Tilray Brands, Inc. Reports Record Fiscal Year 2022 Results

Tilray Brands, Inc. Reports Record Fiscal Year 2022 Results

FY2022 Net Revenue Grew 22% to $628 Million Compared to the Prior Year; On a Constant Currency Basis, Net Revenue Increased by 29%

Fourth Quarter Net Revenue Grew 8% to $153 Million Compared to the Prior Year Period; On a Constant Currency Basis, Net Revenue Increased by 14% to $163 Million

Company Expects to Generate $70-$80 Million of Adjusted EBITDA and be Free-Cash Flow Positive in Its Operating Business Units in FY2023

Foundation in Place for Profitable and Sustainable Growth

  • Fourth Quarter International Cannabis Increased 205% from the Prior Year Q4; Tilray Medical Leads European Medical Cannabis Market with 20% Market Share in Germany
  • Delivered $85 Million in Cost Savings to Date, Exceeding Original Target on Accelerated Timeline; Company Now Expects to Deliver $100 Million by the End of FY2023
  • Significantly Strengthened Balance Sheet, Reduced Debt, and Ended FY2022 with $416 Million in Cash
  • Tilray Brands Sets Stage for Next Evolution of Cannabis Following HEXO Transaction, which Positions the Company for Additional Growth Opportunities in Canada, Europe, and the U.S

NEW YORK and LEAMINGTON, Ontario, July 28, 2022 (GLOBE NEWSWIRE) — Tilray Brands, Inc. (“Tilray” or the “Company”) (Nasdaq: TLRY; TSX: TLRY), a leading global cannabis-lifestyle and consumer packaged goods company inspiring and empowering the worldwide community to live their very best life, today reported financial results for the fourth quarter and full fiscal year ended May 31, 2022. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated, and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”).

Irwin D. Simon, Tilray Brands’ Chairman and Chief Executive Officer, stated, “Over the past year, we have accelerated the optimization of our operations and sharpened execution against our most profitable core business opportunities in medical, adult-use, wellness, and beverage-alcohol across Canada, Europe, and the U.S. At the same time, we accelerated our growth potential through tactical execution and strategic initiatives that enable accelerated revenue growth through improved cultivation, brand building, and distribution. These actions should also contribute to bottom-line performance improvement through production efficiencies and cost reductions. The outcome of this work is that we have driven top line growth across our markets, significantly improved our operating performance, and strengthened our balance sheet.”

He continued, “We are confident that our proactive steps to plan for the evolution of the cannabis business in each of our markets has positioned Tilray Brands to be at the forefront of the industry on a global basis while delivering profitability and driving shareholder value.”

Financial Highlights – 2022 Fiscal Fourth Quarter1

  • Net revenue grew 8% to $153.3 million during the fourth quarter from $142.2 million in the prior year quarter. On a constant currency basis, net revenue increased 14.5%.
  • Net loss of $457.8 million during the fourth quarter compared to net income of $33.6 million in the prior year quarter. Net loss in the fiscal 2022 fourth quarter includes a non-cash impairment of $395.0 million primarily impacting inventory, goodwill and other intangible assets. The impact was related to changes in market opportunities causing a shift in our strategic priorities, and market conditions inclusive of higher rates of borrowing and lower foreign exchange rates.
  • Adjusted EBITDA of $11.5 million, marking the Company’s 13th consecutive quarter of positive Adjusted EBITDA.

Financial Highlights- 2022 Fiscal Year

  • Net revenue increased 22% to $628.4 million during fiscal 2022 from $513.1 million in the prior fiscal year. The increase was driven by 17.9% growth in cannabis net revenue to $237.5 million, a 150.0% increase in beverage alcohol net revenue of $71.5 million, and a 928.8% increase in wellness net revenue to $59.6 million. On a constant currency basis, net revenue increased by 29%.
  • Net loss of $434 million in fiscal 2022 includes the non-cash impairment of $395.0 million in the fourth quarter (discussed above).
  • Adjusted EBITDA increased 17.8% to $48.0 million in fiscal year 2022 from $40.8 million in the prior fiscal year.
  • Ended the year with a strong balance sheet and liquidity, including cash and cash equivalents of $415.9 million.

Cost-Saving Synergies and Strengthened Balance Sheet

Since the closing of the Tilray-Aphria transaction, the Company has delivered $85 million in cost synergies, exceeding its original target of delivering $80 million of cost savings by the end of fiscal year 2023. These synergies are due to consolidation in key areas of cultivation and production, cannabis and product purchasing, sales and marketing, and corporate expenses. The Company has subsequently identified an additional $20 million of savings, and now expects to deliver a total of $100 million in cost synergies from the transaction by the end of fiscal year 2023.

Further, with the benefit of an additional $80 million of shared cost savings, synergies and financial benefits over the next two years associated with the HEXO transaction, management expects that Tilray Brands will be free cash flow positive in its business units in fiscal year 2023.

Upside Potential of HEXO Transaction

Tilray Brands’ acquisition of HEXO Corp.’s senior secured convertible note, on highly favorable terms, closed on July 12, 2022, bringing immediate accretion to the Company and facilitating collaboration and the sharing of best practices that will help Tilray Brands to drive ongoing international expansion and take advantage of the opportunities expected to come with federal legalization in the U.S. In addition, due to significant operating efficiencies, the companies expect to deliver a total of $80 million of shared cost savings over the next two years.

Highlights of Strategic Growth Actions in Fiscal 2022

United States:

  • August ’21 – Tilray Acquires Majority Position in Amended MedMen Convertible Notes 
  • November ’21 – Tilray’s SweetWater Brand Enters Spirits Category Through New Ready-To-Drink Cocktail Now Available in the United States 
  • December ’21 – Tilray Strengthens Strategic Position in the U.S. with Acquisition of Breckenridge Distillery 
  • December ’21 – SweetWater Brewing announced the acquisition of Alpine Beer Company and Green Flash Brewing Company
  • January ’22 – Manitoba Harvest Launches 2022 Wellness Boost Campaign
  • February ’22 – SweetWater Brewing Company Expands Distribution Across California 
  • February ’22 – SweetWater Brewing Company Continues Rapid Expansion with Distribution Rollout Across Washington & Oregon 
  • April ’22 – SweetWater Brewing Company celebrated 25th anniversary and hosted 420 music Festival in Atlanta, Georgia with 75 thousand festival goers
  • April ’22 – Manitoba Harvest Enters Exclusive Partnership with Whole Foods Market
  • April ’22 – Breckenridge Distillery Takes Home Two Double Gold and One Gold Medal at the 2022 San Francisco World Spirits Competition
  • April ’22 – Breckenridge Distillery Launches New Collectors Art Series with Denver Artist Alexandrea Pangburn

Canada:

  • June ’21 – Tilray Launches New Medical Cannabis Brand, Symbios 
  • June ’21 – Tilray Launches Canadian Craft Cannabis Brand, Broken Coast, in the U.S. with Broken Coast Lager 
  • August ’21 – Tilray Medical Launches New Medical Cannabis Edibles in Canada 
  • October ’21 – Tilray Strengthens Leadership Position in Canada with new addition of Blair MacNeil, President of Canada 
  • October ’21 – Tilray Expands Distribution across Canada with Great North Distributors 
  • December ’21 – Launch of Tilray’s Fast-Acting Oral Strips Highlights Commitment to Medical Cannabis Innovation and Patient Care 
  • March ’22 – Good Supply Brand Expands Its Award-Winning Cannabis Portfolio with Hash Bats™; A New ‘Hard-Hitting’ Infused Pre-Roll 
  • March ’22 – Solei Brand Launches New Wellness Product for Nighttime Use 
  • April ’22 – Solei Brand Launches the First Cannabis Edible Available in Quebec 
  • April ’22 – Tilray Brands hosts sold-out ‘Holy Smokes’ 420 Budtender event in Toronto
  • May ’22 – Good Supply Brand Expands High-Potency Cannabis Portfolio with Launch of Liquid Wax Vapes and New Exclusive Strains 

Europe and International:

  • July ’21 – Tilray’s Aphria RX GmbH Completes First Harvest and Delivery of Medical Cannabis Grown in Germany 
  • October ’21 – Tilray Launches Medical Cannabis in Luxembourg
  • November ’21 – Tilray Expands Medical Cannabis Footprint in Malta 
  • January ’22 – Tilray Expands Medical Cannabis Product Offering in Australia 
  • February ‘22 – Tilray Brands Consolidates its Global Medical Offering into Tilray Medical, a Comprehensive Portfolio of Brands and Products 
  • February ’22 – Tilray Launches Medical Cannabis Products in Malta 
  • March ’22 – Tilray Medical Expands Offering in Malta and Launches First Medical Cannabis Oil Products in Market 
  • May ’22 – Announced the launch of CBD lifestyle brand, POLLEN, on Amazon UK 

Webcast

Tilray Brands will host a webcast to discuss these results today at 8:30 a.m. ET. Investors may join the live webcast available on the Investors section of the Company’s website at www.tilray.com. The webcast will also be archived after the call concludes.

About Tilray Brands

Tilray Brands, Inc. (Nasdaq: TLRY; TSX: TLRY), is a leading global cannabis-lifestyle and consumer packaged goods company with operations in Canada, the United States, Europe, Australia, and Latin America that is changing people’s lives for the better – one person at a time. Tilray Brands delivers on this mission by inspiring and empowering the worldwide community to live their very best life, enhanced by moments of connection and wellbeing. Patients and consumers trust Tilray Brands to be the most responsible, trusted and market leading cannabis consumer products company in the world with a portfolio of innovative, high-quality and beloved brands that address the needs of the consumers, customers and patients we serve. A pioneer in cannabis research, cultivation, and distribution, Tilray Brands’ unprecedented production platform supports over 20 brands in over 20 countries, including comprehensive cannabis offerings, hemp-based foods, and craft beverages.

For more information on Tilray Brands, visit www.Tilray.com and follow @Tilray

Cautionary Statement Concerning Forward-Looking Statements

Certain statements in this press release constitute forward-looking information or forward-looking statements (together, “forward-looking statements”) under Canadian securities laws and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be subject to the “safe harbor” created by those sections and other applicable laws. Forward-looking statements can be identified by words such as “forecast,” “future,” “should,” “could,” “enable,” “potential,” “contemplate,” “believe,” “anticipate,” “estimate,” “plan,” “expect,” “intend,” “may,” “project,” “will,” “would” and the negative of these terms or similar expressions, although not all forward-looking statements contain these identifying words. Certain material factors, estimates, goals, projections or assumptions were used in drawing the conclusions contained in the forward-looking statements throughout this communication.

Forward-looking statements include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things: the Company’s ability to become the world’s leading cannabis-focused consumer branded company and achieve $4B in revenue by the end of fiscal 2024; the Company’s ability to generate $70-$80 million of Adjusted EBITDA and expectation to be free-cash flow positive in its operating business units in FY 2023; the Company’s ability to achieve operational scale, market share, distribution, profitability and revenue growth in particular markets, including in Canada, the U.S. and the EU; and the Company’s ability to successfully achieve the expected production efficiencies, synergies and cost savings relating to the HEXO transactions and agreed commercial arrangements; and the Company’s anticipated investments, including in organic and strategic growth, partnership efforts, product offerings and other initiatives.

Many factors could cause actual results, performance or achievement to be materially different from any forward-looking statements, and other risks and uncertainties not presently known to the Company or that the Company deems immaterial could also cause actual results or events to differ materially from those expressed in the forward-looking statements contained herein. For a more detailed discussion of these risks and other factors, see the most recently filed annual information form of the Company and the Annual Report on Form 10-K (and other periodic reports filed with the SEC) of the Company made with the SEC and available on EDGAR. The forward-looking statements included in this communication are made as of the date of this communication and the Company does not undertake any obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless required by applicable securities laws.

Use of Non-U.S. GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial measures, including adjusted gross margin, Adjusted EBITDA and free cash flow. Management believes that the non-GAAP financial measures presented provide useful additional information to investors about current trends in the Company’s operations and are useful for period-over-period comparisons of operations. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP measures may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded. They should be read only in connection with the Company’s Consolidated Statements of Operations and Cash Flows presented in accordance with GAAP.

Certain forward-looking non-GAAP financial measures included in this press release are not reconciled to the comparable forward-looking GAAP financial measures. The Company is not able to reconcile these forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures without unreasonable efforts because the Company is unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact GAAP measures but would not impact the non-GAAP measures. Such items may include litigation and related expenses, transaction costs, impairments, foreign exchange movements and other items. The unavailable information could have a significant impact on the Company’s GAAP financial results.

The Company believes presenting net sales at constant currency provides useful information to investors because it provides transparency to underlying performance in the Company’s 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 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.

Adjusted EBITDA is calculated as net income (loss) before inventory valuation adjustments; interest expenses, net; other expenses (income), net; deferred income tax (recoveries) expenses, current income tax expenses (benefit); foreign exchange gain (loss), net; depreciation and amortization expenses; stock-based compensation expenses; loss from equity method investments; loss on disposal of property and equipment; amortization of inventory step-up; severance costs; impairment of assets; and change in fair value of warrant liability. A reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP measure, has been provided in the financial statement tables included below in this press release. Gross margin, excluding inventory valuation adjustments, is calculated as revenue less cost of sales adjusted to add back inventory valuation adjustments and amortization of inventory step-up, divided by revenue. A reconciliation of Gross margin, excluding inventory valuation adjustments, to gross margin, the most directly comparable GAAP measure, has been provided in the financial statement tables included below in this press release. Free cash flow is comprised of two GAAP measures deducted from each other which are net cash flow provided by (used in) operating activities less investments in capital and intangible assets. A reconciliation of net cash flow provided by (used in) operating activities to free cash flow, the most directly comparable GAAP measure, has been provided in the financial statement tables included below in this press release.

For further information:

Media: Berrin Noorata, news@tilray.com

Investors: Raphael Gross, +1-203-682-8253, Raphael.Gross@icrinc.com

1 This press release includes certain non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP financial measures. Reconciliations of non-GAAP financial measures to GAAP financial measures and other non-GAAP financial calculations are provided herein in the tables.

Consolidated Statements of Financial Position

(In thousands of United States dollars)   May 31, 2022   May 31, 2021  
Assets          
Current assets          
Cash and cash equivalents   $ 415,909     $ 488,466    
Accounts receivable, net     95,279       87,309    
Inventory     245,529       256,429    
Prepaids and other current assets     46,786       48,920    
Current portion of convertible notes receivable           2,485    
Total current assets     803,503       883,609    
Capital assets     587,499       650,698    
Right-of-use assets     12,996       18,267    
Intangible assets     1,277,875       1,605,918    
Goodwill     2,641,305       2,832,794    
Interest in equity investees     4,952       8,106    
Long-term investments     10,050       17,685    
Convertible notes receivable     111,200          
Other assets     314       8,285    
Total assets   $ 5,449,694     $ 6,025,362    
Liabilities          
Current liabilities          
Bank indebtedness   $ 18,123     $ 8,717    
Accounts payable and accrued liabilities     157,431       212,813    
Contingent consideration     16,007       60,657    
Warrant liability     14,255       78,168    
Current portion of lease liabilities     6,703       4,264    
Current portion of long-term debt     67,823       36,622    
Total current liabilities     280,342       401,241    
Lease liabilities     11,329       53,946    
Long-term debt     117,879       167,486    
Convertible debentures     401,949       667,624    
Deferred tax liabilities, net     196,638       265,845    
Other liabilities     191       3,907    
Total liabilities     1,008,328       1,560,049    
Commitments and contingencies (refer to Note 17)          
Stockholders’ equity          
Common stock ($0.0001 par value; 990,000,000 shares authorized; 532,674,887 and 446,440,641 shares issued and outstanding, respectively)     53       46    
Additional paid-in capital     5,382,367       4,792,406    
Accumulated other comprehensive (deficit) income (loss)     (20,764 )     152,668    
Accumulated deficit     (962,851 )     (486,050 )  
Total Tilray Brands, Inc. stockholders’ equity     4,398,805       4,459,070    
Non-controlling interests     42,561       6,243    
Total stockholders’ equity     4,441,366       4,465,313    
Total liabilities and stockholders’ equity   $ 5,449,694     $ 6,025,362    
           

Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)

(In thousands of United States dollars, excpet for per share data)   For the three months ended May 31, For the year ended May 31,  
    2022       2021       2022       2021      
Net revenue   $ 153,325     $ 142,236     $ 628,372     $ 513,085      
Cost of goods sold     160,058       119,738       511,555       389,903      
Gross profit     (6,733 )     22,498       116,817       123,182      
Operating expenses:                    
General and administrative     41,400       32,839       162,801       111,575      
Selling     9,643       8,525       34,926       26,576      
Amortization     30,846       16,100       115,191       35,221      
Marketing and promotion     10,771       5,103       30,934       17,539      
Research and development     54       358       1,518       830      
Change in fair value of contingent consideration     (15,585 )           (44,650 )          
Impairment     378,241             378,241            
Litigation costs     4,099       2,099       16,518       3,251      
Transaction costs     1,221       31,161       31,739       60,361      
Total operating expenses     460,690       96,185       727,218       255,353      
Operating loss     (467,423 )     (73,687 )     (610,401 )     (132,171 )    
Interest expense, net     (5,522 )     (9,466 )     (27,944 )     (27,977 )    
Non-operating income (expense), net     11,342       121,510       197,671       (184,838 )    
Loss before income taxes     (461,603 )     38,357       (440,674 )     (344,986 )    
Income taxes (recovery)     (3,803 )     4,735       (6,542 )     (8,972 )    
Net loss   $ (457,800 )   $ 33,622     $ (434,132 )   $ (336,014 )    
Net loss per share – basic and diluted   $ (0.90 )   $ 0.38     $ (0.90 )   $ (1.25 )    
                     

Net Revenue by Operating Segment

(In thousands of United States dollars)   Year Ended May 31, 2022   % of Total Revenue   Year Ended May 31, 2022   % of Total Revenue  
Cannabis business   $ 237,522   38 %   $ 201,392   39 %  
Distribution business     259,747   42 %     277,300   54 %  
Beverage alcohol business     71,492   11 %     28,599   6 %  
Wellness business     59,611   9 %     5,794   1 %  
Net revenue   $ 628,372   100 %   $ 513,085   100 %  
                   
                   
                   
(In thousands of United States dollars)   Three months ended May 31, 2022   % of Total Revenue   Three months ended May 31, 2021   % of Total Revenue  
Cannabis business   $ 53,253   35 %   $ 53,703   38 %  
Distribution business     61,160   39 %     66,792   47 %  
Beverage alcohol business     22,727   15 %     15,947   11 %  
Wellness business     16,185   11 %     5,794   4 %  
Net revenue   $ 153,325   100 %   $ 142,236   100 %  
                   

Net Cannabis Revenue by Market Channel

(In thousands of United States dollars)   For the year ended May 31,   For the year ended May 31,        
    2022     2022      2021     2021         
Revenue from Canadian medical cannabis products   $ 30,599     13 %   $ 25,539     13 %        
Revenue from Canadian adult-use cannabis products     209,501     88 %     222,930     110 %        
Revenue from wholesale cannabis products     6,904     3 %     6,615     3 %        
Revenue from international cannabis products     53,887     23 %     9,250     5 %        
Less excise taxes     (63,369 )   -27 %     (62,942 )   -31 %        
Total   $ 237,522     100 %   $ 201,392     100 %        
                         
                         
                         
    For the three months ended May 31,   For the three months ended May 31,        
(In thousands of United States dollars)     2022     2022      2021     2021         
Revenue from Canadian medical cannabis products   $ 7,246     14 %   $ 6,968     13 %        
Revenue from Canadian adult-use cannabis products     46,869     88 %     59,710     111 %        
Revenue from wholesale cannabis products     141     0 %     56     0 %        
Revenue from international cannabis products     14,095     26 %     4,623     9 %        
Less excise taxes     (15,098 )   -28 %     (17,654 )   -33 %        
Total   $ 53,253     100 %   $ 53,703     100 %        
                         

Gross Margin and Adjusted Gross Margin

 (In thousands of United States dollars)   For the year ended May 31, 2022  
    Cannabis   Beverage   Distribution   Wellness   Total  
Revenue   $ 300,891     $ 74,959     $ 259,747     $ 59,611     $ 695,208    
Excise taxes     (63,369 )     (3,467 )                 (66,836 )  
Net revenue     237,522       71,492       259,747       59,611       628,372    
Cost of goods sold     194,834       32,033       243,231       41,457       511,555    
Gross profit     42,688       39,459       16,516       18,154       116,817    
Gross margin     18.0 %     55.2 %     6.4 %     30.5 %     18.6 %  
Adjustments:                      
Inventory valuation adjustments     59,500             7,500             67,000    
Purchase price accounting step-up           2,214                   2,214    
Adjusted gross profit     102,188       41,673       24,016       18,154       186,031    
Adjusted gross margin     43.0 %     58.3 %     9.2 %     30.5 %     29.6 %  
                       
 (In thousands of United States dollars)   For the year ended May 31, 2021  
    Cannabis   Beverage   Distribution   Wellness   Total  
Revenue   $ 264,334     $ 29,661     $ 277,300     $ 5,794     $ 577,089    
Excise taxes     (62,942 )     (1,062 )                 (64,004 )  
Net revenue     201,392       28,599       277,300       5,794       513,085    
Cost of goods sold     130,511       12,687       242,472       4,233       389,903    
Gross profit     70,881       15,912       34,828       1,561       123,182    
Gross margin     35.2 %     55.6 %     12.6 %     26.9 %     24.0 %  
Adjustments:                      
Inventory valuation adjustments     19,919                         19,919    
Purchase price accounting step-up           835                   835    
Adjusted gross profit     90,800       16,747       34,828       1,561       143,936    
Adjusted gross margin     45.1 %     58.6 %     12.6 %     26.9 %     28.1 %  
                       
(In thousands of United States dollars)   For the three months ended May 31, 2022  
    Cannabis   Beverage   Distribution   Wellness   Total  
Revenue   $ 68,351     $ 23,459     $ 61,160     $ 16,185     $ 169,155    
Excise taxes     (15,098 )     (732 )                 (15,830 )  
Net revenue     53,253       22,727       61,160       16,185       153,325    
Cost of goods sold     72,342       11,359       65,138       11,219       160,058    
Gross profit     (19,089 )     11,368       (3,978 )     4,966       (6,733 )  
Gross margin     -35.8 %     50.0 %     -6.5 %     30.7 %     -4.4 %  
Adjustments:                      
Inventory valuation adjustments     47,500             7,500             55,000    
Purchase price accounting step-up           2,214                   2,214    
Adjusted gross profit     28,411       13,582       3,522       4,966       50,481    
Adjusted gross margin     53.4 %     59.8 %     5.8 %     30.7 %     32.9 %  
                       
 (In thousands of United States dollars)   For the three months ended May 31, 2021  
    Cannabis   Beverage   Distribution   Wellness   Total  
Revenue   $ 71,357     $ 16,549     $ 66,792     $ 5,794     $ 160,492    
Excise taxes     (17,654 )     (602 )                 (18,256 )  
Net revenue     53,703       15,947       66,792       5,794       142,236    
Cost of goods sold     49,731       5,350       60,424       4,233       119,738    
Gross profit     3,972       10,597       6,368       1,561       22,498    
Gross margin     7.4 %     66.5 %     9.5 %     26.9 %     15.8 %  
Adjustments:                      
Inventory valuation adjustments     19,919                         19,919    
Purchase price accounting step-up           835                   835    
Adjusted gross profit     23,891       11,432       6,368       1,561       43,252    
Adjusted gross margin     44.5 %     71.7 %     9.5 %     26.9 %     30.4 %  

Adjusted Earnings before Interest, Taxes, and Amortization

                   
(In thousands of United States dollars)    Three months ended May 31,   Year ended May 31,  
Adjusted EBITDA reconciliation:     2022       2021       2022       2021    
Net loss   $ (457,800 )   $ 33,622     $ (434,132 )   $ (336,014 )  
Income taxes     (3,803 )     4,735       (6,542 )     (8,972 )  
Interest expense, net     5,522       9,466       27,944       27,977    
Non-operating expense (income), net     (11,350 )     (121,510 )     (197,671 )     184,838    
Amortization     40,768       24,540       154,592       67,832    
Stock-based compensation     8,969       5,937       35,994       17,351    
Change in fair value of contingent consideration     (15,577 )           (44,650 )        
Impairment     378,241             378,241          
Inventory valuation adjustments     55,000       19,919       67,000       19,919    
Purchase price accounting step up     2,214       835       2,214       835    
Facility start-up and closure costs     3,300       2,056       13,700       2,056    
Lease expense     700       335       3,100       1,337    
Litigation costs     4,099       2,099       16,518       3,251    
Transaction costs     1,221       31,161       31,739       60,361    
Adjusted EBITDA   $ 11,504     $ 13,195     $ 48,047     $ 40,771    

Key Operating Metrics

                 
                 
    For the three months ended May 31,   For the years ended May 31,
(In thousands of United States dollars)     2022       2021       2022       2021  
Net cannabis revenue   $ 53,253     $ 53,703     $ 237,522     $ 201,392  
Net beverage alcohol revenue     22,727       15,947       71,492       28,599  
Distribution revenue     61,160       66,792       259,747       277,300  
Wellness revenue     16,185       5,794       59,611       5,794  
Cannabis cost of sales     72,342       49,731       194,834       130,511  
Beverage alcohol cost of sales     11,359       5,350       32,033       12,687  
Distribution cost of sales     65,138       60,424       243,231       242,472  
Wellness cost of sales     11,219       4,233       41,457       4,233  
Gross profit (excluding inventory valuation adjustments and step-up)     50,481       43,252       186,031       143,936  
Cannabis gross margin (excluding inventory valuation adjustments and step-up)     53.4 %     44.5 %     43.0 %     45.1 %
Beverage gross margin (excluding inventory valuation adjustments and step-up)     59.8 %     71.7 %     58.3 %     58.6 %
Distribution gross margin (excluding inventory valuation adjustments and step-up)     5.8 %     9.5 %     9.2 %     12.6 %
Wellness gross margin (excluding inventory valuation adjustments and step-up)     30.7 %     26.9 %     30.5 %     26.9 %
Adjusted EBITDA     11,504       13,195       48,047       40,771  
Cash and cash equivalents     415,909       488,466       415,909       488,466  
Working capital     523,161       479,883       523,161       482,368  
                 

 

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