Katie Perry (00:00):
Wow, Austin, that was one of those examples of you think, but you actually have no idea sitting down with the CEO of what we thought was a cannabis stock, a weed stock, and got a really different story.
Austin Hankwitz (00:12):
Yeah, no kidding. I had no idea that they also owned Shock Top and Sweet Water four 20 as well as having now 500 distributors around the country. And what's also really interesting to me though, is to see how the United States has sort of been the foundation for their beverage alcoholic kind of business segment, right? I mean, this business segment grew by 137% year over year, and that's what's really, in my opinion, pushing their top line revenue higher. So it's just really cool to see what the heck is going on with this company and how it's evolved and changed so much since 20 18, 20 19 when them and a bunch of other companies took Reddit by storm being one of these weed stock ideas.
Katie Perry (00:55):
Yeah, people love their beverages. Of course, the company we are talking about is Tilray Brands, and we have their CEO Erwin Simon on the show today.
Austin Hankwitz (01:03):
I'm Austin Hankwitz.
Katie Perry (01:04):
And I'm Katie Perry. And this is the after earning show brought to you by Morning Brew and Stakeholder Labs. This is the show where we bring you the retail investor up close and personal with the people behind the companies you care about.
Austin Hankwitz (01:16):
Alright, well let's get into it.
Katie Perry (01:17):
Irwin Simon, welcome to the show. You are the CEO of Tilray and we are excited to get into it today.
Irwin Simon (01:25):
Well, thank you for having me. Great to be here with you guys.
Katie Perry (01:27):
Well, thank you so much for the time. Want to start out by talking about your brand recognition in the market. If you look up Tilray online, you'll see a lot of listicles, things like that bucketing you guys as a weed stock, and I know that's where your beginnings were, but would love to hear what the company is selling now, what the portfolio looks like and how you've evolved in the past few years.
Irwin Simon (01:52):
Kitty, good question. And it's interesting, I go back and my first company I started was in the natural organic food and parlayed it into the personal care industry and came out with clean foods, no genetically modified ingredients, organics, and did that for 25 years. And after 25 years, I kind of stepped back and sort of said, what's the next big evolution? I'm somebody that's always trying to be ahead. And I was one of the first into almond milk, oat milk, soy milk, rice milks, and today there's staples in everybody's home. If you don't have oat milk at a barista or a coffee bar or something like that, I think people look for it more than milk. So after 25 years, I looked to do something different. And not that I was a cannabis user, but I saw so many benefits of cannabis with that, I was offered the opportunity to take over a Canadian cannabis company called aa.
(02:56)
And in late 2018, I mean real late, like three days left in December, I took over this company of free as executive chairman in 2019 because of changes that had to take place in management. I took over the company in March of 2019. We were $50 million of sales basically almost out of money. And Canada in October of 2018 was the only country in the world today where cannabis is legal from a federal standpoint, there's nowhere out there where recreational cannabis is legal. So very quickly I moved in to clean the company up, strengthened our balance sheet, raised money, got rid of non-profitable businesses, and free became cashflow generating EBITDA company very quickly afterwards, but the US where cannabis was not legalized and everybody's saying it's going to legalize, it's going to legalize. Now cannabis is legal in 27 states today from a recreational standpoint, but cannabis is not legal from a federal standpoint.
(04:11)
So today, Tilray cannot sell cannabis in the US because we're a listed NASDAQ company and there's none of our income can come from cannabis. So with that not knowing, and depending upon government regulations, depending upon the approval of cannabis from a federal standpoint, I knew I had to do something with an adjacency to the cannabis business. And something ultimately to set up if one day cannabis became legalized, how could I from an adjacency standpoint integrate it? So I figured I would go into the beverage or beer business. So in late 2020, there was a business called Sweetwater Brewery in Atlanta, Georgia that owned four 20, and four 20 is a very popular date within the Canvas world. So in December of 2020, I acquired Sweetwater Brewery doing about two and a half million cases, basically sold in the south. Georgia was the strong market for it, and that was our first entry.
(05:16)
Very quickly after that, a little thing called Covid came along and all on-premise shut down, but we were selling beer into grocery stores and retailers like that. So that was my first entry really into the beer category. As somebody, I always like beer and there's nothing more refreshing than a good cold beer, and honestly, I like beer better than alcohol our spirit. So with that started to build out our beer business started to make many changes. I realized the category was declining and needed to make some change in it. Along the way, I was seeing nothing happening in regards to regulation in cannabis in the us. So with that, I realized I had to get bigger in beer within the us. Now along the way, we also made some other acquisitions in the cannabis industry in Canada. We acquired Tilray and ultimately changed our name.
(06:22)
We did a reverse merger, we acquired Heel Redan from a standpoint in our cannabis standpoint, in our cannabis businesses, but there was nothing I could own in cannabis in the us and ever to get to a scale, I realized I had to get bigger within the beverage business. So went out to continue to buy different beer companies. We acquired Green Flash, Nelson and Alpine, which were strong brands on the west coast. Then I went on to acquire Montauk Brewery, which was started by two young entrepreneurs last year. We acquired from Anheuser-Busch, eight of their craft brands. And then also along the way, I acquired a spirits business called Breckenridge Distillery, which was a strong manufacturer, a bourbon gin and vodka. So going from 2 million cases of beer in late 2020 and on the run rate today of selling 13 million cases of beer, selling $40 million of spirits today. That's what got us into the spirits business and beer business in a very quick timeframe.
Katie Perry (07:35):
Great to get that background. And so if I'm understanding correctly, a RA was cannabis company. You were leading that, leading that turnaround, regulatory changes, slowing, not really moving the pace that you would need them to be. So pivoting into a broader portfolio of brands. And I'm curious, why did you go with the Tilray brand's name and not the AA brand?
Irwin Simon (08:01):
It's a good question. aa, and again, you come back and look at a frea started with an A. So the first time you look something up, it was an A, but Tilray was a US domicile company, a FREA was a Canadian company. AA had some challenges out there and I figured I would ultimately, as I did a reverse merger, I would become Tilray. And Tilray comes from tilling the ground and the Sun and the Ray from the Suns, which has a lot to do with a lot of products. So that's why I went with Tilray. And originally I went with Tilray and then I changed the name to Tilray Brands because as I look to build this into a CPG company that it's just not cannabis, it was all around brands. Today we have over 40 brands within the whole company. We produce 90% of our products ourselves. So we are totally vertically integrated, and I look at it as a brand and consumer packaged good company. I'm big on brands, brand equity, brand equity, brand equity. And ultimately that's what gets you the multiples and values within companies today is owning great brands and building great brands.
Austin Hankwitz (09:23):
Irwin, that's awesome because it really reminds me, and I've seen this on Reddit a couple times, and on Twitter, people call you the general mills of cannabis. And so you guys are sort of building out this portfolio of these different companies that to your point, it's a really diversified portfolio. If it's regulatory hangup, you guys have got some sales going on in a different sector, and as you continue to kind of bolt on and roll up these maybe craft beer type companies, you guys are diversifying now into some non-alcoholic things. So we could talk more about that, but I think it's a really cool kind of call out that you guys are building more of this CPG brand where you've evolved away from just the Yeah, that's the weed stock to like, no, they're actually, to your point, 40 different companies inside of this name, which is really awesome.
Irwin Simon (10:09):
And you got to step back for a second as this here, you just can't be a cluster of brands. You can't be a cluster of businesses and how do they all come together? And that's something that I'm trying to lend the foundation for and how do we build a global business? I'm somebody that has never started a brand from scratch and I like to buy businesses or brands that have been in existence and how do we fix them and rejuvenate them? And that's what I've been trying to do here. And very quickly, if I didn't go into the beer business, being in the food business in the natural organic food business is something I very easily could have went into. But the reason I picked the beer business is because I saw an industry that was declining. I saw the craft beer business as a business that had tremendous amounts of brands out there, but there was not anybody taking a leadership role.
(11:09)
Sam Adams was the one that took the leadership role. Anheuser Busch, Molson Coors Constellation all jumped into it, but they were focused on their bigger brands. So that's where I felt I could make beer cool again, where it's lost its coolness and it lost its uniqueness out there. And how did I change that? We're just not white men. Were drinking beer that everybody could drink beer. Well, Kate should be drinking beer. What about the non out? Everybody concerned if I'm drinking beer, I'm getting my beer belly or I'm getting a bloat there, and what do we change with that? So that's the reason I very much selected the beer business.
Austin Hankwitz (11:56):
No, a hundred percent. Do you have a favorite beer if it's either in the portfolio or out of the portfolio that you are always sipping on,
Irwin Simon (12:02):
Listen, I have four kids, you got to love all your kids equal. I have multiple brands within our beer business, and I'm always trying all our brands out there, and I'm somebody like how many dinner parties they go to and there's always wine or champagne or tequila that why isn't there beer being served here? Okay, and why is beer put on a bar? Like there's a can of beer to show we have this here. Why isn't beer positioned in a better fashion and cooler out there? So that's my whole thing, is how to make beer much more relevant and not just going into a bar and buying it on tap. And what's the position on candy? What's the position on product? And what I'm trying to do is beer, be part of many, many universities. Beer, beer, be a part of many, many sporting events, beer ultimately being served at dinner parties, beer being served at white tablecloth restaurants. And ultimately whether it's our non alk beer, our light beers, our lower carbonated beers, we're also looking at doing beer in the morning with coffee and that where you get that lift, you get a little bit of alcohol.
Austin Hankwitz (13:21):
So beer in the morning count in
Irwin Simon (13:25):
Beer in the morning.
Austin Hankwitz (13:28):
Well, I think what's interesting, and especially for the new sort of listeners right now of after earnings that might be looking up the stock, they said, wait a second. This guy took over the company, call it twenty eighteen, twenty nineteen, revenue has increased by 300, 400% since then. You guys are well on track now to hit a billion dollars in revenue over the coming years. You have 40 different sort of companies in your portfolio, but the stock price is down so much. And so my question to you is what do you think the disconnect is there between the progress you're making as a business and what the street is kind of doing, right? What's the reason for the disconnect in your opinion?
Irwin Simon (14:05):
Great question. And I come back, there's an old saying out there, someone tells you, you don't look good. You say, no, I feel good. No, you don't look good. But I feel good. They just start to say, wait, maybe I don't feel good when you're inside this company. And when I tell people about the exciting things we're doing, beer, cannabis, spirits, medical cannabis, I get requests for people to come work here all the time, then you go look at your stock and say, maybe I'm not doing such a good job. Okay, and you're right, Tilray stock. Now, this is in the early days, was traded at $300 a share. When I took over here, the stock was much higher. What's happened very much, and this is why we look to diversify as a company. Number one, cannabis stock just got decimated because of non-legal in the us.
(15:04)
Number two, almost. There's almost every cannabis stock is not profitable today from that standpoint. Number three, a lot of these cannabis stocks got into trouble from a regulatory standpoint, from a financial standpoint. So there's a lot of bad omens on cannabis stock. The other thing is a lot of institutional funds cannot own cannabis stocks. So you look at our stock today, we've traded close to 60 million shares today, and we probably traded more shares than Apple did today. And we have a very, very large retail presence within our stock, which I love retail shareholders, they're our consumers, they're shareholders, but they trade in and out for pennies. So that is one of the big reasons, and that's the other reason why I had to diversify the company, is not to be just a cannabis company. So challenges today bring more institutional shareholders into this company other than retail shareholders.
(16:12)
Retail shareholders are important for us, but for them to become longer term shareholders. If you look at till rate today, it's five years old. And from a profitability standpoint, it's taken us time to be profitable. Now we have much amortization and depreciation and stock com, but my whole thing was to get us cashflow positive, we are, if you go back and look at Amazon, Tesla, apple, Microsoft, how long did it take to get those companies number one profitable? And for the first 3, 5, 7 years, their stocks traded within the two to $3 range. So again, it's understanding what's intel rate. The other thing is I sit here today, our debt levels are way down. We're 1.7 times leverage. At the end of the quarter end of the year, we sit with 260 million of cash. So we've got a strong balance sheet so it's understanding what else is underneath the hood here. And I think that's what's important, and that's one of the things I need to do is get out there and tell the message of what really is infiltrate today and bring in additional and institutional shareholders.
Austin Hankwitz (17:26):
I think you're right on the money there. I mean, I'm just looking this up in real time. You guys have traded 60 million shares today. Apple has traded 17 million, so that's pretty interesting. And then as you look at sort of your largest institutional investors, what I'm seeing is there's over, there's nearly 500 million of them, but they only represent 12% of your outstanding shares. Yeah, that makes total sense now that you laid it out like that.
Irwin Simon (17:52):
Yeah, 12% of our shareholders today are institutional shareholders, and where you come back and look at most companies, it's probably
Austin Hankwitz (17:59):
90. Oh, it's in the 60,
Irwin Simon (18:00):
70%. Yeah, exactly. So you know what it's like when you have a shareholder meeting, you're trying to get shareholders to vote, you're trying to, you have your average shareholders own 50 shares, you're trying to track them down and everything. It's not easy at all. But we love retail shareholders. We really do. And they trade, they're loyal and they're also consumers of our products.
Katie Perry (18:27):
Austin and I were actually browsing Reddit before the show and definitely a lot of ideas coming from them, enthusiasm there seem to be aligned with you. On the institutional front. Somebody was like, I got a plan, it's to get more institutional. And the strategy was to reach out so you can take that and run it.
Austin Hankwitz (18:45):
Good plan.
Irwin Simon (18:47):
I think the big thing is place listen and reading Reddit, I get good feedback, good criticism, good compliments. There's days you like thick skin here. But I think the important thing here is understanding what we're doing here and how we're getting to profitability. It's not easy to grow a company from 50 million to a billion dollars in size. And we've had a lot of headwinds along the way. Something called covid shut down on premise, COVID shut down all the cannabis stores in Canada where you only could order online. From a standpoint in the Canadian market in cannabis, we've had price compression of $200 million that can rate off our top line and come off our bottom line. We also pay a very, very high excise tax in Canada, which is about $150 million, which is a dollar per gram. That's not on a percentage of sales. And because we're a cannabis company, insurance rates in most companies and households and that have gone through the roof, we probably play triple the amount just because of the cannabis effects. So there's a lot of cost effects out there that absolutely hurt our profitability, but still as a company we've overcome a lot of that.
Katie Perry (20:11):
And I just want to quickly cover, so really interesting bringing up the institutional limitations and does that hinge on the federal regulation of cannabis once that becomes more widespread across all the states, does that unlock more institutional opportunities or is this a case by case? Some companies just aren't comfortable in that area?
Irwin Simon (20:35):
It's an interesting question because if cannabis theoral, so there's no reason institutions can't own our stock because we don't do anything with cannabis in the us and each institution has their own trading guidelines and some probably have that they can't own any cannabis stock no matter what. And there's a lot of regulations around banking for us, we cannot take any of our profits from Canada and bring it into the US and use in our US operations. If we send money to Canada, we can't take it back into us. So there's a lot of banking regulation because Canada is not being legal from a federal standpoint, and that's why we're all hoping there's changes that come into effect. Katie, I will tell you this here, in my opinion, if there was a change in regards to scheduling or regulation, and if cannabis did become legal from a federal level, there would be a lot of institutional shareholders that would absolutely own cannabis stocks.
(21:38)
I also think a lot of the big companies, whether it's a Unilever, whether it's a Nestle, whether it's a p and g or a General Mills would get into it because they see cannabis is a big future within the Gen Z, the millennials of the world, whether it's for medicine, whether its for enjoyment standpoint, and what you're seeing today, there's more cannabis being consumed in a lot of cases on a daily basis than alcohol. So what's the hedge out there? What's the stop gate rate now? It's the whole federal legalization issue. If I tomorrow could go ahead and sell in the US drinks that aren't infused with cannabis instead of alcohol, it would be a humongous business for tail rate tomorrow and it just in Canada today at 44% of our sales. But if I could take those drinks and some in the us, you wouldn't be drinking energy drinks. And again, a lot of our cannabis drinks, you get a good high you connection, you don't have calories, you don't have the hangover from it that you can get if you consume multiple alcohol. So big opportunity, it just we're all stopped by regulation out there.
Katie Perry (23:02):
Right, that makes sense. And yeah, our government officials aren't really known for being efficient.
Irwin Simon (23:07):
I thought there was a chance the Biden administration and I was sitting here four years ago when the Biden administration came into play a, if I was a bet man, I would've said that legalization would be in place today. Now you and I live in New York City, Katie, we walk in every corner and we smell it out there. It is legal, like I said in New York City or New York state as a state, but not from a federal standpoint. And New York state has done not a great job because a lot of product was coming in from the illicit market. A lot of product was coming in from other states that shouldn't have been coming in here. Which again, one of the big things with that from a Tilray standpoint, we have in place very strict quality assurance. We have very strict guidelines in the way we grow our product. What's the potency? What's the genetics? What's the cut with? So products coming into the marketplace are very safe. It's not cut with a fentanyl, it's not grown with pesticides and where it's coming from. So that's why regulation has to come into place for so many different ways because today it's a drug out there that's coming in from an illicit market. It's a drug coming in there that's coming in from states that there's no guidelines how it should be grown. Now
Austin Hankwitz (24:26):
Before we jump into the sort of earnings analysis, I want to take a moment to talk a little bit more about your geographical strategy, right? You guys now have your EM, EEA sort of geography contributing to 38% of all revenue, which is more than Canada and more than the us. So from a sort of forward looking perspective, is that a market you guys are planning to expand into? Where are you guys really focused? Call it in 25 and 26 so that you can hit that $1 billion in annualized revenue.
Irwin Simon (25:01):
So let me step back for a second. Today we have 10 11 share within the Canadian market. The Canadian market at retail today is about a $5 billion market. We're the largest grower in Canada, so ultimately we do about 250 million in Canada today. I'd like to see that double because more and more consumers are being educated about cannabis in Canada. I think more and more consumers will come into that market. Ultimately. I think there will be a faltering out of many the licenses that are there and the Canadian market will condense and consolidate and with innovation and more education around drinks, edibles, vaping, pre-rolls, flour, I think there's a lot more market share for us to achieve there. In the US this past year we did over $200 million in beer businesses. Our beer business. I'd like to see us get to $300 million of beverages and that would include beer, not a and drinks.
(26:10)
And that over the next year, I'd like to see our spirits business grow. So I'd like to see us get to a half a billion dollars in size in our beverage business within the US we have a business called Manitoba Harvest, which is a hemp food product business, which is food products that come from hemp, which is all higher protein from high protein products. I think there's some good growth opportunities in there. So those are the big things, we'll continuously, and that's not really doing additional acquisitions, whether it's in beverages and whether it's in spirits in regards to international, just take Europe alone, there's over 600 million people in Europe with Germany just opening up and rescheduling the opportunity in Germany and the rest of Europe for us is tremendous. Also, we're now selling into Australia and New Zealand. I'd like to see us move into the spirits and beer business internationally, and we're looking at opportunities there. I also see, and I did this in my Hayne days, I went into India in the big way within the rice business. I went into China in a big way, where could they be medicinal opportunities for us in those countries? But I think there's a big, big opportunities in the Middle East where we could sell non-alcoholic drinks and sell 'em into those markets is something that we're looking
Austin Hankwitz (27:43):
At. I think it makes a ton of sense and it sort of tees me up for the first earnings question, which is focused on your beverage alcoholic revenue, right? So you released earnings on July 29th and you grew top line revenue by 25% to $230 million aided by 137% surge in your beverage alcohol revenue business segment. Now the beverage alcohol gross profit margin also expanded 200 basis points to 53%. So my question is, how should retail investors be thinking about this business segment going forward? You sort of mentioned how you want the US to double, so get that closer to half a billion, but is that more of a acquisition type play or I mean, I guess so because you sort of mentioned back in the interview how you'd like to acquire existing brands and then rejuvenate them, but is that going to be then the strategy for the next foreseeable future for this specific business segment in the US or is there maybe other ideas that you guys might have?
Irwin Simon (28:48):
So number one, we acquired some great brands, brands and they're in early stages. Montauk Brewing great beer and we're expanding that into the Tri-state. So New Jersey, Connecticut, New York, you'll see it over a hundred million people there. And one of the things we're going to do is focus on regional areas and what should we take national. We acquired eight brands from a BI and these are some great brands and we're seeing some great growth on Shock Top 10 Barrel, some of the new innovation that we acquired from that. Right now what you're seeing is growth coming from the brands that we acquired and that is some of the innovation that I talked about before in regards to our pub beers in 10 Barrel in regards to some of the new innovation that we're coming out with Shock Top, some of the new innovation that we come out with Montauk and Sweetwater.
(29:52)
So a big part of our growth has to come from the foundation that's in place and that is new products, new innovation. The other thing is we have 500 beer distributors out there and these beer distributors are looking for growth because some of the bigger brands they've had had declined. So they're looking for companies today that are out there innovating products, spending money on distribution, spending money on the brand, and they're also looking at the companies we're going to do additional acquisitions that they have the opportunity to get those brands. So we have that in place. Our distribution, we put salespeople on the street, we put headquarters people on the street, we went out and hired a great marketing department, social media, we're doing a lot around sporting events and sporting teams, we're doing a lot around universities, et cetera. So that is something we're doing to grow our base business of what we own.
(30:53)
Today. We have today 13 brew pubs out there, and that is a big part of it where brew pubs, you go to our breweries and drinking beer, eating good food and having a great experience. Our whole thing is how do we connect people? So we'll continue to come out and introduce and open more and more brew pubs out there based around our beer and based around connecting people. And last but not least, we're going to do more acquisitions out there within the beverage category. We're going to do more acquisitions within the spirits category. We'll do additional acquisitions as we look to take some of our brands here and can we buy some businesses in Europe and bring them over with those businesses? So that's how we ultimately will grow our beverage business.
Katie Perry (31:42):
Yeah, that's a really important breakdown I think, because it sounds like it's kind of a two-step process. You have an organic growth via the initial acquisition and then it's about building that brand, improving distribution, innovating the product to scale it up from there. And on the topic of m and a, there's been significant dilutions for your shareholders, right? And how do you communicate to your very passionate vocal investors when you say, Hey, we're still in acquisition mode, we still want to do more of that. When that's currently being funded by that dilution, is that the plan moving forward or how do you keep people loyal to as shareholders? With that going on
Irwin Simon (32:26):
A great question and we have to go out there and do accretive acquisitions, and that's the big thing out here is if we're going to go out there and be using equity to buy or out there raising equity and using it for acquisitions, that's the big thing is raising money for acquisitions that are accretive their earnings and accretive to growth and not just acquisitions that don't contribute anything to top and bottom line. And that's what I want to tell shareholders. That's the acquisitions that I want to be doing out there and that's what I want to be using our cash in stock for. So ultimately that's what they got to get comfortable with. We're doing this for the growth of the company and that's how we got to where we are today in revenue and where we are today in EBITDA and where we are in free cash flow.
Austin Hankwitz (33:16):
Appreciate that breakdown. Let's now talk a little bit more about your path to profitability. You guys did a great job narrowing your net loss from negative 120 million to now negative only 115 million. Your adjusted EBITDA increased by 37% from 21.5 million to nearly 30 million this quarter. So I'm curious, what levers are you pulling to Cause this 37% jump in adjusted ebitda and what is your plan, your path to reach gap profitability?
Irwin Simon (33:46):
So if you come back and look at our net loss, our big part of our net loss today and in the quarter there was about a $15 million loss. The majority of that comes from non-cash. It's still a loss at the gap loss and ultimately, so it was amortization depreciation and stock comp was the big thing. So I look, I'm big on cash and I'm big on free cash flow and you're generating cash to drive your operations and to pay for your operation. That's important to me and I don't want shareholders to look at that. Correct. So because again, as what I call a startup and we have built tremendous facilities out there and we have pretty significant depreciation and amortization, that's why you're seeing the adjusted EBITDA that you're seeing out there. So to get the profitability, I want our investors to look at us from a free cashflow standpoint and from an EBITDA standpoint, I know some investors look at it from an EPS standpoint, but I ask them to take out what are the non-cash aspects of it too.
Austin Hankwitz (34:59):
I think that makes a ton of sense. I'm a big believer in free cash flow, so I'm right there with you, man. So you have then maybe, I guess what you're saying is there's always variables with depreciation, AM amateurization, stock compensation, things of that nature, but you're saying that you really want to encourage investors to look at your forward looking, the free cash flow, cash from operations, things of that nature and how that trends over 20 25, 20 26 versus sort of a more defined path to gap profitability.
Irwin Simon (35:36):
Exactly. Listen, we're not the general mills. We're not PG that's been around for a hundred years, okay? We're a 5-year-old startup company that's done lots of acquisitions and have lots of assets and lots of high valued assets to depreciate and amortize over a period of time. So I think that's what I ask is to look at us a little differently. How are we growing this business from scratch? How are we getting organic growth sales, not just from acquisitions and what are we doing to generate free cash flow here, not losing money from operations? And that's very much how I want investors very much to be looking at
Austin Hankwitz (36:17):
Us. Yeah, I'm just kind of looking here in real time and it seems like Wall Street's on your side on that one. I think they're projecting about 50 million in cash from operations with your business in 2025. So it's really exciting and it seems like that'll expand to about 75 million in 2026 is what they're hoping for. So as a shareholder, I'm also hoping for it,
Irwin Simon (36:38):
And the key here is I come back and say this here as a company today and putting the infrastructure in place. So today with our run rate last year being about 850 million of sales, and this year we gave projections of 950 to a billion, that was our forecast. The more we can grow our sales, I have in place an infrastructure that could run a $2 billion company easy. So after your costs of goods and being a public company has lots of high costs associated with it. You heard me say before, being that cannabis company has lots of costs associated with it. So building out an infrastructure with good process, good disciplines is something we had to do. And now that we hit that nine 50 to a billion dollars mark, I got the infrastructures in place right size that if I get the $2 billion, which is one of my goals out there, there's a lot of cash.
(37:46)
This company has the opportunity to generate a lot of costs, got to come out of here. Ultimately, I think our margins, I think our EBITDA margins in the last quarter were about 7%. I'm somebody, and I'm not out there making, giving guidance or anything, but I like an 18 to 20% EBITDA margin business, so I'm a very focused person on margins, very focused on generating cash and very focused on how we take costs out of these businesses. With the Hexo acquisition, we took 31 million of costs out. There's a lot more costs that can come out of the beverage acquisitions within our beer business, our traditional beer margins with Sweetwater, were 45% the acquired businesses that we acquired from a BI, the margins were in the 20% there. So there's lots of opportunity to take costs out of these businesses.
Austin Hankwitz (38:42):
Well, I'm sure too with your massive portfolio, I mean there's definitely synergies across all your different products to your distributors to how you guys are manufacturing things. I mean, yeah, I definitely see a pathway for margin expansion with this business
Irwin Simon (38:55):
And that's very much the plan. I just came back from meetings last week with the team and board meetings and margin margin margin is something I kept focusing on and two points of margin in this business, what it's worth to us, if we can get that.
Katie Perry (39:11):
Yeah, what I'm hearing is a lot of diligence on balance sheet on your end, but also seems like you're sort of a brand guy. It sounds like you appreciate the value of brands, you like finding them, acquiring them, building that up. And I'm curious, I feel like the beverage category is so competitive in terms of standing out. You have brands like Liquid Death doing crazy stunts and collabs, all the major beer brands, super Bowl ads. How do you think about differentiating these craft beer brands that you've acquired from a marketing standpoint, knowing you're really trying to keep costs within the realm of unlocking growth, but also being responsible with the spend.
Irwin Simon (39:50):
On one hand, the beverage category from a size is in the trillions and there's some big brands out there and the Coke brands, the Pepsi brands that Dr. Pepper brands, consumers are not drinking the sodas today and there's a lot of new entries into the soda world. So first of all, it's a big category, the beverage category, and I like to play within big categories. Secondly, we have six manufacturing facilities out there today. We have an infrastructure of sales, marketing and quality people out there today. Then we have a major asset called distributors, and these are DSD distributors direct to distributors, distributors that are selling on premise and they're hungry for new products. So the beverage companies out there, and it's amazing how many beverage companies I've been approached to buy that are selling through food distributors or selling differently. They're having trouble getting their products on the shelves, number one.
(40:58)
Number two, the cost for them to go through these distributors is really expensive. So we have a benefit of having a great distribution partners in place, and then we have an infrastructure out there of sales marketing people that can sell to the supermarkets today that can get products out there. Now listen, there's an old saying out there, you can stack 'em. High depletions are the key word in this business and depletions are the takeaway. Consumers got to pick up your products. So your two of my consumers, how do I get you to buy my liquid death or my high ball or my runner's high and through my social media, through my advertising, through my investment, how do I get you educated is the key to that. There's a lot of products out there, there's a lot of beverages, but my key is to get you knowing about my products. So I feel good about, I can make the products, I can feel like good about innovating the products. I feel good I can get the products on the shelf, but how am I getting you to buy them is the
Austin Hankwitz (42:06):
Key question I was stern on when we were preparing for this interview was the company culture, right? You guys make fun products if you ask me. I just heard earlier in the interview talking about morning beers. I love me some morning beers, especially when I was in college. So what's the company culture? I mean, are we sipping beers at the desk? Are we taking smoke breaks? Are we hanging out? How do you sort of navigate that with the products that you guys sell?
Irwin Simon (42:30):
So I'd like to invite both of you to come and hang out with me for a day. Okay, I
Austin Hankwitz (42:35):
Would take up on that. Let's do it
Irwin Simon (42:37):
And do it. The culture is, and it's interesting, I am a believer in engaging everybody in the company for feedback. I will tell you, I have a son at USC and I had his four friends sitting here listening to our strategic plan meetings and coming back to us with their input, what they're seeing out there as a company that's involved in the type of products we are. We listen to all our Reddit readers and Reddit influencers. We listen to our retail shareholders. So the culture is we're having fun. We're trying to connect people, we are very responsible to our shareholders, we're very responsible to our consumers, and with that, we want to help connect people and change the world out there. Now we've talked about how we want to be about wellbeing and healthy. Well, it's hard to talk about being wellbeing and healthy when you're selling beer and products like that, but how do we connect people and what can we do to put out their good quality products and we're all having fun?
(43:54)
That's the big thing. There's fun in what we're doing. And I'd love to, Kate, you're New York, I'd love to invite you out to our blueprint, our bluepoint facility out in Patch Hog. Montauk come up to our offices every day at four 20. There's beer all over the place here. We have on tap our brands, there's cannabis, it's legal. So it's a place that's important and there's a culture where everybody connects, and that's something that's been very, very important to me. Like I said, I'm big on brands. I had twin boys. I wanted to call it one brand and one equity, but my wife wouldn't let me. So, but it's very important to have a culture within your business, and that's a big part of what's until right today
Austin Hankwitz (44:47):
We are wishing you the best of luck, Irwin, man, I'm so excited for
Irwin Simon (44:50):
You guys, but please follow up with us. I'd love for you to let me know with Baron, love to host you here. Okay?
Katie Perry (44:58):
Yeah, watch out for me around the blue point blueberry though. That's my jam. So definitely
Irwin Simon (45:05):
Going to pick you up on that. Hey, I'm impressed that you know that, but there's a big fridge right in the front where you walk into our lobby, so please come visit.
Austin Hankwitz (45:15):
Amazing. Thanks Irwin. Appreciate the time, man.
Irwin Simon (45:18):
Hey guys, thank you. And anytime, let me know and I'd love to see you guys in person.
Austin Hankwitz (45:22):
What an awesome conversation with Erwin, the CEO of Tilray brands. I had no idea that Tilray was not just like this weed stock that I read about on Reddit and may or may not have purchased back in the day for some fund. I didn't know they're literally becoming the General Mills type portfolio of marijuana, but not just from a marijuana perspective, but also with all these beers and energy drinks and everything else under the sun. I mean, they're really going out. They're finding existing brands that could use some extra distribution and they're sort of acquiring them and then bolting them onto their existing business and leveraging the existing distribution and everything else they've done to sort of build out this awesome portfolio now of 40 plus companies. I am blown away, to be quite honest with you.
Katie Perry (46:13):
Yeah, you're right Austin, and I love how they're not waiting around for the regulatory landscape to change. They're setting up this CPG infrastructure so that when that happens, cannabis can be an ingredient across their portfolio, but in the meantime, they are building up this muscle in beverage and spirits. He even previewed a water that they're debuting. So I think that's a really smart strategy and it's just a testament to sometimes you do need the long read, right? Sometimes the quick headline on social media doesn't tell the whole story. So really appreciated Erwin giving us his time and breaking down how he sees the future of this business.
Austin Hankwitz (46:53):
Major. Shout out to Tilray Brands for joining us here on this episode of After Earnings. And I think something that Erwin said that I think a lot of other retail investors should focus on is this idea of sort of cashflow, that free cashflow, cash from operations sort of line item there on their cashflow statements are really important because to his point, you will have these weird one-off stock compensation depreciation and amateurization type expenses that are non-cash expenses, making it look as if this company lost a hundred million dollars. But in actuality, I mean they're free cashflow positive. So I think that's just a really important differentiator that you'd normally only see with sort of software companies and things like that. But to his point, I mean, this is only a five or 6-year-old company, so he's definitely sort of leaning into that infancy, but it seems like they're moving in the right direction
Katie Perry (47:42):
Also, also, we got the tour invite at all of their breweries. I believe that was any of them. So we'll have to do that and report back. With that being said, this has been after Earnings, the show brought to you by Morning Brew and Stakeholder Labs. Thank you so much for tuning in and we'll see you next time.
