Tilray Brands, Inc’s. (NASDAQ:TLRY) third-quarter net revenue decreased from $188.3 million to $185.8 million, missing the consensus of $210.45 million.

Net revenue increased to ~$193 million on a constant currency basis. The prior-year quarter included revenue of $6 million of now-discontinued SKUs. Strategic initiatives and SKU rationalization impacted revenue by $13.2 million in the current year quarter.

The cannabis company reported a breakeven in adjusted EPS ($0.00) compared to a consensus loss of 4 cents.

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Gross profit increased by 5% to $52.0 million compared to $49.4 million in the prior year quarter. Gross margin increased 200 bps to 28% in the third quarter compared to 26% in the prior year quarter.

Adjusted EBITDA was $9.0 million compared to $10.2 million in the prior year quarter due to the beverage segment’s SKU rationalization impact of $1.0 million and $0.6 million related to the prioritization of international cannabis markets.

Beverage alcohol net revenue increased to $55.9 million, up from $54.7 million in the prior year.

Cannabis’ net revenue was $54.3 million compared to $63.4 million in the prior year quarter. On a constant currency basis, Cannabis net revenue was $57.5 million.

• The strategic initiative to redirect product from Canada to international markets resulted in a timing impact on revenue of $3.2 million.
• Additionally, a strategic decision to pause presence in margin dilutive categories, such as vapes and infused pre-rolls, led to a revenue decrease of $4.0 million but prevented a potential loss exceeding $3 million.

Distribution net revenue increased 8% to $61.5 million. It was up 15% to $65.1 million on a constant currency basis.

Wellness net revenue increased 5% to $14.1 million and 8% on a constant currency basis to $14.5 million.

Tariff Update: Tilray concluded that tariffs should not impact sales.

• In the U.S., Tilray’s American beverage brands are solely manufactured and distributed within the U.S. market.
• In Canada, Tilray’s cannabis brands are produced domestically for Canadian consumers.
• In Europe, Tilray manufactures medical cannabis brands and products for distribution across Europe and Australia.
• Regarding Tilray’s wellness business, Manitoba Harvest is exempted from the new tariffs.

Tilray reduced outstanding total debt by $71 million. As a result, net debt to trailing twelve months EBITDA is less than 1.0x

Guidance: Tilray Brands revised its fiscal year 2025 net revenue guidance to $850 million to $900 million from prior guidance of $950 million-$1 billion.

The company said adjustments for constant currency and the impacts of the strategic initiatives and SKU rationalization, which total approximately $50 million, would have resulted in an expected net revenue of $900 million to $950 million.

Price Action: TLRY stock is up 0.12% at $0.58 during the premarket session at the last check on Tuesday.

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