and take this model into other countries. And again, it's how we utilize the sales organization of CC Pharma, or now named Tilray Pharma, and using that organization to sell more and more cannabis into the drugstores that it sells into.
Our next question comes from the line of Aaron Grey with Alliance Global Partners.
First one for me. You mentioned the expectation for Tilray Global Medical to approach $150 million, I believe. So just any color you could provide on the timing of that expectation. And then you also mentioned some commentary briefly regarding potential regulatory changes in Germany as well as pricing pressure. So could you help quantify how big a risk you're seeing from each of those potentially for 2026?
From an annualized perspective, we are currently on track to achieve a run rate of $150 million, which includes both Canada and international markets, with most of that coming from international markets. I am not concerned about regulatory changes in Europe, particularly in Germany, and actually appreciate what has emerged from the German government. Regarding demand, we continue to see increasing interest. As for price compression, I mentioned this before; Canada should take note. There is a growing number of Canadian licensed producers and Israeli companies supplying products to Germany. However, Tilray has been established in Germany since 2019, and we are one of the few with a growth facility there, working closely with German doctors. With Tilray Pharma, we have a vertically integrated operation that encompasses growing, sales, and distribution. While there is a lot of product entering Germany, which contributes to price compression, consumers will soon realize the importance of product quality. You truly get what you pay for, and it’s crucial for them to understand that Tilray Medical represents quality.
I appreciate that. Second question for me, just turning back to the Canadian market. We had some commentary. More broadly, I just wanted to give some color in terms of what your expectations for growth within the Canadian market are. It looks like we finished about mid-single-digit growth for 2025. So what are your expectations now for 2026? You talked about some strong volumes there. But it does seem like volume growth has tempered a bit despite pricing pressure stabilizing for the Canadian market. So I wanted to hear more about your expectations for growth in the Canadian market and if a slowdown in growth also led to your decision to shift some of that product internationally.
First of all, we've experienced a slowdown in growth with a 6% increase, and we've achieved our highest quarter ever in unit sales. We're focusing on how to transform this into a more profitable business. While selling large volumes of wholesale product could be seen as growth, that's not our goal. We're aiming to introduce value-added and premium products. Currently, we hold a 50% market share for our drinks, which continues to grow, as does the demand in that market. We also lead in flower share, having sold over 80 million pre-rolls. We have decided to steer away from the vape category due to low margins where we aren't making a profit. In the Canadian market, I would be very pleased with mid- to high single-digit growth. Blair is also on the call and can add to this at any time. We've had an impressive lineup of new products that I believe will positively impact our growth, as new products are essential. Additionally, in the last quarter, a strike occurred in British Columbia, and if other Canadian producers choose to sell products in Europe, it will simply affect supply. Tilray currently has nearly 7 million square feet of growth space in Canada with the capacity to produce 270 metric tons. In the previous quarter, we grew close to 200 metric tons, so we have more than enough supply. We also have sufficient product for international shipping, where we avoid excise tax and achieve much higher margins. The opportunities are promising. While Canada is a relatively small country, it stands out as the only nation where cannabis is legal on both recreational and federal levels. Increasing numbers of users are recognizing the benefits of purchasing cannabis from federally legal stores.
Our next question comes from the line of Pablo Zuanic with Zuanic & Associates.
Look, let me start with CC Pharma. Maybe you can give more color on that business. I think in the past, you said that you reached 13,000 pharmacies. Now you're talking about tripling your distribution reach. I'm trying to understand that better. And also, if the new regulations in Germany top delivery, your CC Pharma reach could be a big asset in terms of pharmacy reach? Would you be willing to also sell other people's products besides Tilray Brands through CC Pharma?
We've owned CC Pharma since 2019, and it took time to find the best way to operate the business. We acquired it as part of our efforts in Germany and have been integrated into the German drugstore market since then. We have implemented significant changes at CC Pharma, focusing on modernization and investing in technology. We've managed to reduce labor costs and secure better prices for regular medicines from pharmaceutical companies. This is a considerable opportunity for us, as we buy medicines at favorable prices and sell them at higher margins. Our attention has been concentrated on this aspect of the business. Currently, we are well-positioned to attract more pharmacies. CC Pharma and Tilray Pharma have their own sales organization, and cannabis sales do not go through CC Pharma but through our international medical cannabis business. There is a strong emphasis on using this sales organization to increase medical cannabis sales in Germany. Additionally, with the new regulations, patients must visit pharmacies directly and cannot purchase online, which creates even greater opportunities for us. Regarding the question of selling other companies' products, while our primary goal is to generate profit, our focus remains on meeting patients' needs. However, we recognize that some patients might be interested in competitors' products, and this is worth considering for us in the future. We haven't explored this yet, but it is something we should definitely look into.
Okay. And then just a follow-up in terms of beverages. Obviously, this quarter, you had very strong performance in cannabis but a steep decline in sales in beer and profit margins. Maybe just give more color in terms of what has not worked there. You talked about positive momentum, but the numbers don't show that momentum. And why put so much hope on just the spring resets? I mean, is it just about that? I mean, more color would help. And then just long term, a reminder about your confidence that the beer business really fits your cannabis strategy longer term or they just play together, and we should think of them as a diversified portfolio anyway.
There are many companies with diversified business portfolios. Most have segments in food, personal care, and beverages. For instance, Pepsi has snacks, food, and drinks. Other companies have logistics that include personal care and food. It’s crucial to be a diversified consumer packaged goods company, which we are at Tilray Brands. We entered the beer market in late 2020 with our acquisition of SweetWater, followed by multiple acquisitions. Integrating these businesses has taken time; we moved from one plant to ten, and now we're down to eight while expanding from one brand to 18. We've progressed from being the 10th or 11th largest craft brewer to the fourth largest. Much has changed over the past four to five years, including significant integrations. The brands acquired from ABI and Molsons were not performing well initially, and it has taken time to turn them around. I am confident that beer and beverages are here to stay. For our vertically integrated business—manufacturing, brands, distribution, infrastructure, and salespeople—it's taking a bit longer. The industry has faced some decline, but there are opportunities ahead in Delta-9 and hemp-infused drinks, where Tilray is positioned to lead. While I am not making specific projections, if we could sell cannabis-infused drinks in the U.S. tomorrow, considering our 50% share in Canada, the potential could be a $0.5 billion business for us. Eventually, we will be able to sell infused drinks in the U.S., whether it's CBD or cannabis, especially with potential changes in regulations. Many companies are interested in collaborating with us because of our vertical integration. I am not ecstatic about today’s results, but I am optimistic about our business direction and strategy. It takes time to establish a strong brand, as seen with companies like Molsons, ABI, and Constellation Brands. After roughly five years, we’re now fourth in the craft beer space. As some brands exit the craft beer market, we see more opportunities ahead. I am very optimistic about the beverage sector, especially as it remains the largest category available in supermarkets today. Our strategy isn't solely reliant on the upcoming resets; we're focused on growing our market share in convenience stores, on-premise locations, and overall. That’s what excites me the most.
That's great color. Look, if I may, I want to squeeze one more if you don't mind. In your press release, you talk about U.S. federally rescheduling cannabis. But I think my understanding and most people's understanding would be that if they reschedule, it will still be a state-by-state program; it will not be federally rescheduled. But I guess your interpretation is that it will be federally rescheduled. And I think that's a big distinction. Do you want to just share some color on that, but just briefly?
Our plan is as I mentioned earlier: if it gets rescheduled, while many companies are focusing on recreation, we are concentrating on medical cannabis. We intend to utilize the infrastructure, expertise, and knowledge we've built, as we currently have a $150 million business with Tilray. In addition, we have a $300 million distribution platform that we are active in Europe, and we aim to replicate that in the U.S. We are actively engaging with the government, the FDA, and collaborating with hospitals to conduct clinical studies. Our focus for our entry into Tilray U.S. is not on a state-by-state recreational approach. Ultimately, we have extensive research in areas like pain relief, anxiety, cancer-related treatments, anti-nausea medications for cancer patients, and PTSD. We plan to leverage that scientific knowledge, genetics, and strain development while working with hospitals and potentially partnering strategically with a pharmaceutical company to implement these initiatives in the U.S.
The last question comes from Frederico Gomes with ATB Capital Markets.
Just the first question; just going back to the rescheduling comment there with potential rescheduling in the U.S. I'm just curious, does that change the way you see potential investments in the state-legal cannabis businesses like you've done in the past with MedMen?
Yes. It doesn't change anything with the state. But again, as I said, Tilray is committed to invest in research. Tilray is committed to investing in clinicals. Tilray is committed to working with the FDA and DEA in coming up with approved cannabis drugs that can be used and sold for some of the conditions that I mentioned before. But it's not state-by-state where we're looking at recreational; we are totally looking at this from a medical standpoint.
Got it. And then second question, international cannabis. Could you help us understand outside of Germany, what are the main international markets you have right now? And do you anticipate any other international markets where we could see some sort of regulatory change near term this year that could lead to growth like we saw in Germany since April 2024?
So listen, whether it’s Poland, there's today Italy markets. There's the U.K. markets. We're looking at oils for France and Spain. And I will tell you this without going into names or countries, there's a lot happening in the Middle East in regards to working with CBD and THC from a Middle East standpoint. There are some initiatives and testing going on in India in regards to hemp and hemp-infused THC products. Again, and I will say this, that's why I thanked President Trump from a rescheduling standpoint: rescheduling cannabis from Schedule I to Schedule III has opened up the eyes and legality in a lot of other countries. After the U.S. did it, a lot of other countries are saying this stuff is not taboo; it can really benefit people and be helpful for many different diseases.
Thank you. I'd like to pass the call back over to management for any closing remarks.
Thank you very much, operator, and thank you very much for everybody joining us today. As you can see, there is a lot happening at Tilray. As a diversified consumer packaged goods company, we today sell products into the recreational cannabis market in Canada, medical cannabis in Canada, beverages in Canada, spirits in the U.S., and our hemp-infused wellness products and our international medical products and our Tilray Pharma. There's a lot within Tilray today. There's a lot of science, a lot of research, and a lot of genetics that we're pursuing. As a 5- or 6-year-old company that’s really pulling this all together, there’s no one out there today that is diversified like us. One of our strengths is our balance sheet; we are in a net cash position, enabling us to invest in research, clinical trials, and development today. So you can't look at us today only as a recreational cannabis company; you can't look at us just as a beer company. You’ve got to look at us as a consumer company that looks at products in various ways to help bring consumers together and foster connections. That's the work we're doing. At the end of the day, as you can see what we've accomplished this quarter in regards to our profitability for our shareholders. It's been 5 years putting this together piece by piece, and there's a lot to do. The question was asked by Pablo about our beverage business. Yes, there's a lot to do regarding our acquisitions. One proof point is looking at the cannabis acquisitions as we put these cannabis facilities and brands together, cut costs, integrated the businesses, and we’re seeing the performance of that today. It’s no different from our international cannabis business, which we’ve only really developed over the last year or so into a run rate to a $100 million business. There is a lot to achieve within Tilray, with great assets whether it’s our facilities, our brands, our distribution, or our know-how. There’s also a lot of AI coming into Tilray today to help us implement ongoing improvements. I appreciate those who have stayed with us as shareholders; I know there are times you’re frustrated, and I assure you I’m probably more frustrated than you are. I see a good path ahead with the progress we’re making. We have to deal with a tough regulatory environment, and we pay some of the highest excise taxes in Canada. I hope Prime Minister Carney heard me on how important this industry is for the Canadian market, the jobs created, and the tax dollars generated; we don’t want this to run away from Canada. I commend President Trump for rescheduling; he was the first president who truly took this on. It’s up to us to show what this really can do. Thank you very much for joining our call today, and happy New Year to everyone.
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