Tilray Brands, Inc.

’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand our results of operations and our present business environment from the perspective of management. You should read the following discussion and analysis of our financial condition and results of operations together with the “Cautionary Note Regarding Forward-Looking Statements”; the sections in Part I entitled “Item 1A. Risk Factors” and the financial information and the notes thereto included in Part II, Item 8 of this Form 10-K in this Annual Report for the fiscal year ended May 31, 2026 (“Annual Report”). We use certain non-GAAP measures that are more fully described below under the caption “—Use of Non-GAAP Measures,” which we believe are appropriate supplemental non-GAAP measures to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions.

 

Amounts are presented in thousands of United States dollars, except for shares, warrants, per share data and per warrant data or as otherwise noted.

 

Company Overview

 

Tilray Brands, Inc., a Delaware corporation (collectively, along with its subsidiaries, the “Company”, “Tilray”, “we”, “us” and “our”) is a leading global lifestyle consumer products company, which was incorporated on January 24, 2018 and is headquartered in Leamington and New York, with operations in Canada, the United States, Europe, Australia and Latin America that is leading as a transformative force at the nexus of cannabis, beverage, wellness, and entertainment, elevating lives through moments of connection. Tilray’s mission is to be a leading premium lifestyle company with a house of brands and innovative products that inspire joy and wellness, while creating memorable experiences that bring people together.

 

Our overall strategy is to leverage our brands, infrastructure, expertise and capabilities to drive revenue growth in the industries and channels in which we compete, achieve industry-leading profitability and build sustainable, long-term shareholder value. In order to ensure the long-term sustainable growth of our Company, we continue to focus on developing strong capabilities in data analytics and consumer insights, drive category management leadership and assess opportunities for the introduction of new categories and products and entries into new geographies. In addition, we are relentlessly focused on managing our cost structure and expenses in order to expand margins and maintain our strong financial position. Finally, our experienced leadership team provides a strong foundation to accelerate our growth. Our management team is complemented by experienced operators, cannabis industry experts, veteran beer and beverage industry leaders and leaders that are well-established in wellness foods, all of whom apply an innovative and consumer-centric approach to our businesses.

 

Trends and Other Factors Affecting Our Business

 

U.S. Beverage market trends:

 

Within the beverage category, we expect the following key trends to shape the near-term outlook in this segment:

 

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Beverage Distribution. In furtherance of our strategic vision, we remain focused on enhancing the relevance of our brands within their home markets with mission critical SKUs, focusing on growing our core brands in their core markets and on driving growth of our highest margin SKUs within these brands. Through targeted efforts, we continue to strategically optimize our price/pack/channel architecture and drive distribution to continue to execute against our craft beer strategy, streamlining our business, enhancing our relevance and focusing resources on our core markets.

 

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Innovation. In the United States, we have been closely monitoring consumer beverage trends, which have included consumers drinking less beverage alcohol products for a variety of reasons and, when consuming alcoholic beverages, the increasing demand for ready-to-drink cocktail options. To address these trends, we have engaged in strategic innovation based on category analysis, consumer insights, and portfolio diversification into alternative beverage options. More specifically, we have launched products such as Cruisies and 10 Barrel’s Salty Sips line, a lower‑sugar vodka-based refresher made with real fruit juice and a pinch of sea salt. For consumers seeking to reduce their beverage alcohol consumption, the portfolio continues to scale across non‑alcoholic craft beer, clean‑label energy drinks fortified with vitamins, and 10 Barrel Clean Slate, a functional non‑alcoholic cocktail offering. Our innovation pipeline also includes flavored malt beverage offerings under the Popsicle brand, developed through a licensing partnership to bring iconic, nostalgic Popsicle flavors into ready‑to‑drink adult beverages. These strategic innovations underscore our commitment to offering high-quality options across a diverse range of beverage categories, positioning us for sustained growth by meeting consumer demand and differentiation in the competitive beverage segment.

 

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Brew Pubs. We currently operate 18 brew pubs, including our Breckenridge Distillery restaurant and tasting room, in geographic regions across the U.S. and core markets for the associated craft brands. This includes our four recently acquired BrewDog U.S. brew pubs, including a flagship multi‑level location on the Las Vegas Strip. An important part of our strategic plan for our craft beer business centers on the role that brew pubs and experiential hospitality play in promoting and showcasing the distinct, regional positioning of our various craft beer brands. They provide our consumers with a venue in which to connect with others and have an immersive brand experience which serves to enhance brand loyalty and drive immediate and long-term revenue growth. We also believe that our brew pub strategy fuels trial and innovation by allowing us to curate unique small batch product offerings in targeted test markets.

 

In the spirits category, Breckenridge Distillery combines premium craftsmanship, award-winning quality, and experiential tourism appeal, reinforcing its positioning as a lifestyle-driven spirits brand. Recently included in Newsweek's “Best Bourbon 2026” list, the distillery has earned multiple prestigious accolades across Whiskey, Gin, and Vodka, including three Icons of Whisky awards, ten Best American Blended Whiskey honors at the World Whiskies Awards, and recognition as Colorado Distillery of the Year. Breckenridge Distillery products are available in all 50 states, with continued planned expansion into other product categories and product innovations. Recent launches include Mock One, a non-alcoholic spirits line, Mountain Shot, flavored whiskey in convenient pouches, and Casa Breck Tequila, all underscoring our commitment to innovation and evolving consumer preferences. Despite prevailing challenges within the overall spirits market, we believe that our award-winning portfolio and innovative product introductions positions Breckenridge Distillery for sustained growth and enhanced market presence.

 

U.K. Beverage market trends:

 

In the U.K., the beverage alcohol market remains highly competitive and continues to be impacted by evolving consumer preferences, cost pressures, and moderation trends. Consumers are increasingly seeking premium products, no and low-alcohol alternatives, and differentiated brand experiences across both retail and hospitality channels. Through BrewDog’s established brand portfolio, retail and e-commerce presence, and company-operated bar network, we believe we are positioned to compete in the U.K. market while focusing on core brand performance, operational efficiency, and selective innovation. 

 

 

Canadian cannabis market trends.

 

The cannabis industry in Canada continues to evolve given how nascent the industry is with federal legalization of adult-use cannabis occurring just over five years ago. Through analysis of the current market conditions, the following key trends have emerged and are anticipated to influence the near-term future in the Canadian cannabis industry:

 

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Market share. During the fourth fiscal quarter, Tilray continued to lead the Canadian market with the highest cannabis revenue in Canada. However, during the fourth fiscal quarter, we experienced a decrease in market share in Canada from 8.5% to 7.9% from the immediately preceding quarter as reported by Hifyre data for all provinces, excluding Quebec where Weedcrawler was deemed more accurate. The 55 basis point decline primarily reflected a 162 basis point decrease in the whole flower category, resulting from a planned cultivation strain rotation that temporarily impacted supply, and a 660 basis point decrease in the straight-edge pre‑roll category due to an out‑of‑stock experienced by a componentry vendor despite maintaining a market leading position within this category. These declines were partially offset by modest increases in the vape, beverage, and infused pre-roll categories as the Company continues to scale in these high-growth, ready-to-consume product formats. Despite the decline in flower market share, the Company remains focused on improving profitability within the category by prioritizing higher-margin premium brands, including Broken Coast, and supporting targeted innovation, including recent launches of Lemon Cherry Poppers under the Good Supply brand and Ice Cream RNTZ. The Company continues to enhance its global supply chain and expand its cultivation footprint to support demand across Canadian and international markets. We have successfully optimized our Quebec cultivation facility and expect it to generate meaningful flower output in the second half of fiscal 2027, which may be directed to international markets based on potential customer demand. During the fiscal quarter ended May 31, 2026, the Company opportunistically redirected approximately 0.5 Metric Tons to international markets, which are expected to generate higher margin sales.

 

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Price compression. Licensed producer consolidation has progressed more gradually than anticipated, while retailer consolidation has increased the negotiating leverage of larger retailer accounts. At the same time, consumer preferences continue to evolve. Demand is shifting toward manufactured formats such as infused pre‑rolls, beverages, edibles, and vapes, reflecting a broader premiumization and convenience trend within the category. Price compression in specific categories is expected to persist in the market, intensified by fierce competition among the approximately 1,000 Licensed Producers in Canada. The fixed impact of excise tax per gram further compounds these challenges, and has promoted ongoing industry lobbying efforts.

 

International cannabis market trends.

 

We are a global leader in the development, production, distribution, marketing and sale of pharmaceutical-grade medical cannabis products. The cannabis industry in Europe is still in its early stages of development and countries within Europe are at different stages of medical cannabis legalization. Meaningful progress in the legalization and regulation of cannabis for medical purposes, has now taken place in more than 21 countries representing a population of more than 526 million people (Germany, UK, Italy, Poland, Netherlands, Czech Republic, Greece, Portugal, Austria, Switzerland, Denmark, Croatia, Malta, Luxembourg, Ukraine, Sweden, Norway, Türkiye, Ireland and Spain). Beyond this, some countries have expressed a clear political ambition to legalize adult-use cannabis (Portugal and Luxembourg), some are engaging in programs for adult-use legalization (Netherlands and Switzerland) and some are debating regulations for cannabinoid-based medicine (France). In Europe, we believe that, despite continuing recessionary economic conditions, political uncertainty in various countries and the continuing Russian conflict with Ukraine, cannabis legalization (both medicinal and adult-use) will continue to gain traction albeit more slowly than originally expected. This is evidenced by the cannabis regulations in Malta in 2021, in Czech Republic in 2026 and more concretely in Germany in 2024, which we believe will serve as a catalyst for continued changes in drug policy throughout Europe. Outside of Europe and North America, the cannabis industry is also continuing to develop with Australia and Israel representing some of the larger markets and with some Latin American countries also growing their respective medical cannabis markets, such as Argentina, Panama, Colombia and Brazil.

 

 

We continue to believe that Tilray remains uniquely well-positioned to maintain and gain significant market share in the markets in which we participate. We benefit from our end-to-end vertically-integrated infrastructure in major markets and well-placed investments, which are comprised of two EU-GMP cultivation facilities located in Portugal and Germany; our fully owned route-to-market encompassing sales, marketing and distribution infrastructure in Germany, Australia and Italy; a network of leading distributors who we work with in the various other countries in which we participate; and, our extensive genetics portfolio and demonstrated commitment and expertise related to the cultivation and production of high-quality, safe cannabis products. Tilray’s International business also benefits from the depth and breadth of knowledge, experience, relationships and infrastructure we have gleaned from our leading participation and investment into the Canadian medical and adult-use markets. Tilray is proudly pioneering the effort to further understand the therapeutic value of cannabis through strategic partnerships with leading research institutions globally where Tilray is currently supporting clinical trials around the world studying the efficacy of cannabis in treading various indications. We believe that these assets and attributes, combined with our ability to navigate complex regulatory environments, will continue to drive our leadership in international medical markets and allow us to successfully enter new markets as they adopt medical cannabis and potentially adult-use regulations and may also serve to support a potential U.S. participation. 

 

Germany. Today, Germany remains the largest medical cannabis market in Europe. 

 

We continue to believe that Tilray is well-positioned in Germany, especially considering the enactment of MedCanG and given that we are one of only three manufacturers of medical cannabis in Germany since our wholly owned subsidiary, Aphria RX, was awarded the first license for the cultivation of medical cannabis in Germany by the BfArM under the liberalized regime. This license improves our ability to meet the needs of patients and provides cannabis of the utmost quality and enhanced availability to a broader market.

 

As the market continues to mature, we have seen increased demands and differentiation specifically with medical cannabis flowers. In response, we have launched ARX and Good Supply brands and related medical cannabis products, which provides the patient with a segmented portfolio of products while we continue to deliver on the trust, safety and consistency that has become expected from our Tilray Medical brand.

 

Poland. In Poland, cannabis was legalized for medical use in 2018 and is prescribed to patients by a physician and dispensed by pharmacies. Today, all doctors in Poland are allowed to prescribe medical cannabis and it is a self-pay market as medical cannabis is not refundable by the Polish health service. Tilray is a leading supplier of medical cannabis in Poland through our network of distributor partnerships. We predominantly supply the market with whole flower medical cannabis products. 

 

United Kingdom. Since November 2018, doctors in the U.K. have been able to prescribe medical cannabis for medicinal use for patients with medical conditions that had failed to respond to first-line medications. The market today is predominantly all self-pay and prescriptions are facilitated by private clinics. Today, we supply the U.K. market with mainly whole flower products from brands such as Good Supply through our distributor partners with sights on growing our portfolio to extracts and other formats. The Lyphe Acquisition brings deep clinical expertise and a strong patient-first approach that immediately strengthens our capabilities in the U.K.

 

Ireland. In June 2019, the Minister for Health signed legislation allowing for the operation of the Medical Cannabis Access Programme (“MCAP”) on a pilot basis for five years. The MCAP allows a medical consultant to prescribe a cannabis-based treatment for a narrow set of specified medical conditions, where the patient has failed to respond to standard treatment. Reimbursement is available for products which have received the appropriate approvals. Tilray was one of the first players to enter the Irish market and is one of a few suppliers which has received approval for its products to be prescribed and to have been granted reimbursement status. Today, we supply our approved extract product to Ireland through our distribution partner.

 

Italy. In May 2023, Tilray Medical received authorization from Italy’s Ministry of Health to distribute three new medical cannabis compounds. These medical cannabis compounds are distributed by Tilray Medical Italia to pharmacies across Italy. We have an established broad national pharmaceutical distribution network in Italy, where medical cannabis is prescribed by doctors and reimbursed by the healthcare system to eligible patients. In 2025, Tilray has received additional cannabis flower and extract product authorizations and has formed a strategic partnership with Molteni Farmaceutici with the commitment to broaden the availability of Tilray Medical products for patients across Italy.

 

Australia. In 2016, the Australian Government legalized medicinal cannabis, which is regulated by the Therapeutic Goods Administration. Medical cannabis is prescribed by a doctor but there is no coverage under the Pharmaceutical Benefits Scheme. Tilray Medical supplies the market with a wide portfolio of medical cannabis extracts as well as whole flower products. As the market continues to mature, we have seen increased demands and differentiation specifically with medical cannabis flowers. In response, we launched the Broken Coast, Redecan and Good Supply brands and products, which provides the patient with a segmented portfolio of products while we continue to deliver on the trust, safety and consistency that has become expected from our Tilray Medical brand.

 

Luxembourg. Luxembourg established its medical cannabis framework in 2018, with the national program operational since February 2019. Medical cannabis is tightly regulated, accessible only through trained physicians and dispensed exclusively via hospital pharmacies. Prescriptions are limited to patients with defined, severe medical conditions, and all treatments are covered by public health insurance. In January 2025, Luxembourg updated its regulations to phase-out high-THC flower products, now permitting only balanced or high-CBD flower and oil-based extracts. This shift reflects the government’s commitment to standardized, pharmaceutical-grade cannabis therapies and patient safety. Tilray Deutschland GmbH was awarded the official government tender in 2025 to supply medical cannabis flower, demonstrating our leadership in centralized procurement and compliance with Luxembourg’s rigorous standards.

 

Portugal. Portugal legalized medical cannabis in July 2018. The regulatory framework is overseen by INFARMED, requiring Market Placement Authorization (ACM) for all non-pharmaceutical cannabis products, with strict GACP and GMP compliance. While domestic patient access remains limited due to stringent product approvals and the absence of public reimbursement, Portugal has emerged as a leading European producer and exporter of medical cannabis, supplying high-value markets such as Germany, Poland, and Australia. In 2021, Tilray received the first Authorization for Placement on the Market for dried flower, with additional product approvals in 2024, reinforcing our pioneering role in Portugal’s medical cannabis sector. Our strategic investments in cultivation and manufacturing, combined with robust compliance and documentation standards, enable Tilray to deliver EU-GMP quality products to both domestic and international markets. As Portugal explores adult-use reform, we expect that Tilray’s established reputation and operational excellence position us to capitalize on future regulatory developments and market expansion.

 

Spain. Spain introduced a formal medical cannabis framework in October 2025 (Royal Decree 903/2025), marking the first time cannabis-based treatments are systematically regulated within its healthcare system. The model is highly controlled and built around standardized cannabis preparations (magistral formulas) rather than licensed commercial products, with strict requirements on composition (THC/CBD), manufacturing quality, traceability, and pharmacovigilance under the supervision of the Spanish Medicines Agency (AEMPS).

 

Ukraine. Ukraine established a national medical cannabis framework in 2024, driven largely by the need to treat war‑related conditions such as chronic pain and post‑traumatic stress disorder (PTSD). The law (No. 3528‑IX), signed in February 2024 and effective from August 16, 2024, legalized cannabis for medical, scientific, and educational purposes, removing cannabis extracts from the list of prohibited substances and enabling their cultivation, manufacturing, import/export, and dispensing under strict licensing and quota controls. The regulatory system is highly pharmaceutical in nature: products must be registered as medicines or compounded in pharmacies using approved APIs, with full traceability, security requirements (e.g. controlled cultivation environments and surveillance), and oversight by the Ministry of Health and the State Medicines Service.

 

Brazil. Brazil has recently implemented a major overhaul of its medical cannabis regulatory framework (2025–2026), transitioning from a temporary, import‑dependent model (RDC 327/2019) to a more comprehensive, pharmaceutical-grade system covering the entire value chain. The new rules adopted by ANVISA in early 2026 (notably RDC 1.012–1.015/2026) establish for the first time clear provisions for cultivation, manufacturing, research, and commercialization under strict licensing and oversight. Cannabis products are formally defined as industrialized medicinal products based primarily on CBD or CBD-dominant extracts, reinforcing a pharmaceutical approach and excluding non-medical formats (e.g. cosmetics or wellness products). The framework also introduces domestic cultivation (≤0.3% THC) for medical purposes, a regulatory sandbox for controlled pilot activities (including patient associations), and stricter GMP, traceability, and quality standards aligned with international norms.

 

France. France is approaching full approval of a permanent medical cannabis framework, following a multi‑year pilot (2021–2026) and a prolonged regulatory process. The government has already finalized the core legal architecture, including draft decrees covering prescription, production, and distribution, which have been submitted to the European Commission and reviewed by the Conseil d’État.

 

The forthcoming approval is expected to introduce a highly controlled, evidence-driven model: cannabis will be prescribed only as treatment for defined conditions (e.g. neuropathic pain, epilepsy, multiple sclerosis spasticity, oncology and palliative care), using standardized pharmaceutical products (oils, capsules, possibly vaporized formats) under strict ANSM oversight. Prescription will initially remain specialist-led, with potential gradual involvement of general practitioners, and products will require full pharmaceutical compliance (quality, traceability, GMP). A critical pending step is the HAS (Haute Autorité de Santé) evaluation, expected to determine reimbursement and clinical value in late 2026, which will ultimately define real patient access. If favorable, broad patient access is targeted for 2027, positioning France as a large regulated medical cannabis market.

 

 

U.S. cannabis market trends.

 

In April 2026, the U.S. Department of Justice issued an order rescheduling FDA‑approved cannabis products and state‑licensed medical cannabis from Schedule I to Schedule III under the Controlled Substances Act. Concurrently, the DEA is conducting an expedited administrative hearing to consider broader rescheduling, which faces legal challenges in the D.C. Circuit Court of Appeals. As a global leader in medical cannabis, we believe we are well-positioned to participate in a federally compliant U.S. medical cannabis market, but we are monitoring the regulatory landscape and legal challenges that are ongoing. We continue to believe that these recent efforts to reschedule cannabis from Schedule I to Schedule III under the Controlled Substances Act represent meaningful progress toward broader cannabis reform and have the potential to accelerate clinical research, broaden patient access, and support the development of a regulated, science-driven medical cannabis market in the United States.

 

Wellness market trends.

 

Tilray Wellness’s branded business continues to grow across brick-and-mortar retail as well as e-commerce, which we believe further establishes its leading market share position in better-for-you categories. The Company continues to focus on value-added innovation within natural and organic food and beverages across branded and ingredient sales. We continue to participate in multiple growing categories including super-seeds, better-for-you breakfast, better-for-you snacking, as well as functional beverages and natural energy drinks. Within our Ingredients sales business, we have expanded our range of offerings in hemp protein and hemp oil, helping us further develop our business in North America and Asia.

 

Acquisitions, Strategic Transactions and Synergies

 

We strive to continue to expand our business, on a consolidated basis, through a combination of organic growth and acquisition. While we continue to execute against our strategic initiatives that we believe will result in long-term, sustainable growth and value to our stockholders, we continue to evaluate potential acquisitions and other strategic transactions of businesses that we believe complement our existing portfolio, infrastructure and capabilities or provide us with the opportunity to enter attractive new geographic markets and product categories as well as expand our existing capabilities. In addition, we have exited certain businesses and continue to evaluate certain businesses within our portfolio that are dilutive to profitability and cash flow. As a result, we incur transaction costs in connection with identifying and completing acquisitions and strategic transactions, as well as ongoing integration and restructuring costs as we combine acquired companies and continue to achieve synergies, which is offset by income generated in connection with the execution of these transactions. For the year ended May 31, 2026, we incurred $6.3 million of transaction costs (income), net, as discussed further below.

 

Carlsberg. On February 5, 2026, we entered into an exclusive licensing agreement, which commences on January 1, 2027, with the Carlsberg Group, one of the world’s premier brewing organizations and among the largest globally by revenue. Under the terms of the agreement, Tilray has been granted a multi-year license to produce, market, sell and distribute Carlsberg®, Carlsberg Elephant®,1664®, and Kronenbourg 1664 Blanc® branded beers across all channels in the United States, beginning January 1, 2027. The agreement has an initial five-year term, with an automatic renewal for an additional five years subject to performance criteria. 

 

Panama. On October 13, 2025, we entered into a strategic partnership for medical cannabis operations in Panama. Under this partnership, the Company holds a 25% equity interest in Solana Life Group, S. de R.L., a Panamanian entity. The joint venture is engaged in the importation, distribution, and commercialization of medical cannabis products in Panama. During the fiscal year ended May 31, 2026, there were no transactions with this entity.

 

BrewDog. Between March and April 2026, Tilray completed the BrewDog Acquisition. As the only global craft beer brand, the BrewDog Acquisition served to transform our beverage platform from a U.S. platform to a global platform and provided us with the international presence, team and capabilities to support the broader distribution of our U.S. beverage brands across key international markets, all in line with our previously disclosed ambition.

 

Lyphe. On April 15 2026, Tilray acquired the Lyphe Group, a UK-based medical cannabis clinic and digital pharmacy platform. Through Lyphe’s online clinic and pharmacy platform, we will seek to enhance access to medical cannabis while accelerating its existing capabilities in dispensing traditional prescription medicines, creating a seamless, digitally enabled patient experience. 

 

 

Beverage segment Project 420: 

 

During the fiscal quarter ended February 28, 2026, we considered the Project 420 plan to be completed due to reaching the cost savings target that we had set out to achieve even though there are still ongoing initiatives relating to additional cost savings, SKU rationalization and distributor rationalization. As a result of the actions implemented under the plan, the Company expects to realize ongoing cost savings and operational efficiencies in future periods.

 

In November 2020, we entered the beverage category with the acquisition of SweetWater Brewing Company, one of the largest independent craft brewers in the U.S. by volume, with the vision of creating a larger and more diversified global lifestyle consumer products company. This initial acquisition provided us with a foundation to pursue additional acquisitions in the beverage category and scale our business on a national basis. We acquired Alpine Beer Company, Green Flash and Breckenridge Distillery in December 2021, Montauk Brewing Company in November 2022, Craft Acquisition I in October 2023 and Craft Acquisition II in September 2024. 

 

With Craft Acquisition I and Craft Acquisition II, we capitalized on opportunities to acquire additional beverage businesses that consisted of strong brands in decline and in need of investment in order to promote growth at a significantly reduced price. To support the growth of these acquired brands and establish a clear path to profitability, we implemented Project 420, which was a comprehensive plan covering (i) SKU rationalization; (ii) Geographic rationalization; (iii) Distributor rationalization; and (iv) synergy optimization plan through which we expect to invest in the acquired brands for growth and improve profitability:

 

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SKU optimization/rationalization – In response to the declining growth in the craft beer industry and consolidation of distributors, we are working with our distributors in various markets to streamline our portfolio by eliminating duplicative, lower margin and slower growth products, which has the immediate effect of reducing revenue. However, by eliminating these slower moving and lower margin SKUs, we are able to focus our attention and resources on our higher margin and faster growing SKUs, as well as the introduction of new innovation, which we expect will accelerate our revenue growth in future quarters. This initiative is still ongoing.

 

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Geographic rationalization – On a consolidated basis, we generate sales in all states however, our brands are significantly stronger in their home markets. For example, SweetWater is located in Georgia and, as a result, its revenues are stronger in Georgia, Alabama, North Carolina and Florida, while 10 Barrel, which is located in Oregon has stronger revenue in Oregon, Washington, Idaho and Wyoming. In away markets, like Oregon for SweetWater, and Georgia for 10 Barrel, the brands are not as strong and so distribution is de-empathized. Our geographic rationalization works to concentrate our efforts in individual states with our strongest brands in those states. As we reduce the distribution of away markets brands in those states, we are working to increase the distribution and shelf space of home market brands. This initiative is consistent with our Regional Jewel strategy developed in conjunction with the Boston Consulting Group.

 

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Distributor rationalization – As a result of our various acquisitions, we have over 750 distributors and 975 distributor shipping locations. As a result, we are shipping to multiple distributors in the same geography as well as splitting the allocation of local brands between multiple distributors. The goal of the distributor rationalization is to reduce our distributor footprint down to between 450 and 500 distributors, concentrating those distributors’ effort on our brands and SKUs, while minimizing logistical complexities. This initiative is still ongoing.

 

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Synergy optimization plan – We previously announced a $33.0 million synergy plan focused on optimizing our production footprint and eliminating redundancies in manufacturing and warehouse assets. By integrating the newly acquired facilities into our existing footprint, we are optimizing capacities, utilization and better absorbing fixed overheads. This in turn is improving our gross margins. During the fiscal year ended May 31, 2026, we have completed the synergy optimization plan achieving the $33.0 million target. While this initiative is complete, management remains focused on disciplined cost management and continues to advance additional cost‑saving initiatives across the business to drive further margin improvement and operating efficiency.

 

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Brand and business investment – We have been and are continuing to increase our investment in the marketing, promotion and infrastructure of our core brands in order to re-establish their dominance in their home markets. Our intention is to fund this investment through the cost savings and synergies achieved through Project 420 as well as future cost savings and operational efficiency initiatives.

 

Political and Economic Environment

 

Our results of operations may continue to be affected by economic, political, legislative, regulatory, legal actions, global volatility and general market disruption resulting from geopolitical tensions, such as Russia’s continued incursion into Ukraine, the ongoing events in the Middle East, including the conflict involving Iran, and political uncertainty in certain countries in Europe. Escalation of hostilities in the Middle East, including Iran, could further disrupt global energy markets, fuel prices, transportation networks, and supply chains, particularly in Europe, which may indirectly impact operating costs and consumer demand. Economic conditions, such as recessionary trends, inflation, supply chain disruptions, interest and monetary exchange rates, government fiscal policies, and the recent economic uncertainties resulting from certain changes in U.S. global economic policy, including changes on global trade policies can have a significant effect on operations. More specifically, there are limited expected impacts on revenue from the recently enacted U.S. tariffs and foreign enacted retaliatory tariffs in most reporting segments. However, on July 20, 2026, the U.S. government announced additional 50% tariffs on certain Canadian imports. To the extent these tariffs become effective, they predominantly would apply to products sold by the Company’s Wellness reporting segment, and could increase costs, disrupt supply chains and distribution channels, and may adversely impact Wellness operating results. The Company is actively monitoring developments related to these tariffs, evaluating potential impacts on its business, and adapting its operations and mitigation strategies as appropriate. From a cost perspective, we believe the recently enacted tariffs have and may continue to impact input materials such as aluminum, hops, barley, malt and vape componentry, which are partially imported. We intend to mitigate these impacts to the extent possible.

 

In addition, the recent U.S. federal regulatory developments regarding cannabis rescheduling represent a significant shift in the political and legislative environment. This evolution is expected to lead to a legitimate regulatory framework for the provision and use of medical cannabis as a therapy for a multitude of conditions and disease states, bring U.S. drug policy in line with the drug policies of other countries around the world today. We expect that this will also lead to more research, clinical development, and education, aligning closely with Tilray’s established global expertise in regulated medical cannabis markets. We continue to monitor these recent developments, including the recent legal challenges to these regulatory developments in the D.C Circuit of Appeals. With more clarity on the regulatory framework and the outcomes of the legal challenges, we intend to leverage our proven compliance infrastructure, scientific knowledge, and operational scale to expand responsibly in the U.S. market, introducing medical-grade cannabis products in targeted therapeutic formats. While these developments present significant long-term growth opportunities, they also introduce new regulatory complexities and potential risks that we will continue to monitor closely.

 

 

Results of Operations

 

Our consolidated results, in millions except for per share data, are as follows:

 

	For the year ended May 31,											Change							Change
(in thousands of U.S. dollars)	2026				2025				2024			2026 vs. 2025							2025 vs. 2024
Net revenue	$	915,454			$	821,309			$	788,942		$	94,145				11	%	$	32,367				4	%
Cost of goods sold		655,013				580,739				565,591			74,274				13	%		15,148				3	%
Gross profit		260,441				240,570				223,351			19,871				8	%		17,219				8	%
Operating expenses:
General and administrative		203,629				167,324				167,358			36,305				22	%		(34	)			(0	)%
Selling		49,328				56,039				37,233			(6,711	)			(12	)%		18,806				51	%
Amortization		19,585				88,616				84,752			(69,031	)			(78	)%		3,864				5	%
Marketing and promotion		42,290				37,048				41,933			5,242				14	%		(4,885	)			(12	)%
Research and development		361				284				635			77				27	%		(351	)			(55	)%
Change in fair value of contingent consideration		(15,000	)			—				(15,790	)		(15,000	)			NM			15,790				(100	)%
Impairment of intangible assets and goodwill		—				2,096,139				—			(2,096,139	)			(100	)%		2,096,139				NM
Other than temporary change in fair value of convertible notes receivable		—				21,661				42,681			(21,661	)			(100	)%		(21,020	)			(49	)%
Litigation costs, net of recoveries		3,902				17,347				8,251			(13,445	)			(78	)%		9,096				110	%
Restructuring costs		13,113				34,283				15,581			(21,170	)			(62	)%		18,702				120	%
Transaction costs (income), net		6,260				4,534				15,462			1,726				38	%		(10,928	)			(71	)%
Total operating expenses		323,468				2,523,275				398,096			(2,199,807	)			(87	)%		2,125,179				534	%
Operating loss		(63,027	)			(2,282,705	)			(174,745	)		2,219,678				(97	)%		(2,107,960	)			1,206	%
Interest expense, net		(23,663	)			(29,952	)			(36,433	)		6,289				(21	)%		6,481				(18	)%
Non-operating (expense) income, net		(1,370	)			10,284				(37,842	)		(11,654	)			(113	)%		48,126				(127	)%
Loss before income taxes		(88,060	)			(2,302,373	)			(249,020	)		2,214,313				(96	)%		(2,053,353	)			825	%
Income tax expense		17,098				(121,017	)			(26,616	)		138,115				(114	)%		(94,401	)			355	%
Net loss	$	(105,158	)		$	(2,181,356	)		$	(222,404	)	$	2,076,198				(95	)%	$	(1,958,952	)			881	%

 

 

Use of Non-GAAP Measures

 

The Company reports its financial results in accordance with U.S. GAAP. However, throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K, we discuss non-GAAP financial measures, including reference to:

 

•	adjusted gross profit (excluding purchase price allocation (“PPA”) step up) consolidated and for each reporting segment (Cannabis, Beverage, Distribution and Wellness),

 

•	adjusted gross margin (excluding PPA step up) consolidated and for each reporting segment (Cannabis, Beverage, Distribution and Wellness),

 

•	adjusted EBITDA,

 

•	cash, restricted cash and marketable securities, and

 

•	constant currency presentation of net revenue (by segment and consolidated).

 

These non-GAAP financial measures should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America, (“GAAP”). These financial measures, which may be different than similarly titled financial measures used by other companies, are presented to help investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Please see “Reconciliation of Non-GAAP Financial Measures to GAAP Measures” below for reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as a discussion of our adjusted gross margin, adjusted gross profit and adjusted EBITDA measures and the calculation of such measures.

 

Constant Currency Presentation

 

We believe that this measure provides useful information to investors because it provides transparency to underlying performance in our consolidated net sales by excluding the effect that foreign currency exchange rate fluctuations have on period-to-period comparability given the volatility in foreign currency exchange markets. To present this information for historical periods, current period net sales for entities reporting in currencies other than the U.S. Dollar are translated into U.S. Dollars at the average monthly exchange rates in effect during the corresponding period of the prior fiscal year rather than at the actual average monthly exchange rate in effect during the current period of the current fiscal year. As a result, the foreign currency impact is equal to the current year’s results in local currencies multiplied by the change in average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.

 

Cash, Restricted Cash and Marketable Securities

 

The Company combines the Cash and cash equivalent and restricted cash financial statement line item with the Marketable securities financial statement line item as an aggregate total as reconciled in the liquidity and capital resource section below. The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its short-term liquidity position by combing these two GAAP metrics.

 

 

Operating Metrics and Non-GAAP Measures

 

We use the operating metrics and non-GAAP measures set forth in the table below to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. Other companies, including companies in our industry, may calculate operating metrics and non-GAAP measures with similar names differently which may reduce their usefulness as comparative measures. Certain variances are labeled as not meaningful (“NM”) throughout management's discussion and analysis.

 

	For the year ended May 31,
(in thousands of U.S. dollars)	2026				2025				2024
Net beverage revenue	$	253,976			$	240,595			$	202,094
Net cannabis revenue		268,342				249,001				272,798
Distribution revenue		327,244				271,228				258,740
Wellness revenue		65,892				60,485				55,310
Beverage costs		162,743				147,591				113,522
Cannabis costs		161,256				150,005				182,594
Distribution costs		286,589				241,896				230,596
Wellness costs		44,425				41,247				38,879
Adjusted gross profit (excluding PPA step-up) (1)		262,591				242,180				235,581
Beverage adjusted gross margin (excluding PPA step-up) (1)		37	%			39	%			46	%
Cannabis adjusted gross margin (excluding PPA step-up) (1)		40	%			40	%			36	%
Distribution gross margin		12	%			11	%			11	%
Wellness gross margin		33	%			32	%			30	%
Adjusted EBITDA (1)	$	61,139			$	55,035			$	60,465
Cash, restricted cash and marketable securities (1) as at the year ended:		234,631				256,363				260,522
Working capital as at the year ended:	$	433,754			$	408,323			$	378,540

 

(1)

Adjusted EBITDA, adjusted gross profit, adjusted gross margin for each of our segments are non-GAAP financial measures, and cash, restricted cash and marketable securities. See “Reconciliation of Non-GAAP Financial Measures to GAAP Measures” below for a reconciliation of these Non-GAAP Measures to our most comparable GAAP measure and the discussion above captioned "Cash, Restricted Cash and Marketable Securities."

 

 

Segment Reporting

 

Our reportable segments net revenue is primarily comprised of net revenues from our beverage, cannabis, distribution, and wellness operations, as follows:

 

	For the year ended May 31,										Change							Change
(in thousands of U.S. dollars)	2026				2025				2024		2026 vs. 2025							2025 vs. 2024
Beverage business	$	253,976			$	240,595			$	202,094	$	13,381				6	%	$	38,501				19	%
Cannabis business		268,342				249,001				272,798		19,341				8	%		(23,797	)			(9	)%
Distribution business		327,244				271,228				258,740		56,016				21