Tilray's Q2 2026 Earnings Call Contradictions: Regulatory Shifts in Germany, Strategic Revisions in U.S. Cannabis Rescheduling, and Inventory Recognition Divergences

Date of Call: January 2026 (implied from Q2 2026 fiscal year ended November 30, 2025)

Financials Results

• Revenue: $217.5 million, a record Q2 net revenue
• EPS: Adjusted EPS loss of $0.02 (impacted by reverse stock split); net loss per share $0.41, a 49% improvement year-over-year from $0.99
• Gross Margin: 26%, with cannabis gross margin increasing to 39% (up from 35% last year), beverage gross margin 31% (a temporary decrease from last year), distribution gross margin 13% (up from 12% last year), wellness gross margin 32% (up from 31% last year)

Guidance:

• Reaffirmed full year 2026 adjusted EBITDA guidance of $62 million to $72 million.
• Expect Q4 beverage revenue and gross margins to improve due to spring retailer product resets.
• Anticipate increased international cannabis momentum and growth in European markets like the U.K. and Poland.
• Project 420 on track to deliver $33 million in annualized cost savings by Q4 2026.
• Expect to triple medical cannabis distribution footprint in fiscal 2026.

Business Commentary:

• Record Revenue and Improved Profitability:
• Tilray Brands reported record net revenue of $218 million for Q2 2026, achieving a 51% sequential growth in international cannabis revenue and a meaningful year-over-year improvement in both net income and free cash flow.

• The growth was driven by strong performance in international cannabis and Tilray Pharma, alongside a strategic shift of supply from the Canadian wholesale market to higher-margin international markets.

• International Cannabis and Pharma Expansion:

• Global cannabis revenue increased to $68 million, with international cannabis revenue growing 36% year-over-year and 51% sequentially, while Tilray Pharma's revenue grew 26% year-over-year to $85 million.

• This expansion was fueled by a focus on competitive pricing, portfolio optimization, and an increase in medical cannabis distribution footprint, alongside strategic operational enhancements.

• Beverage Segment Challenges and Turnaround Strategy:

• Beverage revenue totaled $50 million, impacted by category-wide headwinds in craft beer and ongoing portfolio optimization efforts.

• The company delivered $27 million in annualized cost savings in the first half of the year and remains on track towards a $33 million target, with anticipated improvements expected from spring retailer product resets.

• Strong Cash Position and Balance Sheet:

• The company ended the quarter with $292 million in cash and marketable securities, reducing debt by approximately $4 million during Q2, leading to a net cash position exceeding debt by almost $30 million.

• This strong liquidity position is viewed as a strategic advantage in navigating the evolving regulatory environment, especially with potential U.S. cannabis rescheduling.

• Medical Cannabis Leadership and U.S. Regulatory Preparedness:

• Tilray Medical operates with over 200 medical cannabis products, serving more than 500,000 registered patients globally and anticipates generating approximately $150 million in revenue annually.
• The company is prepared for potential U.S. federal rescheduling, leveraging its existing platform, regulatory experience, and clinical research to position itself for immediate action in the medical cannabis sector.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized 'record results', 'strong second quarter', 'improving fundamentals', and 'momentum' across businesses. Stated 'We are confident in Tilray's trajectories for the second half of fiscal 2026 and beyond' and 'reaffirming our full year 2026 adjusted EBITDA guidance'.

Q&A:

• Question from William Kirk (ROTH Capital Partners): On the intoxicating hemp bands for November implementation, is there anything Irwin that the industry can do to try to improve the regulatory outcome?
  Response: Industry is working with lawmakers to extend deadlines or adjust regulations; feels good about conversations and highlights potential job losses if banned.

• Question from William Kirk (ROTH Capital Partners): 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?
  Response: Held back ~$5 million of lower-margin Canadian wholesale inventory to redeploy into higher-margin European markets over the next six months.

• Question from Unknown Analyst (TD Securities, on behalf of Robert Moskow): 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?
  Response: Growth was driven by demand and new product rollouts, not price; gained some market share. Distribution sales increase driven by better pricing, high-margin SKUs, and favorable foreign exchange.

• Question from Aaron Grey (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 maybe on the timing of that expectation. And then you also mentioned some of commentary briefly regarding potential regulatory changes in Germany as well as pricing pressure.
  Response: $150 million is current annualized run rate; not concerned about regulatory changes in Germany, sees strong demand and quality positioning to mitigate price compression.

• Question from Aaron Grey (Alliance Global Partners): 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 are your expectations for growth within the Canadian market?
  Response: Expects mid- to high single-digit growth in Canada, focusing on premium products and new launches; shifted some lower-margin supply to international markets for higher margins.

• Question from Pablo Zuanic (Zuanic & Associates): 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.
  Response: CC Pharma modernized and is being expanded using its sales organization to grow medical cannabis sales in Germany; open to carrying competitor products if profitable.

• Question from Pablo Zuanic (Zuanic & Associates): 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.
  Response: Beverage integration is taking time; confident in long-term strategy due to vertical integration, industry resilience, and future opportunities in cannabis-infused drinks.

• Question from Frederico Yokota Gomes (ATB Capital Markets): 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.
  Response: Rescheduling focuses Tilray's U.S. entry on medical cannabis research and clinical trials, not state-by-state recreational investments.

• Question from Frederico Yokota Gomes (ATB Capital Markets): And then second question, international cannabis. Could you help us understand outside of Germany, what are the main international markets you have right now?
  Response: Key markets include Poland, Italy, U.K., and opportunities in Middle East and India; U.S. rescheduling is influencing global perception of cannabis legitimacy.

Contradiction Point 1

German Regulatory Environment and Business Risk

A significant shift in risk assessment and strategic posture regarding a key international market. The company moves from preparing for and downplaying potential disruptive regulatory changes to expressing complete confidence and dismissing any risk, which directly impacts the perceived stability and future growth of a major revenue stream.

What is the expected timeline for Tilray Global Medical's $150M? Could you quantify the risk from potential regulatory changes and pricing pressure in Germany for 2026? - Aaron Grey (Alliance Global Partners)

20260109-2026 Q2: The company is not concerned about regulatory changes in Germany, as recent developments are viewed positively. - Irwin Simon(CEO)

How do Portugal's permit delays affect near-term international growth, and how will CC Pharma's threefold medical cannabis business expansion be achieved by fiscal 2026? - Aaron Grey (Alliance Global Partners)

2026Q1: Germany's quota system and import restrictions, which may shift business to Q3 2026." and "The company believes Germany would struggle to supply its market if it banned imports, making such a regulatory change difficult. - Irwin Simon(CEO)

Contradiction Point 2

U.S. Cannabis Rescheduling Strategy and Focus

This represents a narrowing of a previously stated broad strategic opportunity. The company shifts from being open to multiple paths (organic, partnership, acquisition) to achieve U.S. growth, to a fixed plan focused solely on building a medical cannabis business post-rescheduling. This change could limit perceived growth potential and pathway flexibility.

Can you clarify whether the U.S. federal cannabis rescheduling refers to a full reschedule rather than a state-by-state approach? - Pablo Zuanic (Zuanic & Associates)

20260109-2026 Q2: Tilray's focus is on medical cannabis, not recreational state-by-state. The plan is to leverage the U.S. rescheduling to build a medical cannabis business in the U.S. - Irwin Simon(CEO)

With the potential U.S. cannabis rescheduling to Schedule III, do you have the existing infrastructure to capitalize on it, or would acquisitions be necessary? - Aaron Grey (Alliance Global Partners)

2026Q1: Tilray is well-prepared with existing infrastructure... The company is open to various paths, including leveraging this internal capability, partnering with a pharmaceutical company, or making strategic acquisitions if needed. - Irwin Simon(CEO)

Contradiction Point 3

Amount and Timing of Trapped Inventory Recognition

This is a direct contradiction regarding a specific financial event—the recognition of previously held inventory. The change in both the **amount** ($8M vs. $5M) and the **timing** (specific quarters vs. a vague 6-month period) impacts the accuracy of past financial guidance and raises questions about the management's ability to forecast and manage working capital.

Did you hold back supply to shift it to international markets? Can you quantify how much supply was delayed? - William Kirk (ROTH Capital Partners)

20260109-2026 Q2: The company held back approximately $5 million worth of inventory from the lower-margin Canadian wholesale market and redeployed it to higher-margin international markets over the next 6 months. - Carl Merton(CFO) & Irwin Simon(CEO)

1) Current status of import permit delays and visibility on their approval timeline and impact? 2) Canada's market equilibrium and easing price pressures. What are your current observations and annual expectations? - Kaumil S. Gajrawala (Jefferies)

2025Q4: They expect the previously trapped inventory (approximately $8 million) to be recognized in Q1 2026, with some potentially in Q2. - Irwin David Simon(CEO), with confirmation from Denise Menikheim Faltischek and Rajnish Ohri.

Contradiction Point 4

Scale and Purpose of Canadian Cultivation Expansion

A material change in the stated rationale and scale for a major capital allocation decision. The narrative shifts from a domestically focused, measured expansion to one explicitly driven by international profit motives, suggesting a potential repurposing of assets and a reevaluation of core market priorities.

What are your 2026 growth expectations in the Canadian market? Did a growth slowdown lead to international product shifts? - Aaron Grey (Alliance Global Partners)

20260109-2026 Q2: The decision to shift supply internationally is driven by the opportunity to sell higher-margin product to European markets, not by a slowdown in domestic demand. Tilray has ample production capacity (270mt) to supply both markets. - Irwin Simon(CEO)

1) What categories in beverage/wellness international expansion (Europe/Asia) are most exciting? What is the timeline and approach (organic vs. M&A)? 2) How advanced is the ramp-up for Canadian cultivation expansion? Will the product be exported or remain in Canada? - Frederico Yokota Choucair Gomes (ATB Capital Markets)

2025Q4: The expansion is to support **domestic demand**. Most of the increased capacity will stay in Canada, with only about **2.5-3 metric tons** allocated for international sale. - Irwin David Simon(CEO)

Contradiction Point 5

U.S. Regulatory Strategy and Focus (Hemp-Derived Beverages)

This highlights a strategic pivot away from a previously expressed belief in a significant, near-term legal market opportunity. The shift from viewing hemp-derived THC beverages as a category with broad legal potential to not being mentioned in the context of a new, narrow medical focus could indicate a change in market assessment or corporate priorities.

In your press release, you mention U.S. federally rescheduling cannabis. Do you consider this a full reschedule rather than state-by-state changes? - Pablo Zuanic (Zuanic & Associates)

20260109-2026 Q2: Tilray's focus is on medical cannabis, not recreational state-by-state. The plan is to leverage the U.S. rescheduling to build a medical cannabis business in the U.S. - Irwin Simon(CEO)

How would Tilray's strategy be impacted if the U.S. hemp-derived THC beverage market closed due to regulatory changes? - Matt Bottomley (Canaccord Genuity)

2025Q3: The company believes the [hemp-derived THC beverage] category has potential to become legal in all 50 states. - Irwin Simon(CEO) & Jared Simon(President, Manitoba Harvest & Tilray Wellness)