Tilray's Q1 2026: Contradictions Emerge on Production Expansion, International Growth, Digital Assets, European Strategy and SKU Rationalization

The above is the analysis of the conflicting points in this earnings call

Date of Call: October 9, 2025

Financials Results

• Revenue: $210M, up 5% YOY
• EPS: $0.00 per share, versus a net loss of $34.7M in the prior year
• Gross Margin: 27%, compared to 30% in the prior year

Guidance:

• Reaffirmed FY2026 adjusted EBITDA outlook of $62M–$72M.
• Expect Cannabis to contribute a higher share of revenue over the remainder of FY2026.
• International Cannabis growth to improve once EU permits clear; aim to triple German medical distribution footprint in FY2026 via CC Pharma.
• Project 420 cost savings: $25M realized toward $33M target; further integration and SKU rationalization ongoing.
• Plan to expand non-alcoholic and hemp-derived Delta-9 beverage distribution across additional U.S. markets.

Business Commentary:

* Revenue and Profitability Growth: - Tilray reported record revenue of $210 million for Q1 2026, marking a 5% year-over-year increase. - The growth was driven by double-digit growth in the Canadian Adult-Use and International Cannabis business sectors.

• Canadian Cannabis Business Performance:
• Tilray's Canadian cannabis revenue grew 4% year-over-year to $51 million.

• The growth was attributed to Tilray being the top 5 licensed producer in market share and expanding its product offerings, particularly in pre-rolls, beverages, oils, and chocolate edibles.

• International Cannabis and Distribution Expansion:

• International cannabis revenue increased 10% year-over-year to $13.4 million.

• Growth was supported by Tilray's expansion of its commercial medical cannabis portfolio in Germany and increasing distribution capabilities through CC Pharma.

• Beverage Segment Strategy and SKU Rationalization:

• Beverage revenue reached $55.7 million, with a focus on Project 420 and integrating acquired brands.
• The segment faced challenges due to deliberate SKU rationalization, impacting gross margin; however, innovations and strategic partnerships brought promising growth.

Sentiment Analysis:

• Record Q1 net revenue of $210M (+5% YOY) and net income of $1.5M ($0.00/share) versus a prior-year loss; reaffirmed FY2026 adjusted EBITDA guidance of $62–$72M; Cannabis (+5% YOY) and Distribution (+9% YOY) grew; debt reduced by $7.7M and cash ended at $265M. Management acknowledged gross margin declined to 27% from 30%.

Q&A:

• Question from Aaron Grey (Alliance Global Partners): Please detail the status/impact of EU permit delays and how you plan to triple medical cannabis distribution in FY26 via CC Pharma.
  Response: Portugal permits are now coming through; some shipments may shift to Q3 due to German quotas; growth will leverage CC Pharma’s 13k-pharmacy network and added capacity in Portugal and Germany.

• Question from Aaron Grey (Alliance Global Partners): If U.S. cannabis is rescheduled to Schedule III, can you capture the opportunity organically or would acquisitions be needed?
  Response: Tilray can deploy its existing Canadian/EU medical infrastructure and genetics immediately and is open to pharma partnerships or acquisitions if they accelerate entry.

• Question from William Kirk (ROTH Capital Partners): Clarify the $1M digital assets—investment vs payments, preferred tokens, and cash allocation to crypto.
  Response: Tilray purchased Bitcoin, is evaluating Ethereum/Solana, will enable crypto payments and explore tokenization; crypto is complementary, not a core strategic shift.

• Question from William Kirk (ROTH Capital Partners): What portion of EU sales is sourced from Portugal vs Canada, and what are the risks if Germany changes import rules?
  Response: Most EU sales are supplied from EU facilities; any Canadian product is processed to EU-GMP in Portugal; management sees German restrictions on EU imports as unlikely due to limited domestic supply.

• Question from Xin Ma (TD Cowen): State of Canadian adult-use—market maturity and your growth; price vs volume contribution?
  Response: Market prices fell ~1.3% and volumes rose ~6.5%; Tilray raised prices ~2%, outgrew market volume, and gained share as the only top-5 LP to grow.

• Question from Xin Ma (TD Cowen): How will you improve Beverage margins, and where are you on Project 420?
  Response: Achieved $25M of savings toward $33M via SKU rationalization and facility closures; relisting brands and procurement efficiencies should lift margins despite a tough beer category.

• Question from Frederico Yokota Gomes (ATB Capital Markets): How are you mitigating Portugal permitting risk—are you diversifying supply?
  Response: Tilray remains committed to Portugal with improving permits and government support, while maintaining options via German capacity and EU-GMP shipments from Canada.

• Question from Frederico Yokota Gomes (ATB Capital Markets): Potential German prescription/market rule changes—impact and timing?
  Response: Management won’t speculate; expects patients to retain access through Germany’s broad pharmacy network and is lobbying to preserve medical access regardless of online prescription changes.