Tilray Brands, Inc. (NASDAQ:TLRY) Q2 2023 Results Conference Call January 9, 2023 8:30 AM ET
Company Participants
Berrin Noorata – Chief Corporate Affairs Officer
Irwin Simon – Chairman and Chief Executive Officer
Carl Merton – Chief Financial Officer
Denise Faltischek – Chief Strategy Officer and Head, International
Blair MacNeil – President, Tilray Canada
Ty Gilmore – President, U.S. Beer Business
Conference Call Participants
Victor Ma – Cowen & Company
Nadine Sarwat – Bernstein
Andrew Carter – Stifel
Aaron Grey – Alliance Global Partners
Owen Bennett – Jefferies
John Zamparo – CIBC
Michael Lavery – Piper Sandler
Pablo Zuanic – Cantor Fitzgerald
Matt Bottomley – Canaccord
Frederico Gomes – ATB Capital
Operator
Greetings. Welcome to Tilray’s Second Quarter 2023 Earnings Call. At this time, all participants will be in a listen-only mode. Question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.
At this time, I’ll turn the conference over to Berrin Noorata, Chief Corporate Affairs Officer. Berrin, you may now begin.
Berrin Noorata
Thank you, and good morning. By now, everyone should have access to the earning press release, which is available on the Investors section of the Tilray brands website at tilray.com and has been filed with this SEC and SEDAR.
On today’s call, we will be referring to various non-GAAP financial measures, which can provide useful information for investors. However, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. The earnings press release contains a reconciliation of each non-GAAP financial measure to the most comparable measure prepared in accordance with GAAP.
In addition, we will be making numerous forward-looking statements during our remarks and in response to your questions. These statements are based on our current expectations and beliefs and involve known and unknown risks and uncertainties, which may prove to be incorrect. Actual results could differ materially from those described in these forward-looking statements. The tax in our press release issued today includes many of the risks and uncertainties associated with such forward-looking statements.
Today, you will hear from key members of our senior leadership team. Irwin Simon, Chairman and Chief Executive Officer, Tilray Brands Inc.; and Carl Merton, Chief Financial Officer, who will provide a quarterly financial review as well as reaffirm our full year free cash flow and adjusted EBITDA guidance. Also joining for the question segment of this call are Denise Faltischek, Chief Strategy Officer and Head of International; Blair McNeill, President, Tilray Canada; and Ty Gilmore, who recently joined the team as President of our U.S. Beer Business.
And now, I’d like to turn the call over to Tilray Brands Chairman and CEO, Irwin Simon.
Irwin Simon
Thank you, Berrin, and hello, everyone. We appreciate you joining this morning and hope everyone had a nice holiday season and a great start to 2023. We head into this New Year with momentum and a real-line platform centered around three priorities to create the world’s leading and most diversified cannabis lifestyle and consumer packaged goods company in the world across adult use medical cannabis, beverage alcohol and wellness consumer products.
These priorities include: pursuing our most profitable core business to drive growth now and over the long term which we’re well on our way to realizing this. Maintaining our number one leadership position and growing market share in recreational cannabis in Canada, the largest federated legal market in the world. Maintaining our leadership position and growing market share in medical cannabis across Europe and a strong position to capture the adult-use market when legalization does occur.
And winning in the U.S. despite delayed federal cannabis legalization, which we do not expect to happen at any time in the near future, we’ve invested in leading and profitable cannabis adjacent CPG lifestyle brands across craft-beverage alcohol and wellness consumer products that resonates powerfully with consumers that are ideally positioned in key markets. When federal cannabis legalization does occur, we will leverage our U.S. brands and business their distribution and marketing networks to enter and capture opportunities by essentially creating a broad set of cannabis-infused and focus CPG brands.
We are also, of course, diligently focused on optimizing our global operations while remaining that low-cost producer. And last but not least, strengthening our industry-leading balance sheet and driving our cash position because it affords us opportunities for growth, expansion, including through cannabis adjacencies within the context of economically on certain environment. I want to emphasize the value potential of Tilray brands built on growth opportunities and our foresight to diversify both organic and acquisitive.
I am confident in the fundamental potential of Tilray brands as the most diversified cannabis lifestyle company and consumer packaged good leader. We have already made notable progress in quarter two and exceeding against these priorities. As it is evident by significant improvements in operating cash flow despite a challenging top line performance, we have, of course, a long view generating free cash as an integral part of our business model, in turn, enable us to deliver on our highest priority delivering sustained durable shareholder value.
Close observers of Tilray brands and our team know one thing, we moved quickly and decisively to adapt to the market changes. And I’m proud to highlight that even with the breadth of the platform and our sheer scale, we remain agile, pivoted quickly making smart strategic decisions and executed against them with our free cash flow objective accomplished. For example, during the quarter, we opt to build cash by temporarily slowing down production in our cannabis facilities because of the longer-than-anticipated march toward legalization in key markets.
This included cutting headcount and reducing other operational costs. I want to highlight at the outset our bottom line initiatives, first, and our top line initiatives second, this is appropriate given the market and the incredible progress we have made to drive efficiencies and a lead built-to-last platform. I want to start this discussion with our cost optimization plan we have already removed over $100 million of cash costs when compared to a year ago.
These cost reductions, which I’ll detail shortly, have guided us to achieving over $29 million of positive operating cash flow and $25 million of positive free cash flow this quarter. The components of this effort include cost synergies realized from the Aphria-Tilray business combination, which closed nearly two years ago, represents the starting point for building an efficient and agile foundation.
Recall that our revised post-closure target was increased to $100 million from $80 million in cost savings, which, as of Q2 has been completed. Beyond the Aphria-Tilray synergies, we launched an additional $30 million cost optimization plan, of which we have already achieved $19.6 million on an annualized run rate basis to further solidify our status as the industry-leading low-cost producer.
And finally, our robust balance sheet consists of approximately $433 million of cash and marketable securities, with over 70% of our debt set with fixed interest rates. This solid financial foundation enables us to be opportunistic in capturing market share across global cannabis and CPG adjacencies as we watch what unfolds with respect to legalization in the U.S. and elsewhere.
Having discussed cost structure initiatives and our commitment to maintaining a strong balance sheet, I would now like to focus your attention to our potential to seize top line opportunities across both geographies and business lines specifically. In Canada, we maintained our number one market share position in recreational cannabis despite pressures caused by difficult operating conditions, ongoing price compressions and high excise tax, forcing both industry consolidation and a reduction in roughly 925 licensed producers that are operating today.
Despite these challenging conditions, Tilray remains the number one cannabis market share position with an 8.3% market share in Q2. In Q1, Tilray led the next largest license producer by 54 basis points while in Q2, we expanded the lead to 176 basis points. Our share was up 28 basis points outside of Quebec. Recall that this data is sourced from Hifyre for all markets except Quebec, where we utilize Weedcrawler for more accurate reflection of the marketplace. We continue to build a thoughtful approach to innovation, quality over quantity.
In Q2, we launched products in regions, segments and categories where we had gaps in our portfolio. We leverage our leading proprietary consumer research to ensure we understand clearly what consumer values are in those regions, segments and products. As an example of this, we relaunched RIFF flower, focusing on a segment where we had gaps in our portfolio. Moving forward, our thoughtful innovation will also be easier on the environment.
In 2023, Tilray will convert all flower, vape, pre-roll packaging to half, diverting 158,000 kilos of plastic away from landfill sites. In Canada today, we have the leading internal capabilities in low-cost flower production infused and non-infuse pre-roll automation, BHO, live resin, distillate, vape production and state-of-the-art beverage formulation and production and further manage overhead more efficiently, help stabilization and sustain Canadian cannabis industry, we have reached out to numerous industry partners to leverage our expertise low-cost environment and existing capacity in coal manufacturing partnerships.
We understand the challenging nature of cannabis in Canada. Our investment in consumer insights, innovation, cost optimization and market-leading sales coverage have allowed us to be stable during a time of instability. From our vantage point, we think we’re best situated to thrive as these dynamic play outs and we intend to stay the course for the long term.
In Europe, we are seeing momentum across the continent that we expect to result in 27 countries working together to establish a collaborative effort on cannabis regulation. The EU has already embraced medical cannabis with broad scale adult use legalization expect to follow over the next couple of years. When this happens, we’re strongly positioned to further seize on the opportunity.
European cannabis business offers having built an unrivaled platform through our growing facilities in Portugal and Germany. The shift is supported by growing acceptance of medical cannabis for treatment of numerous conditions and followed by growing support for cannabis legalization of adult use as well.
We believe we’re exceptionally positioned to benefit from the meaningful economic growth that will come to our industry as a result of these positive changes because of our end-to-end EU GMP supply, which enables us to leverage existing assets to meet demand for medical and adult-use cannabis when legalization does happen.
However, in the near term, our industry along with almost all others are contending with a difficult economic environment in Europe because of soaring inflation which is due at least in part to the ongoing war in Ukraine. This is affecting all key cost inputs, but particularly energy prices and is doing so negatively affecting consumer behavior. In Germany, our Tilray-branded medical business increased in the second quarter over the prior year quarter by 4% and 20% on a constant currency basis.
In Poland, we completed our first two shipments of medical cannabis in Q2 and submitted additional doses for new products. In Italy, we expect to commence the distribution of our T25 medical cannabis extracts in quarter three. Consistent with our approach of all our businesses, we are relentless focused on both improving the quality and consistency of our medical cannabis products as well as our cost structure in order to be that low-cost producer in Europe.
Therefore, we have developed a plan to take approximately $7 million of cost out of our European business. We strongly believe that our competitive differentiators in Europe are being that low-cost producer of high-quality consistent cannabis.
Our integration of CC Pharma, our medical cannabis teams to enhance and improve our sales function with CC Pharma’s strong pharma relationships, both in Germany and throughout Europe, bringing credibility to cannabis. Our regulatory expertise to navigate the challenging regulatory landscape throughout Europe will continue to solidify our leadership position.
In summary, while there are some near-term headwinds, we view this as an exciting time for us across Europe. Anchored by our strategy, our people, assets and resources and the tremendous opportunity we see ahead.
Turning now to the U.S. and our CPG portfolio. In the U.S., participation in the adult-use cannabis market has always been very important to us and integral to our long-term strategy. However, as long as cannabis remains federally illegal in the U.S. we will not engage directly in business that touch the cannabis plant to fully optimize the value and strength of our U.S. business we appointed veteran beer and beverage industry executive, Ty Gilmore as President of Tilray’s U.S. beer business, a newly created position.
Ty joined us from Glazer, beer and beverage where he served as an Executive Vice President since 2020. And prior to that, he spent the majority of his career at Diageo. As you may already know, SweetWater is the tenth largest craft brewer in the U.S. now available in 42 states, including most recently, California. Our past year SweetWater and our two iconic Southern California brands, Green Flash and Alpine have vastly expanded distribution throughout our partnership with Reyes, the largest beer distributor in the U.S.
In November, we acquired Montauk Brewing Company the fastest craft growing beer and number one craft brewer in Metro New York. Its success has been driven by its loved product portfolio, premium price point and over 4,700 points of distribution including top national retailers, including Target, Whole Foods, Trader Joe’s, Stop & Shop, King Colin, Walmart and 7-Eleven also Costco, BJ’s and Speedway convenience stores.
The Montauk Brewing transaction was immediately accretive to EBITDA, and we expect it will deliver strong revenue and adjusted EBITDA growth as we move forward. Additionally, we are already leveraging SweetWater’s existing national infrastructure to significantly expand Montauk Brewing distribution network beyond its concentrated presence in the Northeast further driving Montauk growth across key national markets, including California, Georgia, Florida, Connecticut, and while rounding out the presence of our Craft-Beverage portfolio across the U.S.
I’d like to briefly discuss our leading lifestyle Bourbon and Spirit brand business, Breckenridge Distillery. Despite headwinds in the spirits industry, this brand is poised for accelerated growth through Republic National Distributing Company with expansive distribution network on and off-premise retailers and customers across 38 states and the District of Columbia.
Now turning to our wellness segment, which is a very important segment for us as we move forward. Our wellness segment continues to grow its branded hemp food business, Manitoba Harvest in quarter two and Manitoba Harvest is the world’s leader in hemp-based foods where product distribution across 17,000 North American stores and present in 15 established international markets.
The Manitoba Harvest brand expanded its U.S. market share leadership position in quarter two continued to deliver a better than 50% dollar share within branded hemp seed and growing over 10% and in multi-outlet retailers in the last 12 weeks reporting. Manitoba Harvest is now delivering dollar growth in each of its top 10 U.S. retailers, Whole Foods, Sprouts, Walmart and Kroger.
Manitoba Harvest market share in Canada remains near 80%. The drivers of growth include distribution expansion, a strong innovation pipeline and pricing put in place in quarter two and coupled with our increasing consumer interest in hemp products given the key role they can play in plant-based, low carb and keto diet.
Tilray wellness will be launching a new CBD wellness beverage Happy Flower via direct-to-consumer e-commerce platform in early 2020 through our partnership with Southern Glazer, the leading distributor of beverage alcohol and CBD beverages in the U.S. we will look to expand the brand into key markets throughout 2023, focusing on states where CBD is permissible. In short, we continue to build out our wellness business of hemp foods and beverages with more to come.
And with that, I will now turn the call over to Carl Merton, our Chief Financial Officer, to discuss financials in greater detail. Carl?
Carl Merton
Thank you, Irwin. Our focus on operating efficiency or adjusted EBITDA and free cash flow have always been critically important, but even more so in today’s economic environment. As we balanced our business decisions between adjusted EBITDA and free cash flow in the past, we often chose adjusted EBITDA over free cash flow. In the current year, our focus has shifted, and we are prioritizing free cash flow even if it occasionally comes at the expense of adjusted EBITDA.
These decisions are evidenced through our ability to generate positive operating cash flow of over $29 million on free cash flow of almost $25 million in the quarter, an almost $50 million improvement from the same period last year. Before I review our quarter, let me first remind everyone that our financials are presented in accordance with U.S. GAAP and are in U.S. dollars. And throughout this call, we will reference both GAAP and non-GAAP adjusted results.
Our earnings press release also contains a reconciliation of our reported results under GAAP to the non-GAAP measures identified during our remarks. For the quarter, net revenue was $144.1 million, down 6% from the sequential quarter of $153.2 million and down 7% from the year ago quarter of $155.2 million. These declines are due to lower net cannabis distribution and wellness revenue that were only slightly offset by higher beverage alcohol revenue.
Similar to recent quarters, our revenue income and adjusted EBITDA are being impacted by the strength of the U.S. dollar, particularly given our largest revenue sources currencies are the euro and the Canadian dollar. On a constant currency basis, our net revenue rose slightly to $157.6 million with our distribution and beverage alcohol businesses also up in their base currencies compared to the year ago quarter.
Reported gross profit was $40.1 million, a 22% increase from $32.8 million in the year ago quarter. Adjusted gross margin held at 29% and despite the reduction in net revenue. This was made possible by our success in implementing numerous cost savings programs, offsetting part of our allocated overhead from intentionally reducing production coupled with the revenue realized from our HEXO transaction.
Net loss was $61.7 million compared to a net loss of $65.8 million in the prior quarter and net income of $5.8 million in the year ago quarter. Our adjusted net loss improved to $35.3 million or $0.06 per share compared to $45 million in the prior quarter and $38.8 million in the year ago quarter. Reported adjusted EBITDA was $11.7 million, down 15% from $13.8 million in Q2 last year. Still, we were able to extend our track record to 15 consecutive quarters of positive adjusted EBITDA.
The decrease was due to the negative impact of our cannabis gross margin as well as an increase in bad debt expense. As we have stated over the past several quarters, we are keenly focused on being free cash flow positive, and this is evidenced by our significantly improved operating cash flow during Q2 and even if it resulted in a reduction in adjusted EBITDA. Further, absent the onetime charges we took in the quarter for the return allowance and existing business relationships, adjusted EBITDA would have been $14.8 million up $1.3 million from the prior quarter.
Turning to our business segments. Gross cannabis revenue was comprised of $6.4 million in Canadian medical cannabis revenue. $52.4 million in Canadian adult-use revenue, which marks 5.7% growth from the prior year quarter, $7.7 million in international cannabis revenue all offset by $16.8 million of excise tax. This resulted in net cannabis revenue of $49.9 million, representing a 15% decline from the year ago period, largely related to reductions in international cannabis revenue, including a charge of $3.1 million related to international cannabis returns, which we do not expect to reoccur. On a constant currency basis, the decline was only 11%.
The decline in the Canadian dollar and the euro resulted in $2.3 million of the revenue decrease compared to the prior year quarter. Cannabis gross profit increased 37% to $18.6 million from $13.5 million in the prior year quarter, while the gross margin percentage increased to 37% from 23%. In Q2, we also recognized a one-time sales return adjustment, which reduced our top line as well as an inventory disposal incurred as exit costs from both Israel and Uruguay.
Together, these had a combined impact of reducing gross profit by $4.2 million or gross margin by 7.5%. Also impacting the decrease in the adjusted gross cannabis margin is a shift in strategic priorities to focus on pursuing cash flow-generating activities previously discussed. We consciously desired to lower production in our cannabis facilities as a result of slower-than-anticipated legalization globally by reducing operations, reductions in headcount and other operational costs and continue to assess other cost-saving initiatives.
We view these activities as temporary as supply requirements stabilize in the Canadian cannabis market and as European cannabis markets proceed with legalization. Distribution revenue, which has derived predominantly through CC Pharma, declined 13% to $60.2 million from $68.9 million in the prior year quarter. This was primarily impacted by the strengthening of the U.S. dollar relative to the euro. On a constant currency basis, revenue would have actually increased 3% and to $71 million for an additional $10.8 million of revenue.
Adjusted distribution gross profit increased to $7.7 million from $7.6 million in the prior year quarter. While distribution gross margin increased to 13% from 11%. This was the result of a positive change in product mix and our focus on higher-margin sales including the decision to exit the medical device reprocessing business line. Looking ahead, we think we can continue to drive larger business profit margins despite not increasing revenue as we approach full utilization of our facility.
Turning to our beverage alcohol segment, we generated $21.4 million in net revenue, which was 56% higher than the prior year quarter of $13.7 million. This was primarily due to our acquisition of Breckenridge and the Green Flash and Alpine beer brands in December 2021, coupled with our more recent acquisition of Montauk in November 2022.
We remain bullish on expanding this segment over time as we leverage our increased distribution, regain brand acceptance with Green Flash and Alpine, Foster brand acceptance with SweetWater in California, build out an extensive innovation pipeline and, of course, potentially pursue other acquisitions.
Beverage alcohol gross profit increased 28% to $10 million from $7.8 million in the prior year quarter. Adjusted gross profit, which includes $1.1 million in purchase price accounting step-up rose 42% to $11.1 million. However, adjusted gross margin of 52% decreased from 57% in the same period in the prior year.
This decline is a result of the SweetWater Colorado expansion, which is still in the startup phase of operations compared to last year when the expansion had not yet begun. Also, the Breckenridge and Montauk acquisitions were not completed in the prior year comparison and operate at a slightly lower margin than SweetWater.
Finally, for our wellness segment, revenue decreased 8% to $12.7 million from $13.8 million in Q2 last year. Adjusted wellness gross profit was $3.9 million up slightly from $3.8 million in the prior year quarter, while gross margin increased to 31% from 28%.
Turning back to the topic of free cash flow, we took steps during Q2 to pivot from business lines in both our distribution and European cannabis businesses that were no longer accretive so that we can focus on areas of the business that generate positive cash flow. This, along with the strategic decision to reduce production in our cannabis facilities have provided the necessary cash savings to achieve free cash flow of almost $25 million in the quarter, A roughly $50 million improvement from the same period last year.
Our cash, cash equivalent and marketable securities balance as of November 30 was a healthy $433.5 million, a more than $100 million increase from the year ago period. Our working capital balance, which allows us to meet our operational and capital requirements decreased to $388.2 million from $393.4 million over that same time horizon.
For fiscal 2023, we are reaffirming our expectations of generating $70 million to $80 million of adjusted EBITDA and being free cash flow positive across all business segments for the year. In conclusion, I am focused on improving our industry-leading balance sheet, continuing to reduce our debt thriving free cash flow, aligning product with demand, minimizing CapEx and properly aligning our expenses with revenue expectations.
With that, I will conclude our prepared remarks and open the lines for questions from our covering analysts. Afterwards, we will take a few questions from our retail shareholders through the safe platform. Operator, what’s the first question?
Question-and-Answer Session
Operator
[Operator Instructions] Our first question is from the line of Vivien Azer with Cowen & Company. Please proceed with your question.
Victor Ma
This is Victor Ma on for Vivien Azer and thank you for taking the question. So first off, based on Hifyre trends ex-Quebec, it seems like that the share recovery is continuing as you gained dollar share sequentially in 2Q. But there are still some losses in pre-rolls and vapes, I know innovation will address these losses over time. But can you maybe offer some color to dimensionalize the headwind from legacy pre-rolls and vapes SKUs, and then the tailwind from new SKUs and also comment on the stickiness of new innovation? Thank you.
Irwin Simon
So I’m going to let Blair jump in here because he’s on the call with us to talk about it. But I think a lot of it has to do with timing and when we’re able to get these products into the different provinces. And Blair will tell you how many new products that we have and the timing. Blair, you want to jump in and just go through what’s happening with vapes and pre-rolls, and just how many new products that you have coming out?
Blair MacNeil
Yes. Thanks, Irwin, and thank you, Victor, for the question. Certainly, what we’ve noticed in vapes, I’ll start there, is the higher potencies and fruit forward nature of vape. So, we definitely have a plan to build up on the potency side. And to Irwin’s point, you’ll see over 150 new listings from us in vapes and pre-rolls over the next two quarters.
On the pre-roll side, you’re really moving to fruit forward infused pre-rolls, really stealing share from traditional pre-rolls. We have some big news coming in Q3 and Q4. Good supply that you’ll see us be very consistent with that trend.
And then just a comment on your — the stickiness of innovation overall, if you look at Q2 in Ontario alone, there was 859 new products in a market that was sequentially at least from a quarter standpoint, flat. So there’s definitely some dilution of SKU productivity moving forward. We’re calculating that into our innovation pipeline.
We’re cognizant of the dilution effect of that, and we feel very confident that with leveraging our insights leveraging our category dynamics and leveraging our coverage model will be very strong in these categories over the next two quarters.
Irwin Simon
Thank you, Blair. Victor. Just let me emphasize two things. We have the number one share. We’re 176 basis points ahead of our closest rival, number one. Number two, this year versus last year in our revenue it’s almost $12 million of price compression where prices have come down over a year ago. And I think as we see the market settling out and Blair has a plan in place between new innovation, new distribution, taking share and potentially other acquisitions in the Canadian market, how he gets to a double-digit share back in that marketplace.
So listen, yes, we lost some share. I think it’s timing, but considering what price compression considering the marketplace, I think where Tilray is situating in Canada today is in a very, very good place. And the innovation is coming out is tremendous, and that should help share in growth overall.
Victor Ma
And just pivoting to beverage alcohol for my second question, with down trading in beer and wine apparent in Nielsen [scan data]. Just curious, if you’ve noticed consumer weakness in your beverage alcohol portfolio and could you remind us of your annual pricing algo for SweetWater and Breckenridge and now also Montauk? Thank you.
Irwin Simon
So again, I’ll just switch it over to Ty for a second, but we’re still from SweetWater, the 10th largest craft brewer in the U.S., Montauk, which we just acquired in December is the number one craft brewery in New York City, tremendous brand and basically only sold in New York with some sold in New Jersey, Connecticut and put an East together.
From a pricing standpoint, and I’ll let Ty talk about it, there is some pricing opportunities. We probably have been a little slower on taking price increase, but it had to endorse some of the higher costs. From a Nielsen standpoint, I think we’ve picked up some distribution. Recently, we picked up a lot from a Kroger standpoint. So, Ty, do you want to jump in here for a second and introduce yourself?
Ty Gilmore
Yes. Thanks, Irwin. Good question, Victor. Yes, we’re definitely — there is some down trading going on, but we’re also seeing some consumer trade up going on across several segments, super premium domestic Mexican imports, flavors and higher ABB. So, we continue to see some tailwinds with the space that we operate in and expect as we go into Q1 of 2023, that there will be continued pricing opportunities that we’re going to take advantage of, both in the on and off-premise, which will be beneficial.
Irwin Simon
And there is also a major pipeline. And one of the things we’ve done in SweetWater and Montauk is now on our timing of when we can launch products. And we have numerous new products that will be launched as we move into the spring. We have our 420 Fest, which is coming up so there’s a lot of event marketing based around our beer business.
The other thing, Victor, just something you mentioned, we’ve seen some nice increase in our Breckenridge Distillery, our bourbon business, some great increase in our vodka business moving over to RNDC and some of the new distribution. So, we’re quite happy, and you can see we’re up nicely on our beer and our spirits business quarter-over-quarter and year-over-year.
Victor Ma
Great. I’ll jump back into the queue.
Operator
The next question is from the line of Nadine Sarwat with Bernstein. Please proceed with your question.
Nadine Sarwat
Two questions for me. So first of all, you called out that we grew international cannabis business in your prepared remarks. Could you perhaps break down the factors driving this in more detail and how we should think about this part of the business performing in the remainder of the fiscal year?
And my second question, nice to see the Canadian adult use sales actually growing year-on-year. Could you break down this growth between volume, mix and price since there’s a lot going on there? And how are you thinking about that over the coming quarters? Thank you.
Irwin Simon
Great. So number one, let me — I’m going to switch over the piece on Europe to Denise, who runs our European operations. But I think listen, a lot going on in Europe, whether we can blame it on the war, we can just blame it on the economy over there. We can blame it on in regards to cost. But I think as we’re situated in Europe today, with our facility in Portugal, our facility in Germany, where we sell in over 20 countries from a medical standpoint, we’re well situated.
We spent a lot of time in Europe, and you heard me say how much costs were taken out, some of the countries that we’re going to deemphasize. Do we believe legalization is going to happen in ’23? No. Do we believe it will happen sometime in 2024? Yes. But we’ve now combined our businesses in Europe to one business unit between our CC Pharma, which is our distribution business into 13,000 drug stores and our operations in Portugal and our operations in Germany.
So, we have a strong business in Europe with distribution with brands with grow. Unfortunately, controlling legalization is not something that’s in our hands, but it’s something that we’re going to focus on how we grow our business. Denise, do you want to jump in and add to that?
Denise Faltischek
Yes. Thanks, Irwin. So just building on what Irwin said in terms of our business in Europe, very strong business in Europe. As Irwin mentioned, deprioritizing certain countries. We really, in the last few quarters, as we’ve talked about in the past, we’ve made some active decisions to not pursue certain revenue in Israel, given the volatile market that is currently going on in Israel.
And if you look at the quarter the prior quarter last year, we had about $4.6 million of revenue in the prior year quarter as it related to Israel sales. So, we are deprioritizing certain markets in lieu of chasing more profitable and sustainable business. And just building again on how confident we feel in terms of Europe, while we are very much closely following adult-use legalization efforts by Germany, we are also very confident that even in the absence of adult use, we are still very well positioned to win in the medical business.
We are — with our CC Pharma business, we have credibility when it relates to medical cannabis. And as we pursue doctors and pharmacies, we take that credibility with us when we visit with them. We are also well positioned with our two EU GMP facilities one located in Germany, one located in Portugal. And the medical market in Europe is going to be a $13.8 billion market by 2028. So, we do feel very, very confident about the business.
Irwin Simon
And I think as we look at Europe, I like Europe as opportunistic. I think that there’s over 600 million people. There’s a big population there. And if you come back and think no different than the U.S. Europeans want cannabis legalized, okay? And I think it’s just working through the EU, and I’m sure if Ukraine didn’t happen. Germany might be legal today, but we’re ready and will be ready.
And we’re going to look at other business opportunities in that European market because we got that infrastructure. We’ve spent a lot of time have taken a lot of cost out, have streamlined our business with our facilities in Portugal and Germany, we’re looking at other opportunities there where we can grow and we’re profitable there, and we’re going to look how to grow that business.
In regards to your second question in regards to our mix and volume, listen, in Canada, flower is still number one. The good news is the Canadian market is really the only market in the world where adult use cannabis is legalized, okay? And from a positioning standpoint, we’re well positioned with our growth facilities. We have 12-plus brands. We have tremendous innovation there, and that’s the key to that marketplace. And you’re going to see a lot of falling out of that market with other LPs. It’s a tough market to do business from an excise tax.
We still spend $1 a gram. We paid as a company over $120 million in taxes in Canada last year, an excise tax in the last two years. We paid almost $0.25 billion. So, it’s a tough market, but again, it’s the only legal market. And whoever wins there, which we believe we’re going to there’s big opportunities. Blair, do you want to just talk about your mix and pricing from a standpoint in Canada?
Blair MacNeil
Definitely. Thanks, Nadine. Yes, you’ve largely got it right or when in terms of the dynamics in the marketplace. I would say, just in general, you can look at a year ago there was over $12 million in price compression in the market. So generally, you are seeing volumes on the Tilray side go up relative to the industry, although those segments definitely are experiencing a lot of price compression.
So, from a volume standpoint, it’s really driven for us by the resurgence of our flower business. You’ll recall that I talked on earlier calls about having 46 strains in alpha and beta programs that are now commercialized that are now starting to hit the marketplace. So we expect to have a real pipeline of flower moving forward. And to Irwin’s point, flower is still the biggest segment. It’s about 40% of the total business. So we continue to have a very robust pipeline of innovation, but also of genetics for flower moving forward.
Irwin Simon
And I think the thing is — I think the big thing — I’m glad I largely got it right, Blair. But I think the big thing is, we now have the facilities to grow and taking those costs continuously out. And you heard us mention in the quarter, we’re going to run these businesses and drive them for cash. And that affected our EBITDA because we have all these fixed costs.
And we will be out there looking to sell cannabis to other LPs. We’ll be out there looking to grow for others, but we are that low-cost producer there and that’s something we’re going to focus on. The other thing is we’re going to focus on innovation and what’s new. And that’s sort of what drives a lot of the growth in Canada is new innovation.
Nadine Sarwat
Got it. If I could just squeeze one more, given that you mentioned that on Germany. What are you seeing with regards to adult legalization about use legalization in particular with a focus on the EU commission when you think it could be a realistic outcome? Thank you.
Denise Faltischek
Yes. So we originally expected that we might see adult use legalization take effect as early 2024, based on where we are, I think we view that it might be later in 2024 than originally expected.
Irwin Simon
And I think if Germany could make that decision for Germany without the effects of the rest of the yield, it would happen much quicker. But as we all know, borders are open. Once it’s legal in Germany, how do you stop it from going to other borders are some of the biggest issues there. So — and listen, we have a plan in place, how do we expand our medical business. And ultimately, that is partially recreational in Israel and other countries today, even though it’s sold as medical the biggest percentage of the use is in recreational.
Nadine Sarwat
Perfect. I’ll pass it.
Operator
[Operator Instructions] The next question is from the line of Andrew Carter with Stifel. Please proceed with your question.
Andrew Carter
I’ll ask one question this morning, just kind of multipart, I guess. Looking at the sequential — you’ve reiterated EBITDA guidance for the year, $70 million to $80 million. Regarding the step-up that you need to achieve that in the second half, could you walk us through the, number one, incremental cost savings I get the bad debt expense isn’t going to repeat. The Canadian adult use was shipments well below consumption give us any idea of the magnitude of what that hit was? And then incremental EBITDA from Montauk in the second half as well as kind of give us a reminder on the seasonality of beverage alcohol? Thanks.
Carl Merton
Thanks, Andrew. Just trying to walk through as many of those pieces as I can. There was about $3.1 million impact on sales in the quarter related to the return. We had about $4.2 million that was came out in my script on the slowdown in production, which is the — effectively unabsorbed overhead. And then we see all of the optimization plans, the majority of those benefits are coming late in Q3 and Q4.
And so, we had the $100 million from the Aphria-Tilray optimization plan. I think we’ve got about another $20 million of that that has to hit the income statement still. It’s been achieved just the full year savings hasn’t flowed through on the Aphria One optimization plan or the Canadian cannabis optimization plan that’s $25 million in total. The vast majority of that was back-end loaded as we got systems in place to be able to realize those savings. And then, we have the continued impacts of HEXO.
Irwin Simon
And Andrew, I think the big thing is, as Carl was saying is a lot of our cost savings are back-end loaded. There’s additional cost savings coming out of Europe. In regards to beverage alcohol, our beer business is back end in regards to sales there and same with our bourbon business with RNDC, now getting into distribution expansion in more and more states.
But back to your point, we talked about it before, Canada has a major plan in place with a lot of innovation, a lot of growth in its back half, and that’s a big part of it. So, it’s about growing our volumes, growing our distribution, managing our costs. And I can tell you, we’ve done a great job of taking our costs out of the business with the free Tilray was over $100-plus million. We’ve stepped up again as we look at Europe right now and taken out another $7-plus million.
We’ve taken out other costs in the Company, getting cost savings working with HEXO, but the key is getting that growth in these marketplaces and volume is ultimately what’s doing that. And being that low-cost producer in our growth facilities is very, very important. So, it’s a combination of all those — as you know, things do happen up there. But as we look into our crystal ball, that’s what we see today.
Operator
The next question is from the line of Aaron Grey with Alliance Global Partners. Please proceed with your question.
Aaron Grey
So just for me, I want to talk a bit on M&A opportunities available to you, specifically in Canada, as you mentioned, you’re getting back to double-digit share in your prepared remarks. You talked about the tough market doing business there for excise tax, obviously impacting a lot of the smaller players in addition to yourself. So just want to know if there’s any more attractive opportunities that you’ve seen come up in the market. There appear to be an increase in CCAA. So from your standpoint, are you starting to see somewhat of a shakeout come for you guys might have more M&A opportunities available and then maybe different parts in the supply chain that you might see those in the Canadian sector? Thank you.
Irwin Simon
So, in the Canadian sector, absolutely, I think we have two major facilities in Leamington, Ontario. And what you heard us say before, it affected us from an absorption standpoint, there’s a cash benefit to it, but bringing more and more grow into our facilities is absolutely very much accretive to our gross margins and accretive to our earnings.
It also — as competitors come out of the marketplace, there’s less competitors out there and it also helps with some of the price compression. So absolutely, it’s got to make sense. It’s got to fit within our growth facilities and it’s got to be accretive to Tilray and its Tilray shareholders. So we’re very interested. Listen, the Canadian market is the only market out there. It’s a $10 billion projected growth at retail. It’s still a big market and it prepares a lot for when legalization does happen in the U.S.
And just to step back, you only asked me about Canada, as you see in our headlines today, is we don’t rate and house anywhere in the near future, legalization happening in the U.S. We very much like beer and spirits business with great margins in those businesses. We see great growth opportunities. We have an excellent management team both with Brian Nolte and with Ty Gilmore now in running those businesses. And we’d love to find some more Breckenridges or some more Montauk and SweetWater.
We’re now also focused on that wellness business. We’ve been very successful with Manitoba Harvest. And we think with that, from an acquisition standpoint, the whole wellness area is an area we’re going to focus on and look at acquisitions there. And upon legalization, there will be foods that will be infused with hemp. There’ll be foods that will be infused with THC. And that’s why the name of the Company is Tilray brands.
We’re a diversified company focusing on adult-use cannabis, medical cannabis, beer, spirits and wellness products. And we, as a team, have a lot of experience in that. So there’s a major focus on additional acquisitions and to diversify this company. Because we don’t know when legalization is going to happen in the U.S. and we want to grow this business as we’ve always said out there.
Operator
Our next question is from the line of Owen Bennett with Jefferies. Please proceed with your question.
Owen Bennett
Well. I just wanted to come back to your comments around exploring manufacturing partnerships with other LPs in Canada. And you said, I believe, if I heard correctly, you’ve been reaching out around this. Could you maybe give some more details here what these agreements would look like exactly? Have you had any initial interest? And then obviously, you’re able to do this due to spec capacity in your facilities currently, what would happen when demand increases and you perhaps need that your own product again. Thank you.
Irwin Simon
So I’m going to let Blair answer that because he’s the one out there doing that. But let me tell you something. We have the ability to grow in our facilities over 265,000 kilos. We have facilities in the West Coast in Vancouver, and we have other facilities that we’ve taken down since the Tilray acquisition.
So right now, I’m not worried that we run at the capacity — and let me tell you something to fill it up to 265,000 kilos will change our financial lease tremendously. And with that, we have the ability to grow. The other thing is we look at facilities today, there’s food shortages in the world have let us tomatoes, strawberries.
And we’re looking at utilization potentially where do some of these facilities if we have. We’re overcapacity, how do we start growing fruits and vegetables in some of these facilities and supply food to the world where there’s major shortages and there’s price opportunities there.
So, one thing I want to make sure is where utilization assets. We’re giving cash, we’re generating cash, and we’re growing the Tilray brands company. Blair, do you want to address that in regards to some of the stuff that you’re working on in Canada?
Blair MacNeil
Yes. Thanks, Irwin, and thanks, Owen, for the question. Very fair, Irwin hit it right on the nose. We’ve got a tremendous amount of capacity on the flower production side at a low-cost opportunity. We’ve got beverage capability. We have vape capability not just distillate vape, but BHO live resin. We have just a tremendous facility.
The team has done an unbelievable job of building world-class facilities that can operate at a very low cost. And we know in the industry today, a lot of our competitors are focused on survivability and not sustainability. So for us, it’s an opportunity, I think, to utilize some of our excess capacity and help our industry thrives and get to that $10 billion industry in Canada and $100 billion globally.
In terms of the conversations, yes, they’re very productive, fruitful. There’s a lot of interest. We’ve got a few different LPs that we’re talking to today as of right now. And I think we’ll partner up in the near future with those opportunities moving forward.
Operator
The next question is from the line of John Zamparo with CIBC. Please proceed with your question.
John Zamparo
It’s a relatively simple question. It’s on the guidance, which implies a pretty significant step-up in EBITDA even if you account for Montauk — and you some of the cost measures you have underway, but I wonder, can you get to the EBITDA guide with the current level of revenue? Or does your guidance assume some pretty meaningful sales growth.
Carl Merton
So if you remember from the start, John, we talked about the onetime sales adjustment that we had. So obviously, we’re using that more as a base than the 144 that was in our financial statements this quarter. But the answer to your question is, yes, with the cost savings we have coming with the addition of Montauk with the $7 million cost reduction that we’re looking at in Europe, more than half of which will be achieved by the end of the year. We see that as the basis for reiterating our guidance.
Irwin Simon
But John, yes, we’re looking at absolutely sales growth and sales growth is a part of it.
Operator
Next question is from the line of Michael Lavery with Piper Sandler. Please proceed with your question.
Michael Lavery
I wanted to come back to a comment you just made about some of the capacity and how to think about opportunities there. And you mentioned things like fruits and vegetables as an opportunity. But you also had just a little bit earlier reiterated how you think about the Company’s name and Tilray brands and you don’t really see branded produce, at least not with kind of any margins and there’s not any of those companies who have multiples that are really interesting. So you also touched on just some of the fixed costs as a consideration for EBITDA. And I guess, maybe instead of trying to be a farmer would you just rationalize more capacity? How do you think about weighing those trade-offs?
Irwin Simon
So, I think there’s multiple going into it. I think we’re working on a plan on rationalizing our facilities versus and then how do we focus on our brands and is there two businesses here, et cetera. So I think as we come back today, utilization of facilities is important today for us.
We’re not going into the branded vegetable business and don’t take that away for a second. But one thing I want to make sure is we have facilities out there that we’ve invested a lot of dollars into their world-class facilities. And getting utilization, if you look at it just in this quarter, our amortization on our facilities, in the $30 million, $40 million range, okay? So we got to make sure we’re utilizing our facilities to grow something out there and hopefully it’s cannabis.
But we don’t want them to sit idle. And we’re again, sitting here looking at multiple opportunities as these facilities are world-class. So that’s what I’m saying, and there’s lots of things that we’re looking at to do with these facilities, but growing cannabis is first and foremost for us and growing branded cannabis is first and foremost for us, being in diversified businesses, whether it’s spirits, beer or other wellness products is what’s our priorities. We’re not out there saying we’re going to become farmers.
Michael Lavery
So I guess maybe can you just clarify how you thought about that? Is it, I mean, I think you pointed to it as an opportunity? Is that maybe just under the right circumstances or as a temporary kind of bridge?
Irwin Simon
Under the right circumstances or as a temporary bridge ultimately to make sure our facilities are being utilized. That’s what’s the important thing here, and they’re contributing cash sitting there idle, doesn’t contribute anything just contributes cost. And we, as a company, are focused on driving our top line, driving our growth and utilizing our facilities to contribute cash.
Operator
Next question is from the line of Pablo Zuanic with Cantor Fitzgerald. Please proceed with your question.
Pablo Zuanic
Look, two questions. The first one, just remind us how you’re thinking about the target of $4 billion in revenue by fiscal year ’24. I suppose that’s being delayed. But without holding you to it, I suppose that there were different pieces you had talked about they are North American cannabis, Canadian, U.S., international, CPG wellness. Does that mix change? And the reason I’m asking the question, given all the delays and legalization you’re talking about, could there be a scenario where you decide to bulk up the branded, high-margin beer and alcohol business, right?
And I’m not saying you want to buy Molson Coors, but would we have a scenario in ’24, ’25 that we had an alcohol account for 90% of our Tilray brands revenues? And the second question and I know it’s hypothetical. If we go about what Canopy growth has said, that if NASDAQ doesn’t allow them — doesn’t approve the Canopy U.S.A. structure, they would potentially the least and just remain listed in TSX. Would you consider following — and they start buying U.S. assets on the Canopy side, that could put you in a disadvantage potentially, right? So if they were to get — if they were to do that, start buying U.S. assets delis from NASDAQ remain in TSX, would you consider a similar move just not to be a disadvantage when they are buying U.S. assets and you are not? Thanks.
Irwin Simon
Pablo, thank you. Good questions here. Number one, I’ve said before the $4 billion mark and set that out that I believe legalization would have happened in the U.S., and I believe legalization would have been a part of Europe, and I always make sure that it was contingent on legalization. Listen, the spirits business has been a very good business for us so far. It’s very profitable, good margins, other companies, whether it’s Constellation or Diageo there.
I like their multiples, I like their margins. And I think one day, and as I’ve been out there meeting with alcohol distributors and other — everybody is focused on cannabis because they realize one day upon legalization, the cannibalization in the whole Spears beer business is going to come from cannabis.
And trust me all these major alcohol companies have an eye on cannabis, no different than the tobacco companies. So with that, if I today can’t do anything in the U.S. and have to sit there, why not get bigger into some of these craft brewers like a SweetWater like a Montauk, like a Breckenridge like we did. And you know what, I like the wellness area. You know my past in the wellness area. So with that diversify our portfolio with adjacencies.
So we can’t buy cannabis assets. We can’t grow cannabis assets in the U.S. And right now, look what’s just recently happened in New York in regards to valuations, how they’ve come down. On the other hand, the store that opened in Manhattan here with lines and lines and lines around the corner, you see the demand for it. You walk down the streets of Manhattan. You smelt cannabis on every corner there. So with that, absolutely, we’re going to look to grow.
And I’m very clear in our headlines of our press release today. We’re going to diversify this company into multiple categories that have adjacency to the cannabis business. And no, we’re not out there buying Molson Coors, but we want to be that large craft brewer out there that owns multiple brands like we did with SweetWater Lake. We did with Green Flash like we have with Montauk like we have with Breckenridge and looking at other spirits businesses and like we have with Manitoba Harvest. So, you’re absolutely correct on that. Your second question. Your second.
Pablo Zuanic
Do you want to repeat the second question?
Irwin Simon
No, no, no. I got — no, I just. No, I was going to answer your second question. Listen, right now, being on the NASDAQ is important for us, having the trading volume, having the shareholders that we have — right now, it would not be of interest to us to be exiting the NASDAQ and moving to the TSX or an exchange that allows us to own U.S. assets. And if Canopy does it, good luck to them.
But right now, our focus is to diversify our business grow where we have strong, strong cannabis opportunities in Canada where we have strong opportunities in Europe and grow our consumer packaged goods business because one day, you will see beer with THC and in the U.S., one day, you’ll see spirits with THC in the U.S. And if anything, where is the cannibalization going to come from, it will come from the spirits businesses. So our focus is not to move away from the NASDAQ now.
Operator
Next question is from the line of Matt Bottomley with Canaccord. Please proceed with your question.
Matt Bottomley
Just wanted to pivot back to the M&A side of things, particularly in the U.S. So clearly, you guys have had a very specific strategy of acquiring adjacent businesses to THC that are self-sustaining, but when you look at some of the other deals that have been done in this space for sort of optionality.
I know that the deal you guys had done with MedMen, there were some financial cash flow considerations to that that may make sense. But do you think just given the frustration of nothing happening at the federal level, changes your view on how to allocate capital or how to position yourself given some of the headlines or lack thereof in December?
And then also just Irwin on your comment of anticipating a legalization event in 2024, do you think that’s more likely from what Joe Biden had said with respect to some of his initiatives? Or do you think something could actually happen in this new Congress, which is now split?
Irwin Simon
So, I wish the speaker of the house cannabis was one of his focuses, but it’s absolutely not. Listen, I come back, and I’ve said this before, we are not going to buy options and by pieces of U.S. companies. There’s a lot of good things happening with MedMen and we’re excited about how the cleanup has been going there and what is ultimately happening.
And upon legalization, we’d be very interested in having that asset as part of Tilray upon legalization. In regards to legalization, listen, I’m frustrated that legalization or nothing, whether it’s safe bank, whether it’s Mor-Act whether it’s de-scheduling, whatever, nothing has happened within cannabis and almost all the different faces out there. So with that for our business, we got to focus on Canada, where it’s legal.
We’ve got to focus on Europe today and change some of our strategy in Europe, which we’re doing upon legalization, but focus on that medical business, but there’s a whole third market out there where they’re using cannabis as recreational, but buying it from the medical market and really focus on integrating now our CC Pharma business from a distribution standpoint.
We’ve been successful with SweetWater. We’ve been successful with Breckenridge. The Montauk was a great asset for us to buy these niche beer businesses. And we’ve seen a great turnaround in our wellness business. So right now, in the U.S., we’re going to focus our acquisitions on buying adjacencies to the cannabis business.
And if it’s ’24, ’25 or ’26, we’re not depending and sitting here waiting for Congress and the Senate to make decisions, and that is ultimately the results of going to affect the results of our business because I don’t want the effects of the results for our shareholders and our business be affected by politicians in Washington.
Operator
Our next question is from the line of Frederico Gomes with ATB Capital. Please proceed with your question.
Frederico Gomes
Just on the price environment in Canada, in 2022, we continue to see price compression. And obviously, as you mentioned, it has been almost unsustainable with excise taxes and so on. So my question is, do you expect any significant shift in Canada in 2023 in terms of pricing what could be the driver there? Is there any chance of that happening? Or do you believe that sort of price pressure will persist in 2023? Thanks.
Irwin Simon
So, I’m going to answer it partially, and then I’ll turn it over to Blair, and we can also talk about what we see in price compression everywhere else. I think cannabis is probably the only product out there where inflation hasn’t hit, okay? But again, that’s going to — and quarter-over-quarter, we’ve seen very little price compression out there. Year-over-year, we’ve seen almost $12 million from our standpoint. But the focus got to be building brands and brands do have to matter.
At the same time, innovation got the matter, and that’s coming out with different potencies different types of products and innovating product, and that’s ultimately where you’re going to get the right pricing. And as you’re going to see other LPs go away, you’re going to ultimately see that too. And us being that low-cost producer will be able to be that price leader in the marketplace out there. Blair, do you want to add anything to that?
Blair MacNeil
Yes. So just overall, I would say it is going to be unlikely to see rate changes in pricing over the next 12 months. What you may see is category mix, a little bit of a shift to pre-roll which can improve the pricing from a mix standpoint or just volume across provinces.
And then finally, to Irwin’s point, on the brand side, I referenced it in my answer earlier. But if you look at how we’re approaching innovation, we’re really thinking about those consumer segments where we have opportunity to grow and those sub-segments within category.
RIFF is a great example of where we’re entering into a category with higher-quality offering, which will drive some average revenue up, but it will take time. I would say from a when do we see it changing? I think I’ve been saying for 12 months that as we see industry consolidation as we see the number of LPs start to go down or normalize and the inventory levels over the industry normalized.
I think then you’ll start to see a real sustainable push in terms of being able to build rate into your economics year-over-year.
Irwin Simon
And Federico, I think the important thing is listen, let’s step back for a second. Cannabis in Canada is only a four-year-old business, okay, and the same with the U.S. So we’re building out a whole new industry, no different than tech no different than electric cars. At the same time, we’re building brands and brands take a long time to build out at brands take a long time for consumers to get used to it.
At the same time and trying to get the right — what’s the right price out there. Today, there’s bourbon prices out there at $300 a bottle, there’s bourbon prices out there at $39 a bottle. And I think it’s just ultimately settling out the consumer. The Canadian cannabis business that retails between $7 billion to $10 billion, and I think how does it get to $10 billion, one of the biggest opportunities that we have not talked about is a whole beverage category, where you can walk into a convenience store and ultimately buy a drink with you can walk into any store and buy THC products.
You can go into a bar and buy THC beer on tap. So it’s going to be an evolving industry. And I think that’s the important piece of it today. And some of the things that we have to deal with, there’s over 900 LPs out there. The excise tax is $1 gram no matter what the price is. The infrastructure that was spent on building out these grow facilities were billions and billions and billions of dollars. The shakeout will happen, but there’s going to be a winner, and it’s going to be tilted.
Operator
Any additional questions at this time?
Berrin Noorata
Thank you. And now, we will take questions from the Say Technologies platform. The first question is. What are some positives to look forward to in 2023?
Irwin Simon
Listen, I think. As I’ve said throughout all these questions today, there’s a lot of positives out there. As Tilray is today, it’s a diversified company with the adult use cannabis business in Canada has a medical business as we move into the drinks business, the edibles business, and we have a lot of innovation behind it. We’re number one in the medical business sold in over 20 countries in Europe today, with a lot of great growth facilities out there. We have a CC Pharma business, which will integrate into these businesses, so we could have a strong European business and continuously focus on that.
As a company, we’ve diversified and gone into the spirits business have gone into the beer business and have a wellness business in regards to Manitoba Harvest. We’ve built out our balance sheet. We have over $400-plus million of cash today, and we have a strong, strong management team in place that knows how to execute. And I must tell you, it’s not an easy industry. There’s no industries out there that’s easy, but it’s an industry today where we have brands. We have a strong management team we have a strategy.
And yes, strategy has to change. And I’ve said I wanted to be a $4 billion business out there by the end of 2024. But unfortunately, if legalization happened tomorrow, that’s possible without legalization it’s not going to be achievable just with the cannabis industry. If we diversify into other categories, it absolutely can happen. So there’s a lot of things happening at Tilray and there’s a lot of good moving pieces out there for us to execute upon in ’23 and ’24.
Berrin Noorata
Thank you. And the final question is. What are the plans to increase the stock value in this economic environment?
Irwin Simon
Listen, I come back and say this here, I’m proud of a lot of the things that happened at Tilray. I would like to see our stock at a different place. The markets have been tough markets in 2022. The whole cannabis industry is down over 50-plus percent. And I think there were a lot of expectations out there upon legalization. We just got to do better than that, and that’s why we have to diversify and not sit here and wait for the politicians to make decisions on legalization.
And when legalization does happen, we’ll be ready to pounce upon every one of those opportunities with cannabis, whether it’s beer, whether it’s spirits, whether it’s food or other products. But one thing I can tell you is this company in the cannabis industry whether it’s in R&D, whether it’s new quality, whether it’s in grow, whether it’s in brandy, we’re well into it, and we’ll be ready for it upon legalization.
Berrin Noorata
Thank you. And that concludes our question.
Irwin Simon
Thank you, everybody. And as you can see, there’s a lot going on. And as you’ve talked — as I’ve talked about, we have an excellent team in place to help execute upon this, A lot going on in Canada, a lot going on in Europe. You heard from Blair, you heard from Denise, you heard from Ty, Brian Nolte runs our Beverage business; Jared Simon, who runs our Wellness business.
We have excellent teams in our financial area, our operational area, our IT area, our legal areas. So, there’s an incredible team in place that works alongside of me here at Tilray today. And that’s what’s key. We have a strategy in place ultimately, it’s shifting because as we sit and expect legalization then how do we shift to that, and we’re shifting upon that. We focus on our balance sheet. We focus on cash. We focus on how to take cost out. We focus on top line growth.
There’s a lot of hurdles that get in our way and how do we overcome them and ultimately what can we do. We have in Canada 10 different customers. And that said, we can’t go to Walmart, Target, Loblaws and Sophie’s and go sell our products. There’s limitations that we can sell our products in Canada. There’s no limitations where we can sell our beer products or our spirits products in that in the U.S. or a wellness food. There’s limitations where we can sell our European products to the doctors in the scripts. But with our CC Pharma business, there’s no limitation that we can sell into the 13,000 drug stores. So, we want the world to be a oyster to sell products.
We want to sell brands. We want to sell consumer brands. We want to sell products that contribute margins and contribute free cash flow to the Tilray brands business. We’re looking at multiple opportunities, and we’ll continue to do that. We’re looking at multiple acquisitions that we’ll continue to do that. But before I conclude, I’d like to mention that Tilray brands has had to adjourn its Annual Meeting of Shareholders to January 18 because we do not yet have sufficient participation from our stockholders.
I’d like to urge all Tilray brands stockholders of record as of September 26, 2022, and have not yet voted to vote today. The charter amendment is intended to simplify Tilray’s capital structure and ensure that all stockholders of common shares have equal voting rights or one vote per share. The elimination of Class 1 stock will not be dilutive to stockholders or increase the number of outstanding shares. They’re already outstanding there. So, it is not dilutive.
This is a key initiative to ensure best corporate governance, and that is key for us and practices that help the Company protect influence of our stockholders. Your support is really, really important no matter how many or how few shares you own, if you need help with voting or you have any questions, please contact our investors@tilray.com.
And with that, I want to thank everybody for joining us today. Thank you for your support and I look forward to speaking to you very much in the near future. Have a great day and a happy new year.
Operator
This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation.
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