Q3 2024 Tilray Brands Inc Earnings Call

Participants

Berrin Noorata; Chief Corporate Affairs Officer; Tilray Brands, Inc.

Irwin Simon; President, CEO & Chairman; Tilray Brands, Inc.

Carl Merton; CFO & Principal Accounting Officer; Tilray Brands, Inc.

Blair MacNeil; President of Tilray Canada; Tilray Brands, Inc.

Andrew Carter; Analyst; Stifel, Nicolaus & Company, Incorporated

Nadine Sarwat; Analyst; AllianceBernstein

Bill Kirk; Analyst; ROTH MKM

Michael Lavery; Analyst; Piper Sandler

Matt Bottomley; Analyst; Canaccord Genuity

Doug Miehm; Analyst; RBC Capital Markets

John Zamparo; Analyst; CIBC

Presentation

Operator

Thank you for joining today's conference call to discuss Tilray brand's financial results for the third quarter of fiscal year 2024 ended February 29, 2024. (Operator Instructions)
I will now turn the call over to Ms. Berrin Noorata, Tilray branch Chief Corporate Affairs and Communications Officer. Thank you. You may now begin.

Berrin Noorata

Thank you, operator, and good morning, everyone. By now you should have access to the earnings press release, which is available on the Investors section of the Tilray Brands website at Tilray.com and has been filed with the SEC and CEDAR.
Please note that during today's call, we will be referring to various non-GAAP financial measures that 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. Our 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 those forward-looking statements.
The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements. Today, we will be hearing from key members of our senior leadership team beginning with Irwin Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary, followed by Carl Merton, Chief Financial Officer, who will review our quarterly financial results for the third quarter and update our financial guidance for the fiscal year 2024. Also joining us for the question and answer segment are Denise Faltischek, Chief Strategy Officer and Head of International; Blair MacNeil, President of Tilray Canada; and Ty Gilmore, President of our US beer business.
And now I'd like to turn the call over to Tilray brands' Chairman and CEO, Irwin Simon.

Irwin Simon

Thank you, Werner, and good morning, everyone, and thank you for joining us at Tilray brands. We take great pride in our mission to be the most responsible, trusted and market leading cannabis and consumer products company across the globe today with our complementary business units, we believe Tilray brands is the best positioned company in the world to take advantage of all the positive regulatory tailwinds happening globally with cannabis legalization and drug policy reform in Canada, Tilray continues to lead the cannabis industry with the leading portfolio of adult use brands and the number one market share.
In the event, the current excise tax regime were to be replaced with a 10% ad valorem tax based on the value of the product sold and not a per gram tax. We expect an annual savings of $80 million. We also expect to benefit from additional cannabis related regulatory reforms around marketing and THE potencies. I'll take a deeper dive into the Canadian market shortly in Germany, Tilray has the leading cannabis market share by revenue for the trailing 12 months, and we believe we are best positioned to capture a large portion of the expected growth in the medical market with both our in-country cultivation facility in Germany and our state-of-the-art facility in Portugal.
We also have the ability to ship products from Canada into Germany in the US, Tilray has multiple options and in particular, is well positioned to benefit from the federal legalization of medical cannabis as a result of rescheduling yes, we believe that the rescheduling of cannabis from Schedule one to Schedule three in the U.S. would provide a path for Tilray to sell pharmaceutical-grade medical cannabis in the U.S. subject to DR prescriptions. This is a different strategy from what MSOs are doing today.
We believe there's an opportunity to supply medical cannabis products from our existing operations into the U.S. for medical purposes. Further in the event of a future federal adult-use and medical cannabis legalization in the U.S., we believe Tilray is well-positioned to immediately leverage its strong global leadership position, know-how and strategic strengths across operations, distribution and brands sell THC infused products across its robust distribution network and sales channels in the US today, Tilray is a clear outlier in the global cannabis industry because we're the only company with global expertise in both adult-use and medical cannabis.
Our innovation comes from GMP certified pharmaceutical-grade medicines through all recreational cannabis formats, including THC, infused beverages, which also parlays into our beverage strategy. We have rigorous cannabis quality control, regulatory affairs, branding, marketing, sales and distribution. We also have the number one cannabis market share in Canada the number one cannabis market share in Germany as measured by revenue, and we distribute medical cannabis in over 20 countries around the world. Since 2019, we quickly develop a diversified and award winning portfolio of brands backed by a best-in-class operations in Canada, the US, Europe, Australia and Latin America that support our goals of becoming a multi-billion dollar cannabis consumer products company that addresses the needs of consumers and patients we serve today.
As you know, the leadership team at Tilray has the expertise of buying CPG brands and building them into somewhat greater than they were before. Our curated portfolio of beverage brands includes craft beers, spirits, ready-to-drink cocktails, ciders and non alcoholic beverages. We are now the fifth largest craft brewer in the U.S. with a 4.5% share of the craft beer market with over 500 beer distributors alone.
Tilray is now dominating key regions across the US with our craft beer brands in the Northeast Pacific, Northwest, Midwest and Southeast, along with one of the most awarded bourbon brands with Breckenridge distillery, which continues to gain market share across whiskey, Blockdot engine products. Our wellness brands include Manitoba, Harvest, hemp-based food products, ingredients and snacks, as well as our Happy flower, our CBD-infused beverages and our recently relaunched high ball energy drinks, which in its first month on Amazon received over $1 million in orders with the appropriate approvals. We're also looking to introduce tenant base, Delta nine beverages and products with our Happy flower brand and across other wellness brands in the US.
And finally, we own and operate a European medical cannabis and pharmaceutical distribution business in Germany, CC Pharma, also known as Tilray pharma with a robust footprint, reaching 13,000 pharmacies in Germany alone with broader medical cannabis use doctor prescriptions in Germany, we expect there to be tremendous demand for medical cannabis within pharmacies. I can't predict the future, but my belief is there will be a lot of cannabis regulatory changes we've seen with Germany in Canada and the U.S. and Tilray is best equipped to reach these underlying opportunities.
And we have the assets and the tools to reach our goal for Tilray brands to deliver industry leading profitable growth and sustainable long term shareholder value through a focus on these three fundamentals, maximizing profitable revenue growth through organic growth and strategic acquisitions with strong synergy opportunities, realizing the benefits of optimize asset utilization and cost management to ensure an efficient cost structure across all our business segments and to strengthen our industry-leading balance sheet and cash position.
During Q3, we achieved net revenue of $188 million representing approximately 30% growth over the previous year. We grew our revenue across our core business segments. This was achieved by focusing on organic growth of legacy brands and enhancing the performance of our more recent strategic acquisitions.
Gross profit was $49.4 million despite impact of the newly acquired craft beverage brands, which have a lower margin. Our net loss was $105 million, which only $4.5 million represented loss from operations and cash used in operating activities was $15.6 million. Adjusted gross profit was $51.6 million. Adjusted EBITDA was $10.2 million, adjusted net income of $900,000 and adjusted EPS of $0.00. We delivered positive adjusted free cash flow for the quarter.
Over the last three quarters, we significantly reduced our convertible debt by $205 million, decreasing our net debt to approximately $175 million, and we'll work to continue reducing our indebtedness, optimizing our capital structure and enhancing our financial flexibility. The net reduction in our convertible debt will decrease our annual interest expense by $9.8 million, which flows directly to adjusted net loss and adjusted free cash flow.
Let's now dive deeper into each of our business segments. We grew our global cannabis net revenue by 33% to $63.4 million in Q3 compared to the previous year quarter, driven by our acquisition of Hexal and trust as well as our international business and innovation in the Canadian markets.
Net Canadian cannabis revenue grew 31% to $49.4 million in Q3 compared to the previous year. We achieved this growth with the Hexal acquisition despite price compression totaling $3.1 million from our prior year quarter and a crippling tax structure that has allowed taxes, despite while prices declined by more than 50%. Excise tax increased by $8.2 million and amounted to $21.8 million or 32% of our gross Canadian cannabis revenue in Q3 compared to $13.6 million or 26% in the same quarter last year.
Recent enforcement efforts by Canada Revenue Agency guard DCLP payments from the provincial boards is already having an impact on our competitors, over 1,000 of whom have negligible market share to continue enforcement by CRA we believe will lead to further and necessary industry consolidation.
Perhaps on a mass level, Canada continues to be the largest federally legal and commercial adult use cannabis market in the world. And Tilray brands maintains that number one market share position in the country. We are number one in interior number one in Quebec, number one in British Columbia, which together represents over 60% of the population of Canada. We're also number one in cannabis flower and oils concentrates and THC beverages, number two in pre-rolls and number four in vapes. And in the top 10 and all other categories, all while operating under rigorous high quality control standards.
Our focus in Canada is on two things. First, growing sales primarily through continuous launches of new product innovation. And second, taking more and more costs out of our businesses on a ladder on a large part of our acquisition strategy for Hexal, Entrust involves removing legacy cost and skew rationalization from these businesses for heck. So we originally targeted $27 million, but then increased that to between $30 million and $35 million, of which we've already achieved $27.5 million in savings on an annualized run rate basis, of which $15.6 million his realized cost savings during the period.
Our Hex o integration plan includes streamlining our Canadian operations, improving utilization of our core facilities, improving margins and maximizing cash opportunities by pursuing divestitures and consolidating facilities. We plan close to close the call. You have facility and move its cannabis cultivation to our existing Canadian production line. Seller may sign a facility in Quebec, which is currently cultivating cucumbers as eventual operator and sell the Belleville facility and move our manufacturing to our London facility for our beverages. We expect this plan to result in onetime $70 million to $85 million of Canadian cash flow inflow opportunity and accretive to margins and net income by $5 million to $7 million on an annual basis.
From a regulatory standpoint, the expert panel appointed by the federal government clearly highlights three areas of focus which Tilray would benefit from once implemented. First, excise tax reduction, which I've talked about, both in adult recreation and medical would benefit fill rate $80 million.
Secondly, there is a proposed opportunity for pharmacies to carry CBD and medical cannabis for medical patients, which would move plant-based medicines into the mainstream as an options for patients to treat ailments.
And finally, enforcement against illicit websites dispensaries that don't contribute to excise tax and put you at risk through unregulated product channels available easily online with each tranche transfer a Canadian post the mail, we see Canada Post and the Canadian baking systems are responsible for shutting down access to these unlawful establishments.
Turning to international cannabis, we grew net revenue organically by 44% year over year to $14 million. And we remain the number one market leader in medical cannabis across Europe with a leading market share in Germany and Poland still raise international growth has also been driven by increased sales in our existing markets such as Portugal, Italy, the UK, Australia and New Zealand.
The new German medical market opportunity is projected to be approximately $3 billion in the medium term, while the European opportunity could represent a potential $45 billion medical market alone in the long term, our presence in Europe allow still rate to grow our global brand portfolio through a base of over 700 million people in Europe, which is twice the population of US.
While much of the media attention related to the new cannabis reform in Germany has been centered around cultivation for personal use and the establishment of cannabis Social Gloves. The new opportunities for Tilray flow, mostly from the removal of medical cannabis from the narcotics Act. This the schedule change is expected to significantly expand the medical cannabis market in Germany as it would allow for more doctors to prescribe medical cannabis more easily to patients and potentially allow for a broader health insurance coverage.
We will therefore be increasing our educational efforts to bring more and more health professionals onboard with medical cannabis as therapeutic options we estimate that less than 2.4% of the population in Germany are presently buying medical cannabis compared with 4% and states like Pennsylvania in Germany. We also stand to benefit from the abolishment of the tender process for in-country cultivation of medicinal cannabis, which is being replaced with a licensee's scheme. We are currently one of the only three in-country cultivation facilities in Germany today.
And these legislative changes would allow us to better meet patients' needs by expanding our medical cannabis product offerings. This would in turn significantly increase our cannabis production in Germany by five times more than double our revenue opportunities. Tilray opportunities in the U.S. cannabis remained strong over the past several years. Our playbook of expanding our business beyond cannabis through adjacencies and complementary markets has positioned Tilray well for the current environment as well for future growth opportunities.
While we currently do not engage in any U.S. cannabis operations because of federal regulations, we are well positioned to participate and win in a federally legalized market when that changes either rescheduling or medical cannabis or the passage of federal cannabis legalization given our deep knowledge, global expertise in medical and adult-use cannabis and the regulatory compliance apply. Tilray is playbook in the US is to build and deliver iconic sought-after brands in the beverage alcohol and the CPG backed by product excellence and innovation, educate consumers about our brands and our stringent quality standards to encourage trial and foster loyalty.
And last but not least, to drive and scale and distribute to get our brands into consumer hands to grow our market share.
Moving to our beverage segment, which is quickly approaching approximately $300 million annualized as mentioned earlier, Tilray brands is now the fifth largest cracker in the US with a 4.5% craft beer market share. And we aspire to be a top 12 beverage company in the US. Q3 beverage alcohol net revenue was $54.7 million, representing 165% growth year over year. Kilroy now holds a 4.5% of the craft beer market share in the U.S., and we're just getting started and ramping up of this.
Our legacy brands of Sweetwater Montauk, our clients, Nelson and green flush demonstrates our ability to successfully grow existing brands. Along with our recent acquisition of 12 craft brands from ABI InBev, we have gained the scale. We have gained in scale and see further expansion opportunities. We've water remains the number one brand family in Georgia, multi outlets. Montage remains the number one brand family in Metro New York, having increased its distribution by 28% versus last year.
Tilray is now the number one craft supplier year to date in the Pacific Northwest. And there was volume growth increased by 413 basis points since Tilray took over the brand. And we're now capitalizing on the success of 10 barrel of beer brand extensions by adding Popeyes harvester vessel line expenses, both innovations, we are extremely excited to launch growing 24% of beer is now, but top 20 brand on the West Coast with only half the distribution, our top competitors due to its focus on the Pacific Northwest states.
Still, our ambition is to be much higher as we're aiming and uniquely positioned to become a top 12 beverage alcohol business. This will be accomplished by leveraging our portfolio to win more occasions through core products such as craft beer and beyond through innovation to categories like flavored malt beverages, ready-to-drink cocktails and spirits, but ultimately, our plans go beyond alcohol as we will be expanded into sparkling water, energy drinks and other categories.
This is important because we have the manufacturing facilities, the distribution and the sales and marketing infrastructure to drive Tilray businesses. Working with the ECG., we developed a clear and focused strategy to drive top line and bottom line growth for our beverage businesses. Three-prong approach will deploy our regional strategy called fuel to stabilize scale brands such as Sweetwater Montauk blue points in their respective key adjacent regional markets across the U.S. and maximize their potential to gain market share from competitors. Stool is already paying off.
According to BI. sales to retail data, Tilray has increased its market share of total beer in 13 states, including key markets such as Oregon, Washington, Colorado, Idaho, Minnesota and Arizona. When comparing share before and after the Kraft acquisition in the South East alone, we've improved trends by 4.6% post acquisition for q three 10 barrel, I see a 12.3% increase in distribution amongst our top 10 distributors when compared to the same time last year. And when comparing six months pre acquisitions with the five months post acquisition, overall trends have improved 3.3%.
Overall trends for BluePoint have improved 1.3%, whilst number one distributor has improved trends by 3.8%. I know those are just a few examples. We are also executing a national brand strategy beginning with revitalizing Shock Top to win as a national craft beer overtime by targeting share and connect occasions to reach major through male and female drinkers. We see there's tremendous upside with chopped up as according to our qualitative research Shock Top has the highest purchase intent among 12 of the largest beer brands. This is why we're focused on increasing distribution and getting this brand back into the hands of consumers. We are already on our way in Q three shocked us.
Number one distributor has increased distribution 24% versus last year, while on-premise distribution has increased by 0.5% over last year. Among shop talk top 10 distributors, we are aggressively launching new and often disruptive innovation across our beer and nonalcoholic brands through increased portfolio of brand appeal to new consumers and new occasions. Many of our newly acquired brands have not had innovation in the last couple of years among many others, recent examples include liquid love for heart cell hydration runners, higher on nonalcoholic craft brew for athletes, eyeball and a hardball on non-carbonated 10% ABV product sold and 16.9 ounce plastic, resealable containers and noncarbonated Shock Top lid, hard tea.
Let me say that we're working to get the cost structure right, brainstorming the productivity and profitability of the breweries. We acquired. We expect that our beer gross margins will increase once we fully realize the cost savings achieved in connection with the fully integrated beverage alcohol platform as we move away from the existing co-packing manufacturing agreements with ABIT. and increase our productivity in our newly acquired breweries and 13 brew pubs.
Finally, let's discuss our wellness segment represented mostly by Manitoba Harvest, which is fostering a positive impact on people and the planet through him by making ongoing commitments to sustainability with breakthrough initiatives such as investment in regenerated agriculture, revenue grew 12% in Q3 to $13.4 million compared to last year.
We partner with bioactives company, right C to revolutionize the functional fiber market and break through products, Manitoba Harvest bio active fiber, which is now exclusively available at Whole Foods markets nationwide. Incredibly 95% of Americans do not consume the recommended daily intake of fiber. This product provides six grams of both soluble and insoluble fiber for service and is the only fiber solutions 82 powerful hand phase file access from gut health.
Moving forward, the team continues to assess the opportunity to bring in hemp derivative Delta nine beverages to market under happy flowering Tilray brands.
With that, I'll now turn the call over to Carl to discuss our financials in greater detail.

Carl Merton

Thank you, Irwin. Recall that we present our financial results in accordance with US GAAP and in USD. Throughout our discussion, we will be referring to both GAAP and non-GAAP adjusted results, and we encourage you to review the reconciliation contained within our press release from our reported results under GAAP for the corresponding non-GAAP measures.
Let's now review our quarterly performance for the three months ended February 29, 2024. Q3 total net revenue rose to $188.3 million compared to the prior year quarter of $145.6 million, representing almost 30% growth excluding acquisitions completed within the fiscal year and the $8.7 million actual advisory fee captured in the prior year quarter. Our legacy businesses remained consistent despite a 13% revenue decline in our lowest margin segment.
We continuously emphasize the strategic importance of our adjacency business model, which is a key differentiator for us. This is best reflected by the contribution of our four segments to our overall results, which shows that we are not too dependent on any individual segment having a disproportionate impact on our sales or profit growth. Each segment is also in our view on a path to sustainable long-term growth.
Looking at each segment now during Q3 and compared against the prior year period. Net beverage alcohol rose 165% and represented 25% of our total revenue mix. More than double relative to last year's 14% of total mix. Net cannabis revenue rose 33% and represented 34% of total mix, up slightly from 33% last year. Distribution revenue decreased 13% and represented 30% of total mix, down from 45% last year. And wellness revenue rose 12% and represented about 7% of total mix, down only slightly from 8% last year, respectively. Diversification is also reflected in our geographic footprint.
During Q3, more than 62% of our net revenue was generated in North America, roughly 36% was generated in EMEA and the remaining 2% coming from other parts of the world. This compares to about half from North America and EMEA in Q3 last year with the variance related to the North American acquisitions we completed since that time, namely XO, the Kraft acquisition brands and the remainder of Truss beverages let me first touch on the key current item related to cannabis.
Before moving on to a discussion on profitability. We incurred $21.8 million in Canadian cannabis excise taxes during Q3, which are a reduction to revenue compared to only $13.6 million last year. The increase in excise taxes is reflected by a sharp increase in cannabis revenue generated in Canada versus the year ago period due in part to the excellent Truss acquisitions and a change in our revenue mix to higher excise tax products.
Through the first three quarters of our fiscal year, we've incurred more than $75 million in excise taxes versus $47 million for the year ago, nine month period. For many quarters, we have been on the record with respect to the inherent unfairness as to how the excise tax is predominantly computed, which is largely a fixed price on gram sold rather than as a percentage of the selling price because the selling prices declined meaningfully since the law was first enacted in 2018, it has made the excise tax a larger and larger component of net revenue over time, particularly as current growth categories like infused pre-rolls and concentrates become the biggest part of our sales mix to prove this point.
Further excise tax amounted to 32% of gross Canadian cannabis revenue in Q3 compared to 26% in the same quarter last year. While through the first three quarters of the year, excise tax came to 34% of gross cannabis revenue versus 27% for the first nine months of fiscal 2023. In our view, and in the view of so many others, this price based tax structure is curriculum as it has allowed taxes to spike and the price of cannabis has declined by more than 50% since legalization.
In late February the Canadian House of Commons Standing Committee on Finance issued a report outlining several recommendations regarding the regulated adult-use cannabis industry, including the recommendation to adjust the tax structure recommendation three to nine, in particular calls on legislators to make adjustments to the excise duty formula for cannabis. So that is limited to a 10% ad valorem rate. If enacted, this would be a welcome change that could result in $80 million in annualized revenue for our cannabis business, which would largely fall to the bottom line.
The key to the government's plan and needed relief for our industry is that the provinces not enact their own excise tax. We reflect the loss and taxes. They are reaping from the status quo, increase their profits at the boards for mandate that the tax savings are passed on directly to the consumer in the form of lower pricing. The budget announcement is next week and we are following developments closely, but are resolute in our view that reform is greatly needed and measures must be enacted to stabilize the Canadian cannabis industry.
Turning back to our performance, gross profit was $49.4 million compared to a loss of $11.7 million in the prior year quarter, while gross margin increased to 26% from negative 8% in the prior year quarter adjusted gross margin decreased to 27% compared to 30% in the prior year quarter. I will discuss adjusted gross margin by individual segment in a moment. However, the majority of the decrease relates to the addition of the new craft brands, which are subject to a co-manufacturing agreement with ABI until at least the end of Q1 next year and the prior year figure, including the Exel advisory fees.
Net loss improved to $105 million compared to a net loss of $1.2 billion in the prior year quarter, which included $934 million of impairments on a per share basis, this amounted to a net loss of $0.12 versus $1.90 in the prior year quarter. Recall that last quarter we introduced two new reporting metrics to our discussions, adjusted net income loss and adjusted earnings per share.
The definitions of both were identified in the press release, along with the relevant reconciliations and calculations for Q2, we are reporting an adjusted net income of $900,000, which when calculated on a per-share basis results in EPS of zero for the quarter, adjusted EBITDA was $10.2 million, down from $13.3 million in the prior year quarter.
This is mainly a consequence of the negative impact to cannabis gross margin related to wholesale revenue, determination of the actual advisory services contract on our acquisition of XO in June and the co-manufacturing agreements with the new craft brands. As I will explain shortly during the quarter, we made great progress against the XO synergy plan, which we had previously increased to between $30 million and $35 million. As of the end of Q3, we achieved 27.5 million in savings on an annualized run rate basis, of which $15.6 million represented actual cost savings during the period.
Operating cash flow was negative $15.4 million compared to negative $18.6 million in the prior year quarter. This improvement in cash used during Q3 this year was primarily related to achieve synergies of previously identified cost savings plans.
For me now to our four big business segments. Beverage alcohol revenue was $54.7 million, up 165% from $20.6 million in the prior year quarter. Positive delta was due to contributions from the craft brands, which were purchased last fall. However, we note that the impact of dry January was far more of a headwind than it was for the industry in previous years.
Beverage alcohol gross profit increased to $18.9 million compared to $10 million, while beverage alcohol gross margin decreased to 34% from 48% in the prior year quarter. Adjusted gross margin fell to 38% from 53%. Both of these outcomes were a result of the craft brands, which currently have lower margins than our historical business. This is primarily due to co-manufacturing agreements for brewing for greater context.
Adjusted gross margin for our legacy beverage business was 59% compared to the prior year quarter of 53%, primarily as a result of an agreement with a distributor related to our spirits business. Adjusted gross margin from the Kraft brands was 26%. The improvement of gross margins in the beverage alcohol business, primarily in the beer portion of the business, represents a major focus for the organization grows. Cannabis revenue of $85.2 million was comprised of $62.1 million in Canadian adult-use revenue, $14 million in international cannabis revenue, $6.4 million in Canadian medical cannabis revenue and $2.8 million in wholesale cannabis revenue.
Net cannabis revenue, which excludes the aforementioned $21.8 million in excise taxes, was $63.4 million, representing a 33% increase from the year ago period. The positive variances related to the increased organic growth of over 14% combined with contributions from the acquisitions of Paxil and trust, offsetting the increase in net cannabis revenue was the elimination of advisory services revenue totaling $8.7 million from the prior year quarter due to the XO acquisition, which terminated the previous strategic arrangement that was in place, while revenue from Canadian medical cannabis grew only slightly as the category is being impacted by competition from the adult use market and its related price compression.
Revenue from Canadian adult use rose 37%, which was driven by new product innovation and increased revenue from Paxil and trust. International cannabis grew 44%, largely because of growth in our existing markets and the expansion into emerging international medical markets. Wholesale cannabis revenue increased to $2.8 million from essentially zero last year. As these sales are opportunistic and variable, we entered into this wholesale agreement to optimize our inventory levels and prioritize the generation of positive operating cash flow, unfavorably impacted our gross profit and EBITDA.
Cannabis gross profit was $20.9 million and cannabis gross margin was 33% compared to negative $32.8 million and negative 69% in the prior year quarter. Excluding the impact of the non-cash fair value purchase price accounting step-up in inventory valuation adjustments. Adjusted gross margin decreased to 33% from 47%. As I said earlier, a portion of the margin decrease is a result of the termination of the Hexal advisory services agreement, which contributed $0 gross profit in the current year compared to $8.7 million in the prior year, which if excluded, would decrease adjusted gross margin to 35%, essentially, meaning that our cannabis gross margin was largely flat year over year.
Distribution revenue derived predominantly through Tilray pharma decreased 13% to $56.8 million from $65.4 million in the prior year quarter. Revenue was negatively impacted by infrastructure outages and weather which impacted revenue by just over $3 million and short term challenges related to new rebate regulations sorry, pharma gross profit decreased to $5.6 million compared to $7.5 million in the prior year period sorry, pharma gross margin decreased to 10% from 11% in the prior year quarter. Because of product mix, wellness revenue grew to 12% at $13.4 million from $12 million in the prior year quarter. The increase was driven by our strategic focus on targeted advertising campaigns, aligned with emerging trends and healthier lifestyles, particularly around the new year, coupled with our continuous innovation efforts.
Wellness gross profit was $4.1 million, up from $3.7 million in the prior year quarter and gross margin held at 30% compared to 31% in the prior year period as we experienced a change in sales mix towards more bulk retail sales.
Our cash and marketable securities balance as of February 29 was $225.9 million, down from $408.3 million in the year ago period. The majority of the variance was related to the payment at maturity of the Tilray 23s threes are cash acquisition of the new craft brands and suddenly assumed liabilities from Exel, including unpaid excise tax as well as legacy litigation settlements.
Having now completed three quarters of our fiscal year, it is clear that our prior fiscal 2024 guidance of adjusted EBITDA of between $68 million and $78 million is no longer feasible. We have therefore lowered our adjusted EBITDA range to be between $60 million and $63 million which takes into consideration our performance through the three quarters over $12 million year to date and price compression in the cannabis business and continued expectations for the fourth quarter.
Still for Q4 represents a major increase from the current quarter, which is traditionally our lowest quarter due to the seasonality within our segment. Fourth quarter seasonality improvement is a function of our beer business leading up to the summer historically busy season new innovations scheduled to be launched as part of the spring reset new innovation in our cannabis business, along with expected wholesale sales and in our distribution businesses, pharmacies buy in bulk for their customers ahead of them going on summer vacation.
Recall that we also projected positive adjusted free cash flow from operations for the entire fiscal year, excluding our integration costs for XO trust, the new Kraft brands and the cash income taxes associated with Aphria Diamond due to the timing of collecting the cash on the various asset sales mentioned, we now do not expect to achieve this prior adjusted free cash flow guidance. While we were adjusted free cash flow positive in the current quarter. Our current expectations are for a very strong fourth quarter of adjusted positive free cash flow. Of course, we will continue managing CapEx as part of our efforts to strengthen our industry leading balance sheet.
Let me now conclude our prepared remarks and open the lines for questions from our covering analysts. Operator, what's the first question?

Question and Answer Session

Operator

(Operator Instructions)
Andrew Carter, Stifel.

Andrew Carter

Thank you. Good morning. Wanted to ask about the German changes. I mean, obviously it's going to likely manifest in a big uptick in patients with doctors now having a Board a more freedom to prescribe it to prescribe cannabis. But kind of thinking through this competitively, how do you how do you see this as your position unique in being able to attack this market and know that know, for the past five years, we've seen a lot of decks with German circled and capacity hit that market. Is that capacity still out there? How expensive it is to maintain this? And can you give us a reminder of kind of the stringent quality standards you have to have in place to serve the German market. Again, thank you.

Irwin Simon

Andrew, great question. Number one, this and we see the opportunities in Germany in multiple ways on. We have a facility in Germany today and that Germany before only with service of tender to the German government. Now that tender will process will go away and we'll be able to sell product into the marketplace. So that's number one. Number two is before only a certain amount of doctors are able to prescribe cannabis and it was a very small amount for specialty reasons. And now every doctor, because it's no longer a narcotic, we'll be able to prescribe cannabis.
Number three. We also have a facility in our Portugal of which will be able to supply Germany than before is we have something called So radiopharmacies in pharma, which is a distribution company that distributes cannabis and other medicines to over 13,000 drugstores are we have a team based in Germany. We have a sales team based in Germany. We have R&D we have quality insurance. So we've been there for four or five years, and we've had some tough four or five years because of what's happened is the other big thing here is Europe. It's a big country and with no longer being a narcotic and the personalized. We see lots of other places in our countries opening up, I believe Salto checkers, Head of Europe produces anything I missed or anything that you should that then their earnings

Berrin Noorata

No irwin, you did not missed anything just to add a little bit more in terms of factor in terms of data abolishment of the tender that Irwin spoke about on and the fact that under the new under the new regulations, we'll be able to apply for a license with our facility in Irvine versus today.
Just to refresh everyone's memory. We are subject to a tender contract and we are capped at about 1,000 kilograms that we can grow every year and that is done pursuant to certain pricing so with the abolishment of the tender, we now open up into a licensing process where we are now subject to just market conditions as it relates to patient demand. And so we can utilize that facility to meet that demand, which will allow us to increase our capacities.
We have the ability to buy today grow up to about 5,000 to 6,000 kilograms and without any additional CapEx. And we can basically then also survive and have pricing that is subject to market demand today so that that is an immediate benefit there in terms of the ability to prescribe, we are amping up our ability to hear from the doctors and working on symposiums and educational platforms uncommonly on one of the things we've done on the prescription platform software. If the doctor wants to prescribe medical cannabis patient and they go to that page and that the Tilray banner at the bottom, which shows all of our portfolio of products, but the conditions are how to prescribe. So we are out there also providing basically information for doctors who are willing to prescribe and want to emphasize

Irwin Simon

That we communicated in January, we do have a branded jewelry brand, but you know, the whole thing of socialized medicine and prescription and paying for it. We see lots of changes happening so, you know, we have been working in the German market in regards to our products for pain for enzymes for sleep for cancer for epilepsy from. So we've been all over that and take our expertise of what we do at medical cannabis in Canada and translated there.
And secondly, like I said, there is a market out there that will be looking for medical cannabis, but ultimately use it for recreational cannabis. So from a standpoint, we really are excited about what's happened in Germany. It does not affect us in regards to the social measures that have come in place there and that we have the team we have to grow and we have the infrastructure, the research and development ready to go here and it's effective now.

Andrew Carter

Thanks. I'll pass it on.

Irwin Simon

Thank you.

Operator

Nadine Suraj Bernstein.

Nadine Sarwat

Thank you. two for me, please. First on the guidance, I appreciate the added color that you gave. Could you be a little bit more specific and perhaps what exactly has changed versus last quarter and this quarter, what sort of surprise to the downside and how do you see that progressing over the quarters to come?
And then my second question, I know you guys called out your number one position in Canadian cannabis though, looking at the market share numbers you guys quote in the press release, I think that's on the downward trend for the last couple of quarters. So could you break down what's driving that? And if you think you can we gained that over the quarters to come? And if so, how how do you anticipate doing that.

Irwin Simon

So I'm going to take to start. Part of it are number one, not all quarters are equal this third quarter being one of our lowest quarters in regards to bev alcohol in our cannabis business, our fourth quarter's enter first quarter second quarter. So that's, you know, Asian look at our quarters and absolutely there's seasonality. We've been all these businesses Secondly, we did lose some share in Canada. Some of it was again coming back to price compression and some of it was coming back to some of the prices in regards to our flower.
On the other thing, what happened is we have a lot of innovation that was coming into the marketplace that we didn't get into the market in our third quarter, which we expect to be able to get back in our fourth quarter.
I think what's important here, again, there's been lots of price compression in Canada where he regards to we talked about our percentage of excise tax and the market is changing dramatically there in regards to potencies and being, you know, infused pre-rolls, et cetera. So some of it is just timing and do I expect to get it back on where you're on the line, Do you expect to get your share back.

Blair MacNeil

Thanks, Irwin, and Thanks, Nadine, for the call. Just to add a little bit more color to what I was talking about. Q2 and Q3 were our most operational complex periods. So in addition to what Irwin talked about what we also saw is when you are moving the location of skus and where they're going to be distributed from. And one of the things we've done is centralized all our packaging and logistics out of Bloomington that requires us to draw down inventories in each of the boards and then rebuild that inventory once we've changed to source a location.
So what you're seeing in some of the numbers is in addition to the price compression Irwin talked about in the innovation side, it's just a reflection of the operational complexity we implemented in Q2 and Q3 once that is completed and that was all completed inside of Q3, that will generate very strong operational efficiencies for us moving forward as everything outside of beverages will be shifted.

Carl Merton

Well, that's I'll just highlight a couple of things to add to the explanation as well on in our beverage alcohol business. And I think in the entire industry was hit and which had a little bit harder than it has in the past in terms of in terms of dry January for that. So I took away a bit of a portion of our sales expectation for the full year on the beverage alcohol business, with the new acquisition of the new brands, those brands are at a lower gross margin than they than the rest of our businesses. We're working very hard to have to bring those pieces up and we will get that up over time as I said in the script.
we expect to be able to bring those up much closer to our to the historical margins that we've achieved. But it's going to take it's going to take a few quarters and so it's just it's coming. It's really a function of the co-manufacturing agreements that we have on getting that production, move them into our facilities and organize them in an effective manner while not quarterly operational problems during during that move.
And in terms of the free cash flow guidance, we had some expectations on cash receipts on some of some of the bigger things, including on some of the make-whole provisions inside of the spirits business, which we now see coming in in June or July as opposed to a day. And that's really what's led to that page.

Irwin Simon

I think the big thing here is just timing in that, you know, I can't always predict things. And, you know, with our beer businesses or VABI. businesses bought lower margins. But just from an integration standpoint, we had a transfer service agreement with ABI. We're moving away from that. The end of May move it into our facilities. We expect to get our margins up into the high 30s. Low 40s today with our Sweetwater in our legacy businesses were running margins at that rate so with that, we look, we look to those margins in regards to the Canadian cannabis businesses, as Blair said, integrating heck. So with SKU rationalization with some of the strains and looking at some of the potencies and timing. And when you deal with ag products, not everything moves accordingly. Here, we've made some moves in regards to our colleagues in regards to Nissan in regards to Belleville and consolidating our businesses, they are taking out costs. So again, as we look at guidance, yes, there's guidance out there, but a lot of it is just timing and data as we move forward. We have four quarters, not six quarters of or six quarters that would be different InterSearch.

Nadine Sarwat

Understood. Thank you.

Irwin Simon

Thank you.

Operator

Aaron Grey, Alliance Global Partners.

Good morning and thanks for the questions is now running. This is Matt on for Aaron Grey, my first question is are the terms of the CRA having the provinces garnish wages, we started to see any changes in purchase habits from provinces and the overall competitive environment yet and then kind of greater focus on those LPs paying their taxes Phase two?

Blair MacNeil

I don't think we've necessarily seen changes in purchasing patterns. I think we saw very quickly after CRA starting to garnish in those wages, a couple of LPs filed for protection on within the same week that and I think there's been a few more that have filed since that period of time. And so some of them who's excessively behind on their excise tax and having the payments partners are looking at four or five, maybe six months of time before they're going to get their next payments. They just don't have a lot of choices. And so they're having to file for that protection. I don't think that the boards are actually changing those patterns yet.

Irwin Simon

I think that will probably happen over the next three or four months as more of them sell fees realized and get caught up in the Gartner show.
but there's a lot of the boards out there that have been asked by the CRA to garnish excise tax when they sell into that big. The big thing for us is we're finally seeing the Canadian government kick in this series and those that weren't paying an excise tax could keep going and putting the rest of us at a disadvantage. So I think we're going to continuously see changes. And, you know, we've talked about the study that's come out there in regards to changes in regards to excise tax and marketing on medical cannabis, et cetera. I think there are some major themes here that could really benefit the Canadian cannabis industry.

Great. Thank you. I appreciate the color there.

Irwin Simon

Thanks.

And then my second question, I've got no, go ahead. My second question, just regards the excise change excise tax changes that you mentioned on that could potentially occur in the budget release next week, you mentioned tax saving potentially of $80 million for Tilray. So I guess with those savings, you expect that to mostly be realized by the LPs or could there be some benefit realized in the province and the retail as well. So any color there would be a good quite good question.

Irwin Simon

I see as we know provinces and we know, government, I'm sure they're going to try and grab some of that, Tom. But I think listen, as we've said, and we've openly said it's about $80 million. You know, to Tilray. And the big thing is you guys price compression and you still have the same amount of excise tax that you're paying. And I think in this quarter was 32%, 33% of our sales was built to excise tax. So something has to be done idle mine. Some of it goes back to the government's on education and promoting the safety, bringing awareness, marketing and allow us to do these things. So again, if we got half of that $40 million back invest back in the business, I think it would be tremendous beneficial yields to Tilray than other LPs.

Blair MacNeil

And I think the key the key and there's pieces that if the government's making the change to strengthen the industry and because the tax became a way oppressive they need to avoid creating new things that that pull that money back and they need to allow to go to the industry to help the industry continue to grow and strengthen.

Okay.

Operator

Bill Kirk, ROTH MKM.

Bill Kirk

Okay. Thank you for taking the questions. And maybe I missed it in the prepared remarks, but what is the at $29 million in assets that have been moved to held for sale. I imagine some of it might be facilities that you mentioned earlier, but what specifically is in that number and how is it determined?

Irwin Simon

So that number is, is there a legal facility. That's my San ended, the Belleville facility that we acquired as part of trust. And so in each case, if that facility it is in the business, the business is being reorganized within our existing footprints and then where we're releasing our smart selling that won't become redundant assets at that point in time.

Bill Kirk

Okay, got it. That's what I was looking for on not the businesses.
Okay. And then in the third quarter compared to 2Q of selling marketing expenses up a little bit --

Operator

I'm sorry, Tim set his line may have a technical difficulty.
Michael Lavery, Piper Sandler.

Michael Lavery

Thank you. Good morning. And just wanted to touch on the US And I understand at the moment it's strictly speaking a little bit hypothetical still, but if rescheduling occurs, you laid out at a high level, how you're thinking about it, a more pharmaceutical approach. I guess a couple of questions. Is it just maybe what's your patience level if it does come to that just because the FDA certainly is known not for its speed. And so is your understanding just that that obviously if that door opens, it could still take quite some time or how are you thinking about that?
And in the release as well, you reminded us about the connection to MedMen and how would that fit into that potentially is that something that would still they separate or could potentially become sort of like pharmacies? I guess just maybe lay out some of how you're thinking about potential U.S. opportunities should regulatory change come through.

Irwin Simon

So as you know, as I said, within U.S., medical, cannabis is rescheduled on the medical cannabis becomes legal. We'd be in a large medical cannabis producer in Canada, and Europe and have the expertise and have the research not knowing what the FDA and not knowing in regards to we know what the guidelines will be built. Tilray is ready to capitalize on all our expertise on. Is there a possibility with naptha or with other rules that we can export cannabis from Canada? That's GMP-certified. And today, you think export, you know, cannabis from Canada into other parts of the country, other countries around the world, if it's GMP-certified. So I'm not sure why that wouldn't be the case in the US if that happens.
And my personal belief, if it's rescheduled from the medical cannabis standpoint and they leave it up to each of the states on a recreational standpoint, and that is something different. So I think the big thing as I look into a crystal ball, not knowing where this is going, I think something happens from a rescheduling standpoint and Tilray is ready to move from a medical standpoint, if there was an acquisition for us, we're ready to move. And, you know, we pulled the debt of MedNet.
We think the MedMen name still has a strong, strong brand name, even though it's had its challenges and it's going through some changes right now to get rid of some of those liabilities not and there's an opportunity that we could execute with the MedMen name across the US. The other thing is depending and I think one of the biggest opportunities, and we're seeing some opportunities with Delta nine, which is an infused drinks with and continues to see some.
I think the biggest opportunity is in drinks and with our distribution systems with our brands within our beer business, in spirits, no Tilray to get into that. So, you know, not knowing and not what's going to happen. And I think as I said, Tilray is circled in the U.S. And it's not like we have to change your model being an MSO where we'd be no restricted to each state right now. We can take our expertise from around the world. We can take our medical expertise. We can take our beverage expertise and bring it to the U.S. once we know which way rescheduling happens and it goes. So that's what I'm excited about is once we know what the guidelines are, once we know what the opportunities are, we could easily jump in there without doing something that we own today.

Michael Lavery

Okay. Thanks and just on the beverage side, you touched on your hopes for distribution upside on a lot of the especially the recently acquired brands. But and do you have a sense how you see coming into this spring shelf resets and what sort of shelf space gains you're positioned for that are already in hand?

Irwin Simon

So I have to tell you you're on the call, right, you want to jump in there. And listen, I got to tell you in a short period of time on a lot of these brands were just started on innovation starved on distribution. We have 500 distributors that they're now we sanitize each distributor to a million more, which is not a lot as $500 million. So I think the upside on beer is tremendous. As you look at pricing, you look you look in regards to the whole spirits industry. I think we're so well positioned on beer on innovation that we're coming out with, we are moving into water moving into some energy drinks moving into some other infused drinks. So we're well positioned with our distributor distributors. We have over 100 salespeople and your headquarter people between marketing. So Kai, you want to just talk about some of the stuff that's happened?

Carl Merton

Thanks, Irwin and thanks for the question Michael.
No, we feel really solid about some of the distribution gains, not only that we've made in the third quarter, but we also feel solid about the conversations we're having with several national and regional our retailers across on and off premise with our brands.
Yes, specifically, if look over Q. three, and we've gained north of 1,200 new effective placements on our existing brands and with the innovation, we continue to see uptick every day with our distributor network and how they're leaning in with us and helping drive distribution.
So on yes, chains. We're going to continue to play a critical role in our success, and we're well suited, as Irwin said, to us leverage our partnerships through our distributors and the relationships that we have across you.

Michael Lavery

Okay. Thanks so much.

Operator

Matt Bottomley, Canaccord Genuity.

Matt Bottomley

Good morning, everyone. Just one for Karl.
I just wanted to go back to the revised guidance here on adjusted EBITDA going into fiscal Q4 here. So I'm just wondering if you could give a little more color on the dynamic between overall revenue progression versus margin expansion. There's obviously quite still a big step-up expected even in the revised guidance. And then specifically within that, I'm wondering how much of that is beverage related, given that I think you had commented that you're close to about a $300 million business now and all your beverage portfolios your run rate this quarter, and I understand there's seasonality, it's closer to $200 million to $225 million.
So I'm just wondering if there's some step up on the revenue side specifically in Q4 when it comes to your alcohol contribution.

Carl Merton

So banks, banks, neither there is significant increase in sales in Q4 in beer, as I think we've talked a little bit already on the call in terms of the spring reset and essentially getting those are the key summer selling season, which is really driven in our April and May sales results for the organization, particularly in beer. We've also we've talked a few times about some challenges in the spirits business with sales growth and that we were going to get resolution of that in Q4 of this year. So that's also reflected in sight of our goals that expectation on EBITDA. It's potentially driving both our revenue and earnings and margins on during that during that time period, I think you'll find them on the beer businesses.
Margin side, you are going to see an increase in margins, Q4 that will be driven by just more more volume flowing through the facilities as we as we ramp up production in Asia in March and April to hit those April and May sales because they're such quick turnaround time and lack of inventory inside inside that segment. You've also got the buildup on the cannabis business for the summer period of time and increases in things like pre-rolls and other product forms in the cannabis business that are better consumed on a more of a, let's call it a shared basis, either in a shared setting or actually some share, not bet on its own. And so that that's that's a that's a part of it. And with that increased sales level comes our increases in margins just because of efficiency or on the production side, okay.

Matt Bottomley

Thank you.

Operator

Doug Miehm, RBC Capital Markets.

Doug Miehm

Yes, thank you and good morning and question just has to do with again the excise tax.
And going back to this, there's obviously an opportunity for your company, but I am curious if these changes were to go through and you benefit somewhere between $40 million and $80 million the way you expected. What do you what you're thinking on the other companies because we're starting to lose some of the smaller companies, but is this going to provide the smaller companies with another year or two of life and I'd say the other thing that I'm curious about as it relates to this could this result in another leg of downward pricing as a charge to maintain market share?

Irwin Simon

So I think a couple of things, yes, I think yield if companies don't have to pay the same amount of excise tax on that, you know, everybody, I think some of these companies absolutely and survive. And I think listen, I think at the end of the day. We all want a strong cannabis market in Canada from the DC is again, what's got to change is the excise tax and DSC instead of three, we probably have the highest. We are the highest payer of excise tax in Canada. So for us to receive back, it was $80 million is a lot of money. But at the end of the day, it's money that we're going to put into building our brands, building our products, our innovation and also marketing and building a bigger category of there. And I think that's ultimately the benefit that the money's not going back to our taxes going back in to build a marketplace, in fact, to continuously grow the industry. So yes, will more competition be it there could be price compression.
Absolutely. But I pay a lot. I don't mind some more price compression. I don't mind some more LPs being in there. I wouldn't mind that $80 million coming into our into our company where we can invest it back in our business and drive growth, drive innovation and drive marketing a brand so much bigger category to some extent, will take longer to understand the different entities are going to have different amounts of a waiver into this. Right.

Carl Merton

And as you get as you get closer to the tail end of share. The impact for a lot of those companies is going to be a lot less. And if they're behind on their excise taxes, the excise tax diminishment may have may have a bigger impact for them. We're on the off, as Irwin said, we're on the opposite end of that tail because because we're the largest And then you've got a bunch of companies in the middle where I think that is more towards where your question was, we're you're going to see some people who will be able to survive a little bit, and I don't think excise tax is going to keep everybody business here.

Irwin Simon

Okay. I hope that continues to see more consolidation in the Canadian market. I see some of the smaller players ultimately going away. And I think that's what happens here as a new industry. There's just a filtration of feel of these LPs. If you come back and looked at it today, 25 LPs make up about 50% market share. There's about another 1,000 LPs that make up the other 50% market share. So a I see some consolidation, you see companies going away. And I think what this creates is a much stronger cannabis industry within the Canadian market. And if what happens also, as I said, before there could be opportunities for grow in Canada to be shipped into the U.S. and other parts of the world, which could enhance Canadian cannabis industry.

Doug Miehm

Okay, excellent. Thank you.

Irwin Simon

Thank you.

Operator

John Zamparo, CIBC.

John Zamparo

Thank you. Good morning. My question is on the cost side. Both COGS and SG&A. And there's just a lot of moving parts here. And I wonder how much FQ3 three represents a run rate because you've got additional synergies coming from XO, it sounds like you have savings on the beverage side as you move away from co-packing agreements, but you're also investing in innovation and product extensions. And it sounds like another variable is selling the production facilities, which I think you said saves $5 million to $7 million annually. So I wonder when you think about all of this in aggregate, is there a net benefit on the cost side? And do you expect to see total costs come down from SQ3? Because it seems like organic revenue growth is a bit more difficult to achieve near term.

Carl Merton

So I'm first off, I think organic growth is going to come five, particularly in the fourth quarter as we see the new launches and new innovations hit the market, particularly in some of these new categories that we're doing on the beverage alcohol side, including including the water and the nine out Tom and playing in that space playing in the F&B part teen space, things like that are new categories for us. And so I so I think there are opportunities for organic growth by using QQ. three has a baseline.
I don't think that's the range when you look at it on and similarly, you know, I don't think Q4 is necessarily the right baseline for and therefore the exact for office of Lisa's. Q3 is traditionally our lowest quarter in terms of revenue and production. And Q4 is traditionally our highest quarter in terms of revenue and production. So we get it we're going to get a an uptick on margins as a result of that incremental volume, particularly in beverage alcohol in our legacy business. And that's that's going to be what drives a chunk of the earnings guidance and is to me what what drives our results.
Our networks.

Irwin Simon

I think the big thing here is to you've heard me say before this, the savings we're getting from the integration of Exel and trust and somewheres between close to $35 million. We don't get that up immediately. You know, it evens out over the quarter. So it takes us a full year to get that amount.
The second thing is, as we've just own the AVI. businesses for two months and just two quarters from as we integrate them into our businesses and start from the procurement from, you know, from the distribution standpoint, I mean, there's a lot for us to get done here, but we're focused on organic growth, and we're starting to see that already. We're focused on which facilities stated rate, these products to which states we're going to focus on. We also have 13 brew pubs out there that we're focused on growing our brands through these brew pubs on, you know, big event for us for 20 coming up April 20.
We have two big events, one in Atlanta and one in Long Island. And there's also in every retailer there's displays built out. So July fourth is one of the biggest beer category months that is sold out there from occasion. So you know, right now as we bring this together and our aspirations is to grow our beer business to a $300 million business and you remember in 2020, we sold 2.5 million cases. And when we first acquired the Sweetwater brand today, we're on a run rate to 12.5 million cases with tremendous opportunity with all the innovation that's happening. So there's just a lot of evening out here, and there's a lot of moving pieces to bring all this together.
And I think the big thing is is as we look at it, when we get a full year behind all these acquisitions with Paxil with truss and the integration there, and we get all this, you know, full year together with all the ABI. stuff, we're seeing some great stuff. And listen, just with mom-and-pop, we've owned it over a year, one of our fastest growing beer within New York today, some of the stuff we're seeing on the West Coast with free flash, Nelson's and Alpine. So the legacy stuff that we've already bought and owned the year. We're seeing good results for that. Just it takes us some time here to get these things integrated.

John Zamparo

Okay. I appreciate the color, and I'll pass it on. Thanks.

Operator

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Simon for any final comments.

Irwin Simon

Thanks, everybody for joining us today. On this, and I wish I could predict what's going to happen in the cannabis industry from there is going to be one thing for sure I can predict there will be change and we've been waiting for change for a long time in the German market is finally came to fruition, and there's going to be a lot of execution to get it where it needs to be, but it's happening. And I do think we've been sitting and waiting through the Biden administration before that change happen within the cannabis industry.
And there's lots of discussion about rescheduling. And again, it's not something we have control, but one thing we do have control of We do know how to grow cannabis. We do know how to sell medical cannabis from Novo research. We do have within candidates today over 5 million square feet of growth. We do have in Europe, we have two major facilities on and with that depending what happens in the U.S., we will be ready to launch what needs to be launched in the US, whether it's taking share from our existing businesses, acquiring putting something together, we will have the opportunity to do that. As I've said, our aspirations is to grow our beer business to a $300 million pure business.
We already are the fifth largest craft brewer today within the US, we have a great business within Breckenridge distillery, and we've been named some of the number one whiskey within the world within the U.S. as of exciting things happening. I'm also really excited about what's happening in our wellness business in regards to Manitoba Harvest and what's happening with camp from a high-protein food and now the perception of hemp as a great product and a healthy product. So Phil below is touring brands comes together over the last five years.
There's a lot of really good pieces that ultimately will come together. There's tremendous opportunities with our products. There's tremendous opportunity with our distribution. There's tremendous opportunities as we build out our global market. So as I look at Tilray we've circled a lot of the right wagons and again, that dealing with regulatory dealing with unknowns in regards to rescheduling. But Tilray is there. I'm real happy with the team that I have in place and excited to work with the team. We've done a great job in an industry in regards to banking, what we've done with our balance sheet, and we continue to work on that balance sheet. I'm somewhat personally that does not like debt.
So how do we focus on our balance sheet? I'm very much in favor. And as I push with Karl and the risk team, cash flow and taking costs out of our business. And there's not too many other industries out there that are tax the way we are on cannabis on beer and spirits. And I wish I was Tilray was already the amount of money that we're providing, the governments of Canada, U.S. and Europe from our taxes that we generate from our business.
With that, I look forward to talking to you again soon. Appreciate you getting on the call and have a great week. Thank you.

Operator

Thank you. This concludes today's conference call and you may disconnect your lines at this time. Thank you for your time.