OrganiGram Holdings Inc Stock

Hello, everyone, and welcome to Organigram Global's 2026 Investor Session. Many of you watching today, I already speak to fairly regularly, but for those I haven't met yet, my name is Max Schwartz, and I'm the Director of Investor Relations at Organigram.

So thanks again for joining us today. Before we get started, I'll quickly cover the standard cautionary statement, so just bear with me a moment. Today's event was prerecorded and is current as of September 14, 2026. Watchers and listeners should be aware that today's session will include estimates and other forward-looking information from which Organigram's actual results could differ. So please review the cautionary language in our public disclosures on various factors, assumptions and risks that could cause our actual results to differ. Further, reference will be made to certain non-IFRS measures during this session, including adjusted EBITDA and adjusted gross margin, and these measures do not have any standardized meaning under IFRS and are intended to provide additional information.

As such, these should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Our approach to calculating these measures may differ from other issuers, so such measures may not be directly comparable. Please see our public disclosures for more information about these measures. You should also be aware that Organigram relies on reputable third-party providers when making certain statements relating to market share data. And unless otherwise indicated, all references to market data are sourced from Hifyre in combination with data from Weedcrawler, provincial boards, retailers and our internal sales figures.

Now with that out of the way, a lot has changed at Organigram since our last Investor Day. We've got a new CEO, James Yamanaka. We've acquired Sanity Group, establishing a significant operating business in Europe. We've added new leadership and capabilities across the organization. And most importantly, the business itself looks quite different today than it did just 6 months ago.

So today is really about highlighting how things have changed and laying out where we go from here. You'll hear from our CEO, James Yamanaka; our CFO, Greg Guyatt; and Finn Hänsel, Founder of Sanity Group and now Organigram's President, Rest of World and Chief Strategy Officer. We're also going to take you inside several of our facilities to hear directly from the people running different parts of the business. And the overarching theme of today's session comes down to 4 strategic priorities: a rock-solid Canadian business, international expansion, manufacturing excellence and innovation, and disciplined ROI-focused capital allocation. All of these, we believe, support our ability to generate consistent profitability and increase shareholder value. Now we're going to come back to those 4 priorities throughout the session.

But rather than spend any more time setting it up, I'll hand it over to James Yamanaka, CEO of Organigram Global, and I'll be back shortly to moderate our fireside chat.

James?

Thank you, Max, and thank you all for joining us as we begin what I believe is an important new chapter for the company. Many investors will know the Organigram name from the last 5 or 6 years. Over that period, Organigram has been known for a lot of things. At different points in our history, we've been known for medical cannabis, indoor cultivation, plant science and innovation.

More recently, we've become the Canadian recreational market share leader and now with the Sanity acquisition, a leader in the 2 largest federally legal cannabis markets in the world. These are all things to be proud of, all parts of our evolution, but ultimately, none of them is the end goal. The goal is to build a global business that can translate our market positions and our capabilities into sustained profitable growth, consistent cash generation and shareholder value.

When I joined Organigram in January, what stood out to me was the quality of the underlying pieces, a strong domestic business, world-class cultivation and product science, nationally recognized brands, increasingly sophisticated manufacturing capabilities, strong R&D and innovation capabilities, a strong partnership with BAT and now through the Sanity Group acquisition, a significant international commercial platform. The ingredients are here. Our job now is to connect these ingredients into one coherent global strategy that drives sustainable growth and value to our shareholders.

So what is our strategy? I think the easiest way to explain how we get there is through 3 key questions. Number one, where and how do we compete? Number two, what capabilities allow us to win and ultimately, how do we allocate capital behind these choices to create the greatest value. As Max mentioned, I'd like to think about these questions within the framework of 4 connected pillars. Let me start with Canada. Our Canadian operations are the foundation of the company. Canada is a place where we built strong brands, where we've become the market share leader and where we have established leading capabilities in cultivation, R&D, innovation and plant science.

We've also gained expertise across all noncombustible categories from flower to vapor and edibles as our Canadian business has grown, expertise that we can leverage in Canada and in other markets around the world. Canada is also a jurisdiction where the cannabis industry has been firmly established from a regulatory and public acceptance perspective with relatively lower risk of shocks than countries where legal cannabis is more nascent. Now let's be honest, while we are very proud of our market share leadership in Canada, we know that we need to improve our profitability in the market. We are determined to remain the market share leader in Canada. But with that said, we've also made some clear choices not to chase revenues in segments that do not have the potential to drive overall margin.

In line with this, we are already being more selective about the number of brands and SKUs our dollars support. A more focused portfolio allows us to concentrate on building brand equity while significantly lowering complexity and costs across our operations. We've already reduced our SKU count over the past year by roughly 10% and completely exited certain wholesale white label segments. Both of these actions have supported improvement in margins, and we'll continue to rationalize and simplify our portfolio as we move forward. We'll increasingly focus our investments on our big powerful brands like SHRED, BOXHOT and Big Bag O’ Buds, all of which have become some of the most recognizable brands in Canada, commanding strong positions in the categories and consumer segments they serve. In sum, we will not lose our focus on our core Canadian business, but we will shift our focus to driving profitable quality growth.

Moving on to Pillar 2, international expansion and vertical integration. Global cannabis markets continue to grow, and OGI is well positioned to participate in this growth. The acquisition of the Sanity Group has already transformed the business and significantly strengthened our ability to grow globally. Just 6 months ago, Organigram was a leading Canadian player with a small but growing export business, but very limited commercial capabilities on the ground outside of Canada. With the Sanity Group, Organigram continues to have a strong business in Canada, but now also has a leading medical platform in Germany, a significantly strengthened ability to develop new markets in Europe and regulatory engagement capabilities in Europe that did not previously exist.

The scale of the change is significant. In fiscal 2025, only about 10% of Organigram's net revenue came from nondomestic sales. With the addition of Sanity Group in Q3, roughly 35% of OGI's revenue was international. And this proportion is growing. In Q4 2025, the pre-acquisition Sanity business generated EUR 19 million in revenue. Just 2 quarters later, the Sanity Group segment of OGI reported revenues of EUR 25.5 million, a 34% increase. If this trajectory continues, investors should expect our international sales to catch up to and possibly outpace our domestic sales in the not-too-distant future.

This will, of course, be driven in the near term by the German market, but we expect to build on our positions in other markets, both organically and should the right opportunity arise via inorganic avenues. And all of this growth will be supported by our operational capabilities in Canada. To continue growing our international business, we brought in Sanity's Founder and CEO, Finn, as our new President, Rest of World and Chief Strategy Officer. He'll talk much more about the opportunities he sees shortly.

Now moving on to Pillar 3, manufacturing excellence and innovation. In order to grow our domestic and international businesses, we will need to drive operational excellence across our supply chain. We'll need to improve our operational costs and gross margins. We'll need to ensure that we deliver high-quality products consistently to our consumers and patients. And of course, we'll need to drive innovations that can grow the business. So what are we doing to drive manufacturing excellence and innovation in OGI? First of all, we've appointed Adrian Frenzel, the former Managing Director and COO of Sanity Group as the new Chief Operating Officer at Organigram. Adrian brings a strong record of success in operations from previous roles as a McKinsey operations consultant and as Co-CEO of HelloFresh USA.

I'm fully confident that Adrian will drive significant improvements in our operational efficiency and effectiveness. Adrian and the team will be laser-focused on improving operational efficiencies. They'll ensure that we realize gross margin improvements that stem from our SKU reductions and simplification. They'll simplify production flows, increase automation and introduce more standardization into our processes to drive efficiency. They'll continue to improve the global supply chain. And of course, they'll ensure strong, consistent and consumer-relevant quality in all of our product lines.

Finally, we'll continue to focus on driving relevant innovation. And innovation for us is not just about the next novel recreational product. It's about building an ecosystem of innovation, including process improvements, plant science and genetics, product science and the technical building blocks for innovation across our categories. Pillars 1 and 2 were about where we compete and how we win. Canada as a bedrock, Germany as a current growth opportunity and prudent expansion in current and future markets. Pillar 3 is about how we drive down costs and deliver the best quality to consumers and patients worldwide. Combined, these pillars are designed to help us grow profitably and deliver free cash flow, which we can then reinvest into other opportunities.

Pillar 4 is a guardrail on our growth ambitions. We are determined to grow the business globally, but we'll do this prudently with disciplined capital allocation to ensure we do not overextend the business. Every acquisition, every brand, every production asset, every SKU, every commercial decision will continue to be evaluated through the lens of strategic importance, contribution to the bottom line, cash generation and liquidity and, of course, return on investment. Greg will walk us through this pillar in more detail shortly. So that's an overview of how we're thinking about our strategic priorities moving forward.

Now I want you to hear from some of the people supporting these priorities. First, let's head over to Moncton.

[Presentation]

I think what you just saw gives you a better sense of what we mean when we talk about operations in general. And there are some genuinely impressive capabilities in Moncton, which as you can see, we are constantly trying to improve. We have other facilities across our cultivation and manufacturing network with similar focus on continually improving. Let's take a look at what's happening at our Aylmer facility.

[Presentation]

Thanks, team. We've now covered cultivation, plant science and manufacturing consistency. We've shown you Moncton and Aylmer covering pillars supporting our business and operational initiatives. We have another cultivation and derivatives facility in Lac-Superieur, Quebec, which is strategic to our growing success in the Quebec market. In Lac, we mainly grow flower and manufacture hash, leading to our leadership in the concentrates category. In the interest of time, though, I want to finish these pillars with one last stop at our Winnipeg facility. Going from Moncton to Aylmer to Winnipeg gives you a view across our supply chain from cultivation through extraction and manufacturing all the way to finished products like beverages and edibles. And beverages are a relatively new capability for OGI that we're excited about. Let's check it out.

[Presentation]

The edibles and beverages category in Canada are underdeveloped relative to what we believe they can be. Today, edibles are only about 5% of total retail sales. In the U.S., that number is closer to 15%, making edibles a much more significant category. On beverages specifically, the category is just 1% to 2% of Canadian retail sales, but we believe there is a significant potential opportunity ahead. We've seen in the U.S. that when beverages move outside the dispensary model as hemp-derived beverages have, the category can scale quickly with some analysts estimating close to USD 1 billion in sales in 2025.

Both categories are still constrained by regulation in Canada, and we're actively advocating for changes through ongoing government relations efforts. And as consumer preferences continue to evolve, we believe cannabis beverages have the potential to participate in something that is already a deeply social behavior, having a drink with your family and friends.

So let me pull this first part together through the lens of our 4 strategic pillars. Canada remains our foundation and the place where we will continue to grow our business. What you've seen today is the cultivation, brands, plant science and infrastructure supporting that business, along with the work underway to make it more focused, efficient and profitable. Importantly, Canada provides a stable regulatory environment that reduces the risk in our operation. The German market and further international expansion will be our future growth driver.

With Sanity, we are a transformed business with a meaningful commercial platform in Europe, and we are already connecting demand in Germany and beyond with capabilities we have already built in Canada. Manufacturing excellence and innovation are the connective tissue between these 2 businesses. The work happening across our facilities is about improving quality, lowering cost, developing differentiated products and getting more out of the assets we already own. And underpinning all of this is disciplined capital allocation, making sure the capital we deploy behind Canada, international growth, innovation and our operating platform is prudent and directed toward opportunities that can generate attractive returns.

We're going to hold the deeper international discussion for just a moment and hear from Greg on our recent performance, our expectations for the rest of the year and beyond and how we're applying that capital allocation discipline across the business. Then Finn will take you much deeper into the international opportunity.

Greg?

Thanks, James. The long-term vision and the pillars James and the team just laid out are designed to produce one thing, sustained free cash flow. Cash we can reinvest into the business at attractive returns or used to secure strategic advantages that themselves can eventually earn attractive returns. That's our fourth pillar, disciplined capital allocation. Historically, Organigram invested to build cultivation and manufacturing capability and gain market share through acquisitions, a broad brand portfolio to hold shelf space and a steady stream of new products to reach different consumers.

We did all that well, expanding into new categories, improving efficiency and generally protecting share gains. That strategy suited a market that was still taking shape where a large brand portfolio and a steady stream of new products was strategically important. But that kind of optionality did bring with it additional costs, costs we have already begun reining in, as James outlined. However, it also helped us to build the capabilities and competitive position we're going to need going forward.

Before I get into our expectations about how we're thinking about the business going forward, let me quickly review our financial trajectory and put our recent consolidated results, including Sanity into context. Organigram's long-term trajectory tells a very clear story, and it helps to zoom out past the quarter-to-quarter noise as our business is seasonally weighted towards Q3 and Q4. Zoomed out, what you see is a clear step-up in revenue and profitability over time with rising adjusted gross margins and higher adjusted EBITDA.

And just to be clear, fiscal 2026 on this chart represents only the first 9 months of the year. Between fiscal 2023 and fiscal 2024, net revenue rose about 6%, adjusted gross margin expanded by 9 percentage points and adjusted EBITDA grew by 55%. The growth continued between fiscal 2024 and 2025, where net revenue rose 62%, adjusted gross margin held roughly steady as a percentage of net revenue, while gross margin dollars grew substantially and adjusted EBITDA increased 160%. The large step-up in fiscal 2025 was driven in part by the acquisition of Motif, which took our vape business from almost nothing to #1 in the category, while also substantially growing our pre-roll and infused pre-roll businesses.

With a greater mix of ready-to-consume products post the Motif acquisition, efficiencies in cultivation and production and the realization of net synergies, year-over-year gross profit and adjusted EBITDA both stepped up meaningfully. But what's more telling for where we are today regarding our pre-sanity business is the revenue ramp-up through fiscal 2025 and the performance that we achieved in Q4.

So let's come back to the quarterly view. Our fourth quarter of fiscal 2025 set several records, and we've just surpassed them again in Q3 of this year. This view also puts the first half of fiscal 2026 into context. We dealt with the BC labor disruption, lower international volumes related to out-of-spec flower, increased competition and the now resolved issues in vapes and infused pre-rolls that we discussed in our Q2 conference call. Those factors affected our historical product mix and compressed gross margin and adjusted EBITDA. Now I've said this before, but as a reminder, Q1 and Q2 are also typically our seasonally lower quarters. So the aforementioned issues had a more pronounced impact in the first half of this year than they would have otherwise.

We viewed many of those issues as temporary, and our record Q3 showed meaningful progress in areas within our control. Vapes and infused pre-rolls began recovering with both continuing to gain share post Q3, while we also saw continued growth in flower, concentrates and beverages. Q3 was also our first full quarter consolidating Sanity Group, which contributed almost $40 million of net revenue and was accretive to both gross margin and adjusted EBITDA. The result was the highest quarterly net revenue and adjusted EBITDA in Organigram's history with adjusted EBITDA margin returning to approximately 13%.

We think the Sanity business, given its trajectory, can grow our international revenue contribution to the point where by the end of fiscal 2027, our overall business could become much more balanced between Canadian and international revenue. And looking beyond that, we see a path to a geographically diversified business with revenue streams that are predominantly international and higher margin.

Now I'd like to talk about cost discipline for a moment. From the second quarter of fiscal 2025 through the second quarter of this year, our SG&A held in a relatively tight band of roughly $22 million to $27 million a quarter, demonstrating a relatively stable cost base given the size of our business. As a result, our SG&A expense ratio moved largely with the top line. The ratio reached a low in our record fourth quarter of fiscal 2025 and rose again in the first half of this year due to sequentially lower revenue. However, our SG&A dollars actually declined over that period with the expense ratio reaching a new low due to our Q3 recovery. And in this case, a new low is a good thing.

Then in Q3, we consolidated Sanity for the first full quarter. SG&A dollars increased as we brought that business into our results, but revenue increased substantially more. As a result, our SG&A expense ratio fell to about 31%, which is its lowest level in at least 2 years. The picture gets even clearer when you exclude noncash expenses like depreciation and amortization. With the addition of Sanity, we did begin amortizing the acquired intangibles associated with that business. Excluding noncash expenses like depreciation and amortization, our SG&A expense ratio actually fell to about 26% in Q3 after adjusting for roughly $3 million benefit from bad debt recovery that we achieved during the quarter.

With the lower SG&A expense ratio and growing international contributions, the business has greater potential to convert future revenue into cash flow. But a relatively stable SG&A structure doesn't mean we think the work is finished. We continue to see opportunities for additional cost discipline. The company is progressing through initiatives designed to reduce complexity, support higher velocity products and build fewer, more powerful brands, all while reducing overhead expenses. One avenue James mentioned is reducing our SKU count along a gradual glide path. Another is rationalizing the brand portfolio itself to focus on fewer, stronger brands.

And as the company expands internationally, we'll be extremely thoughtful about how we launch products in new jurisdictions, balancing where incremental SG&A investment makes sense and where we can leverage existing infrastructure to control our costs. With Organigram's current structure, we believe there's an opportunity to bring total SG&A down further, inclusive of Sanity, while simultaneously improving our gross margins over time. And as James mentioned, our new global COO, Adrian Frenzel, will be guiding many of those initiatives.

Now I'd like to talk about how our capital philosophy has evolved alongside the transformation of the business. A couple of years ago, we probably would have been talking about launching new brands and innovative SKUs to capture market share and gaining expertise across every single category. Today, we'd rather strengthen our core brands, which include SHRED, Big Bag O’ Buds and BOXHOT, 3 Canadian power brands, all among the top 10 national brands. Generally speaking, we're concentrating our capital behind fewer opportunities with clearer paths to attractive returns while building more diversified revenue streams across geographies and between medical and recreational cannabis.

That said, every investment we evaluate has to answer 4 key questions, and you'll recognize them because they're essentially the 4 pillars that James already laid out. Does it strengthen our Canadian business? Does it accelerate our international business? Does it improve our manufacturing advantage? Does it generate attractive long-term returns? Those questions give us a consistent framework for deciding where that capital should go. And Sanity is a great example of how we apply that framework. We see Sanity as a critical infrastructure for a European medical platform, bringing our distribution, regulatory expertise, pharmacy and physician relationships and market access in one of the world's fastest-growing medical cannabis markets.

The strategic fit starts with international growth. Sanity gave Organigram an established commercial platform in Europe immediately rather than requiring us to build one customer by customer, market for market from the ground up. It also creates a direct connection between our Canadian capabilities and European demand. As our supply chain becomes increasingly integrated, including through our expected EU GMP certification in Moncton, we believe more Organigram grown flower can move through that platform from plant to patient. The longer-term return on that investment will ultimately be measured by what we do from here, how quickly we grow the business, how successfully we integrate our supply chain and how much cash flow the combined platform can generate.

So let's step back for a moment and look at Organigram's investment thesis today from my perspective. We are a leading Canadian business, which is focused on translating its capabilities into higher margins and cash flow. We have a rapidly growing international medical cannabis platform, giving us exposure to markets like Germany that are at a much earlier stage of development than Canada as well as other EU markets. We are increasing vertical integration between those businesses with the ability to connect our Canadian cultivation and product capabilities directly to international demand. We've got a relatively stable underlying cost structure that creates meaningful operating leverage as revenue grows alongside additional opportunities to reduce our cost of goods sold and SG&A over time. And we're being more disciplined about how we allocate capital.

Finally, I can't overstate the importance of the unparalleled innovative research we conduct and commercialize through our product development collaboration with our largest shareholder, BAT, who have provided over $400 million in strategic capital to Organigram over the last few years. Put together, we believe that's a fundamentally different business than Organigram was even just a couple of quarters ago. And we're operating against the backdrop of regulated cannabis frameworks continuing to develop across major international markets.

So what should Organigram look like over the next few years? I think it's the following: a meaningfully higher share of revenue from international markets, stronger gross margins supported by medical cannabis mix, operational efficiency and manufacturing scale, fewer, stronger brands, higher returns on invested capital and a diversified business less dependent on any single market. For the near term, our priorities remain consistent with what we laid out on our Q3 earnings call a couple of months ago. We expect to generate positive free cash flow in Q4. And for fiscal 2026, we continue to expect revenue of about $350 million with adjusted EBITDA and adjusted gross margin above fiscal 2025 levels.

Looking into fiscal 2027, our focus is on continuing to improve profitability, expanding the contribution from international markets and further refining our Canadian operations. James described Organigram strategy and the assets we have to execute against it. I've described the financial trajectory and what we believe that strategy can mean for the economics of our business.

Now I'll hand it over to the person responsible for leading our international growth strategy, Finn Hänsel.

Thank you, Greg, and thanks to everyone watching. To start, I want to tell you why a digital entrepreneur ended up in cannabis and then why I'm excited to lead Organigram's international strategy. In Germany, people know me for digital entrepreneurship. I built and exited several companies before Sanity, always asset-light and always digital first. Sanity thinks the same way, digital and how we reach the patient, how we manage a journey and how we facilitate access to medical cannabis. And we're deeply engaged in the regulatory and political landscape, which matters in a market built by regulation.

So cannabis, why? I was an active member of the young conservatives in Germany. And within that circle, a physician I knew was diagnosed with cancer and unfortunately passed away. After his passing, the role that cannabis played in his care became known and learning of its positive impact on his life truly changed my perspective on cannabis. The necessity of having to treat himself with cannabis without his physician's knowledge because there was no legal medical access yet really got me thinking. So I began to lend my voice to the chorus of people pushing for responsible patient-oriented cannabis regulation.

Then in 2017, Germany significantly expanded access to medical cannabis, allowing physicians to prescribe it more broadly and creating the foundation for the market we see today. I think here is a good place to explain how a company that generated EUR 9 million revenues in 2023 became Organigram's European platform and where that business is going. I founded Sanity Group in Berlin in 2018 with my co-founder, Fabian Friede. When we founded Sanity, the German medical cannabis market was small, fragmented and stigmatized even within the health care system. Patients faced bureaucratic barriers, doctors were reluctant to prescribe, pharmacies were unprepared, and the product was largely inconsistent and very expensive.

That's why we built Sanity based on 3 beliefs: First, the patient need was real, chronic pain, neurological conditions, oncology, existing treatments were leaving too many patients without adequate care. Second, the regulatory direction in Germany was toward liberalization. We couldn't know the timing, but the direction could be expected. Third, the companies that would win this market were the ones that understood regulatory matters and actively engaged with policymakers. That means responding quickly and responsibly to expected changes in regulatory landscape and persistently building out the capacity to meet patient needs through pharmacy partnerships, consistent quality supply and reducing barriers to access. And doing all of this before the real volume arrived, not after.

In April 2024, Germany removed cannabis from the so-called Betaubungsmittelgesetz, aka the controlled substance law and the volume finally arrived. In 2023, Sanity generated EUR 9 million in revenue. In 2024, EUR 19 million. In 2025, EUR 60 million. We went from the fifth largest medical cannabis brand in Germany to the leading brand in 12 months. That trajectory is the result of over 7 years of relationship building, brand investment and medical positioning culminating at the moment we had been preparing for. And the trajectory remains strong. We exited fiscal 2025 with a Q4 revenue of EUR 19 million, the same level of revenue we generated in all of fiscal 2024.

While triple-digit growth is not something we assume going forward, over the following 2 quarters, we still grew revenue by a very solid 34% while delivering very positive EBITDA, including our first consolidated quarter as part of Organigram. So let me explain Sanity and now Organigram's current European business. In Germany, we can operate across 2 primary medical cannabis channels, the private pay market and the reimbursed market. Avaay Medical is our premium medical cannabis brand. It is clinically positioned and it carries the strongest recognition among patients and physicians. We estimate avaay is now the #1 medical cannabis brand in Germany by market share. And because patients using avaay predominantly pay privately for their prescriptions, it represents our highest margin commercial channel.

Vayamed meanwhile, gives us the broad access to the reimbursed market and an extensive network of German pharmacies. As our pharmaceutical development and distribution business, it supplies pharmacies with medical cannabis sourced from a range of producers, allowing us to serve accounts that want access to a broad portfolio rather than only our proprietary brands. That business currently has lower margins than avaay, but the pharmacy relationship and market access it provides is strategically important. And over time, we see 2 opportunities to improve the economics of that platform.

First, as avaay's share grows within the pharmacies we serve, our mix shifts towards our higher-margin proprietary brands. Second, Vayamed can increasingly source product from Organigram's Canadian cultivation platform, particularly following EU GMP certification, allowing us to capture more of the economics across the value chain. So even before considering underlying market growth, we see a clear path to improving the margin profile of the existing Sanity business through both mix and greater vertical integration. Germany is the foundation of our European business. The medical market continues to grow as patient volumes expand and prescribing becomes normalized. The adult-use framework through social clubs under 2024 law is live, but a commercial retail pathway hasn't been established. And we are not building forecast around a time line that hasn't been confirmed.

But we have a number of expansion opportunities outside Germany that are already underway. We are taking our regulatory expertise, medical brands, procurement and pharmacy relationships into other attractive European markets. In Switzerland, we've established both medical and recreational channels. On the medical side, we are building our presence through local partnerships and began generating medical sales in Q3. On the recreational side, we are participating in government-authorized scientific pilot programs that give us direct experience operating retail locations in a regulated adult-use environment. Based on the data we've seen from these projects, we are very optimistic that Switzerland could adopt a full adult-use model within the next 2 to 3 years.

Switzerland is our proof of concept for the pilot to policy journey we anticipate other European markets will follow. Our Grashaus Projects pilot stores have now served thousands of participants under the Swiss Federal pilot program. Our data on illicit market displacement is compelling. We have seen illicit sourcing among participants decline by roughly 50%. That's exactly the kind of data that can help inform cantonal governments and ultimately federal frameworks as they consider broader access. Ours is also the only pilot project run commercially by a company. We operate 2 dispensaries today, potentially more very soon. And if Switzerland moves to adult use, we believe that experience positions us well for what could have become Europe's next potential recreational market.

In the U.K., we've begun introducing our branded medical products through strategic distribution partnerships, giving us access to another large and developing medical cannabis market without requiring significant infrastructure investment upfront. In the U.K., the market runs through specialist prescription and private pay pathways. It's at an earlier stage than Germany, but moving in a very similar direction. We are building the pharmacy and the clinical relationship now before the volume arrives, the same playbook that has worked very well in Germany for us. The Czech Republic, Poland, Slovenia and Ukraine are in active development on different time lines. We believe the German precedent can travel across borders faster than many outside observers expect, and we expect all 3 to be generating revenues within the next 18 months.

I think our European portfolio in 4 buckets. Germany is our scale market today. Switzerland gives us both medical and recreational growth and direct experience operating regulated adult-use retail. The U.K. is an opportunity to replicate the medical playbook we built in Germany. And markets, including Poland, Czech Republic, Ukraine, Slovenia and possibly later, countries like Spain and France represents the next -- the fourth bucket of expansion. So there is a very deliberate and repeatable model we intend to apply in Europe. We don't need to recreate Sanity Group in every country. We can use the infrastructure, the brands, the regulatory capabilities and supplier relationships we already built, enter new markets through the right local partnerships and scale our investment as those markets develop.

Now I've just been appointed as President, Rest of World of Organigram, not just Europe. And there are, of course, also opportunities elsewhere. In Australia, we already sell a number of branded vape and pastel products under our BOXHOT and Edison brands and are evaluating opportunities to expand within that market. And in the U.S., we began selling branded hemp-derived THC beverages and gummies with other functional ingredients for various consumer mood states shortly before a hemp-derived THC ban was announced last year. We expect that ban to go into effect in December, but are watching to see how regulations in this area unfold. As the U.S. market shifts in response to the expected rescheduling of cannabis, we are watching closely and will respond to opportunities as they unfold.

I think the U.S. medical market is very interesting, but we will need to find avenues of participation that support our near-term business opportunities. As Greg said, every dollar of capital spend on one strategy is a dollar we can't spend on another. So we need to be selective about where capital goes to support yielding cash flow that we can reinvest in the business in the near term. And the best near-term opportunity in our current view and given our structure right now remains Europe. That said, we continue to monitor developments in places like Brazil, Thailand and many places more.

To put this all into perspective, Germany alone remains a large growth opportunity for Organigram. We expect the German medical market to double by 2028, and Sanity is already operating at an annualized revenue run rate of more than EUR 100 million. Several other European markets, some of which we are actively developing, provide further additional upside. And as these markets grow and medical cannabis demand increases, Organigram can participate in both directions. We can be vertically integrated supplier, connecting Canadian production directly to our European distribution platform, while also sourcing EU GMP-compliant flower from other producers as European demand dictates. That could potentially include U.S. sources if future regulations allow.

So since we're here for an investor session, here is my investment thesis. I believe the European cannabis market will likely be measured in tens of billions of euros within this decade. The companies that lead it will be the ones that build the brands, pharmacy relationships, medical credibility and patient trust before the real volume arrives, just like we did it. That's a position Organigram through Sanity has a meaningful head start in building. And with the 2 companies now integrated and focused on operational execution and global growth, not just in Europe, but Australia and the U.S., we believe we have the platform, capabilities and market position to turn that early advantage into sustained growth and long-term value for our shareholders. Thank you very much.

All right. Thank you very much for waiting as we begin the fireside chat portion of our Investor Day. We're doing things a little bit differently this year. Last year, we had a live Q&A with pre-submitted questions and live submitted questions from investor. This year, we got pre-submitted questions. And in addition to that, there are a number of topics that I think are really relevant to today's keynote. So I'd like to get a little deeper into those. So why don't we kick things off?

James, you've described Canada as the stable foundation and international becoming a much larger part of Organigram. Does that mean that profitability now matters more than defending every point of Canadian market share? And do you think it was a mistake to invest so heavily in gaining market share at what seems like the expense of profitability in the past?

Right. Let me answer that in a couple of ways. Put it this way, if Finn came to me tomorrow and said, do you want share in revenue or do you want profitability? The answer will be, I want both. So I think in today's current context, where we're trying to get to is a point where we want to consolidate the portfolio, make it simpler, build a strong set of SKUs and brands so that over time, we'll have a smaller set of brands and will grow more profitably. So for the current moment, yes, profitability is a priority.

If I look back prior to the time I was here, I don't think it was a mistake. I think it was a certain point in the evolution of the industry in Canada where building that market share, building those revenues are something that helped to attract strategic capital. It was how you were rewarded in the day. And I think as the industry has evolved, matured, it's now the time for us and probably for a lot of other companies as well to solidify portfolios and really to focus on growing profitability in the market.

Got you. So you mentioned SHRED, BOXHOT and Big Bag O’ Buds and portfolio rationalization. Right now, I think Organigram has something like 10-plus brands. How far are you willing to take the rationalization piece of that? Is it going to be concentrated into those 3 brands? Or are there any more that you're thinking about sort of keeping in the portfolio?

Yes. First of all, whatever transition we do will be gradual and over time because you can't consolidate your entire portfolio in one go. As of today, those would be the 3 key brands plus some of our regional brands such as the brands that we have in Quebec. If I really project it out over 4, 5 years, I could easily see having half the brands and half the SKUs that we have today.

But it will be a transition over time to make sure that we continue to drive revenues, that we have time to make sure the investments in our brands are really building those brands, building the stickiness, building the premiumness of those brands so that you have a smooth transition. And at the same time, you get better margin all along the way. Every time you reduce the portfolio, simplify it, it will be a lot easier for Adrian and the COO job to drive better margins for the group as a whole.

Got it. And speaking about margin, I mean, obviously, we just made this acquisition of Sanity Group. International cannabis tends to have higher margin than domestic cannabis. And Finn to you, Germany is a really rapidly growing market. It seems like it's attracting a lot of competitors. There's more consolidation happening in the space. So what does Organigram have today that would actually make it difficult for, say, a well-capitalized competitor to replicate what we have in Europe now?

Yes. I mean, first of all, it's not only about capital, right? So there's a lot of different aspects that make you successful in the market. There's pharmacy relationships, there's reputation, there is marketing, there's your brands, there's your network you're building up. So obviously, you can't really replicate this from one day to another, no matter how much capital you have. However, now with the combination of Sanity Group and Organigram, I really think we built a strong vertically integrated model now.

So on the one hand, the cultivation that actually allows us to directly import from Canada into Europe and then actually marketing it through market access to the patients. So I think that kind of customer journey or patient journey really from cultivation to the brand, to the patient access, that is nothing that anyone can replicate easily. And I think that's quite unique of what we built here in the market.

And a big part of that sort of value proposition moving forward is obviously Organigram's ability to supply EU GMP-compliant flower. And Greg, I want to just pass this over to you. So you've described EU GMP as a margin working capital unlock. So walk us through exactly how the economics change once Moncton can supply sanity directly.

Yes. It's a significant benefit to us when we get EU GMP. I think for starters, today, we take our GACP flower and ship it to a third party for GMP conversion. There's a cost to that, roughly $0.50 a gram. So that's a material part of the value chain that we're not capturing today. The other part is not directly visible on the P&L, but it's the speed to market. So today, sending it to that third party actually adds about, I'll call it, 4 to 6 weeks or more of working capital that's being tied up while this is happening. So by having EU GMP, it allows us to get the product directly from Canada into the target market that much faster and we turn into cash that much faster, which is a huge advantage to us.

And if I can add to that, it's also about the freshness of the product itself. I mean it's not purely economic, but also from a patient perspective, the fresher the product is, the more the customer likes it. And that's the reason why this is also a very big advantage for us if that happens.

So you actually do see a difference in terms of product that is EU GMP supplied directly from Canada, say, versus something that's gone through other version?

Yes. Absolutely.

Interesting. And overall, would you say that the EU GMP compliant -- is there a supply constraint across the market for EU GMP compliant flower?

Well, I would say the whole market at the moment has a challenge to get enough EU GMP product into the country. I think we've been very good historically of getting enough product into the country. However, I mean, having a direct partner who has EU GMP without all the different like pathways of getting it into the country makes it much easier for us. And I think there are only very few companies right now that have a direct relationship with the EU GMP manufacturer, maybe 3 or 4 out of 200 companies in the market. So having that in the future will bring us big benefits in the market.

Right. But you also have a unique perspective because being part of Sanity Group, you're also just -- you're also a buyer of EU GMP-compliant flower. So I understand what you're saying in response to Organigram's ability to supply the flower directly. But as a buyer, how are you seeing the market right now? Is it tight? Are you having trouble meeting demand?

Yes. I mean the demand in Germany is growing very, very, very fastly. However, there is not enough EU GMP flower in the market. So obviously, we need to process GACP flower into GMP flower. So that is something that adds a lot of complexity right now. And once we have enough EU GMP cultivators who are EU GMP qualified like Organigram in the future, that will help us to have a competitive advantage against all our competitors who don't have that.

So on EU GMP, James, we applied for our EU GMP certification a couple of years ago, and it's been significantly delayed. What's your level of optimism in achieving the certification over the next, say, 2 to 3 to 4, 5, 6 months?

Okay. I think, first of all, look, I think it's a brave man to be betting on this sort of thing because it really does depend on the regulator and if there's any specific issues in the market at that time. But I think from our point of view, what I am very confident is after the audit we had last November, we have addressed all the concerns that the regulator brought up to us. We've completed all of the remedial efforts, everything that they pointed out at that time. And I think we have not heard anything negative.

And right now, it's just a matter of really keeping that engagement, working with the regulator, pushing it as much as we can, of course, with the help from Finn, who's sitting in Germany, which does help. And I am confident we'll get it. But am I confident enough to give you an exact date today? I think enough of myself and my predecessors have been burned that we'll see. But we're pushing, and I'm very confident that we've done the work that we need to do on our side.

And I recently had an investor ask me whether or not our delay in EU GMP was a factor contributing to the accelerated earn-out in Sanity. Can you speak to that a little bit?

No, that's really not a factor. Like Finn mentioned a couple of seconds ago, EU GMP compliant flower is a general constraint across the market in Germany and in Europe as a whole. So I don't think this was something that made that happen. What really drove the earnout was a couple of things. Number one, the earnout did create different incentives within the company where Finn and the team really had to focus on the earnout. And from an OGI perspective, there is more things we would have wanted to do to integrate to bring people like Finn and Adrian directly into the company to be able to really lead the company forward. So that was really the driver we wanted to do it.

And the earnout was the mechanism where we needed to give to make sure that we gave the best deal to the former Sanity shareholders as well as OGI shareholders, and I think we've done that well. And I think the real benefit now even 1 month in having Finn directly on the team be able to drive the rest of the world plus the strategy and having Adrian, who has a good -- a great track record of what he's done in Sanity plus his previous roles, I think we have now a team that can really drive not just the top line growth, the future-looking expansion in Europe, but also really drive those efficiencies to make sure we have a great supply chain that can supply wherever we happen to move into the world.

Interesting. And speaking about bringing in new talent to the team, so Finn, I want to direct this to you. You've been an entrepreneur. You've had multiple exits. Now you're joining a larger public company. I'm curious what kind of experiences you believe that you can kind of infuse into the Organigram culture.

And then you've obviously worked with Adrian for a number of years. What gives you sort of confidence that he's the guy to come in and streamline operations in a way that improves cost of goods sold and increases gross margin?

Look, at the end of the day, a start-up is a very different culture from a corporate, right? So I mean that's a fact. However, I strongly believe that there's no right or wrong. So I'm very far away from saying start-up is doing everything right and the corporate is doing everything wrong. I think it's the mix of the 2 that brings out the best out of both companies. So Organigram has implemented processes, years of experience, a lot of actually knowledge about things that we don't even know, for example, the recreational market. But then you also have the culture of being very fast, very dynamic, break things fast, fix them faster.

And all this kind of dynamic, I think, is also very strong for a start-up to have because what the advantage of a start-up is that it could always react quickly to changing market circumstances. And I think if you combine those 2 cultures like the knowledge, the processes and the experience in the market plus the dynamic culture of a start-up that basically reinvents itself from time to time, I think only then you can create something really superior. And I think really we are about to do this right now at Organigram.

Yes, that's an interesting point. I mean, I've observed Organigram, although being sort of a larger public vehicle, it has made a lot of strategic investments and a lot of M&A over the years. So I want to throw this question over to Greg. So you mentioned that Organigram invested heavily in optionality. And looking back at investments like Phylos, Greentank, OBX, Collective Project, et cetera, are there -- which investments have actually earned an acceptable return in your view? And are there any investments you wouldn't make again under today's new sort of capital allocation framework?

Yes. I mean, look, whenever you make an investment, there's not 100% guarantee that investments will pan out. And that's what we do. We take on a certain amount of risk and hope that the return comes from that. The vast majority of the investments we have made have been successful. Look at Phylos as an example. Phylos is what allowed us to really develop the seat-based cultivation methods that really was novel within the industry. It reduced the amount of time from start to finish in the cultivation cycle and also reduced the amount of labor that we are incurring. So I'd say that one is a fantastic investment.

On the other side, we have an OBX as an example. At the time, the hypothesis was solid. Unfortunately, that one hasn't panned out quite as well because there's been regulatory changes in the U.S. that have really had a negative impact on that business. But by and large, the other investments we made, Greentank, I think that's been successful. We've made certainly capital appreciation on that, but also gained access to vape technology that we've been able to participate in as a business.

I think we've also done some other significant acquisitions that were not just investments, but full company acquisitions where we had EIC, which was our edibles business in Winnipeg. We had Lac and Mont-Tremblant for our hash business that we acquired, hugely successful. Collective Project got us into the beverage category, very successful. Motif was very successful as well, got us -- went from 0 in vapes to leader in vapes across the industry.

And then finally, culminating with the Sanity acquisition, which we're only 1 quarter in, but I've been very happy with how it's performed. The first quarter under our belts did around CAD 40 million, which is really where we expected it to be. And the growth profile is really fantastic, accretive to EBITDA, accretive to earnings. So I'd say, by and large, I think we've really demonstrated a solid track record of being able to execute and deliver on the investments that we've made so far.

And speaking of future investments, investors are always worried about dilution. So when it comes to thinking about the next strategic investment, the next M&A opportunity, can you talk a little bit about how you think about the cost benefits of, say, raising equity versus debt and how the company intends to compete with its peers on a balance sheet basis given the landscape right now?

Yes. I mean, first of all, we all know that debt is cheaper than equity because debt can be paid back, equity can't unless you're doing a share buyback program. But whenever we're looking at an investment, whether or not that investment is successful is not totally dependent on how it's financed. It's what's the net impact of that investment on our cash flow, on our adjusted EBITDA. Is it accretive? So that's really been our focus is doing accretive transactions that will facilitate the growth of the company and also further our overall corporate objectives.

So we may issue shares again in the future to fund an acquisition or for general corporate purposes, but it's only done with future growth opportunities in mind. So we're not going to just issue more shares for the sake of it because we feel like we need more cash on the balance sheet. We'll issue shares when our strategy suggests it's the right approach and that it's accretive to revenue, EBITDA, cash flow and creating value for our shareholders.

And speaking of those kind of opportunities, Finn, and then please chime in if anyone else wants to contribute here. But what would OGI look for with you as Chief Strategy Officer in potential M&A targets now that you're in the mix?

Yes. If you really think about a proactive M&A strategy going forward, I would say there are 3 pillars that are very important to be matched by those potential targets. Either you gain market share in markets where we are not strong yet, for example, like countries like Poland, Slovenia, where we are just getting started to acquire someone who's already there, so winning market share in existing markets. Then the second one would be increasing our footprint. So really look into markets where we're not even present right now.

Let's think about Brazil, let's think about maybe France going forward, like really acquire something that would add to our footprint or thirdly, really strengthening our supply chain, really thinking about how can we become more flexible in supply chain. We talked about EU GMP, what's actually the right way of remaining flexible in the global supply chain, also always having in mind that Organigram is not only Canada anymore and not only Germany, but hopefully, ideally 10-plus countries going forward that are all run sustainably and that requires a very strong supply chain that could be strengthened by potential acquisitions going forward.

Interesting. So I want to talk about BAT for a second, but not in the sense that many investors will probably want me to ask. But James, you worked at the company for 20 years. You have experience in highly regulated markets. Cannabis is no exception to that. So I'm curious, is there anything you learned from your 20 years of BAT that you intend to apply at Organigram or that you're already applying?

Yes. I think from my time at BAT, there are things that I learned that I think we can apply and there's things that I learned that I would never want to apply. So I would put it in a couple of ways. Bigger companies and more complicated companies, you do need more process than you need to when it's a single market or a startup. When it's small groups of people, you can get things done on the fly. And when I was in BAT, I probably thought there was too much, but landing here in Organigram and especially as we've added new markets, the lack of more standardized processes becomes a bit of a barrier.

So one thing is I do know how to do that. And I think it's something that you need to do selectively to make sure you get the true efficiencies and effectiveness that Adrian will be trying to do. So it doesn't mean that you overdo it, but I think you have to have some -- the more complicated your business gets. That's number one. The second thing I would think about for my time at BAT was really around sort of a fairly sophisticated government engagement strategy. And what I mean, it's about really making sure that whatever you're engaging for can't be just sort of a selfish industry look. You've got to take into account the views of all the stakeholders.

So in Canada, for example, you would have to think, is this something that Health Canada would accept? Is this something that the ministries or the different provinces would accept and how do you make it something that's a win. And the other side of that strategy as well is fighting everything and doing everything from a sort of a selfish industry view is not going to get you anywhere. And there's times, I think, as an industry, when you grow up, especially in industry like cannabis, there's times where you probably should self-regulate and make sure you're doing the right thing proactively. Obviously, you want the government to create a regulation and make sure they enforce it. But I think there's times where to be responsible, we need to take the lead Organigram itself and ideally more as an industry, which is something where all the stakeholders can win.

And finally, I think the other thing I learned is really about the value of building a culture that's pretty consistent globally. The one thing that I loved about my time at BAT is you can walk into any market in the world. The culture was similar, almost identical. The ways of working were identical. What people saw as important was identical, and it really enables you to get -- it's not just for simplicity and because I love places feeling the same. What it meant it was very easy to place your best talent anywhere in the market, get that experience and you combine sort of the best -- in our context, somebody from Germany, somebody from Canada, somebody from whatever next market we're in and bring them together and really grow the business. It just simplifies the way you do it.

So those are the kind of the bigger things I take from BAT. And they don't all apply some things you wouldn't want to take. We're not that size. We're nowhere near the size of a BAT, so you wouldn't overdo it to that extent. But there's basics that I learned from BAT that I'd love to apply in Organigram.

That's great. I want to zoom in on what you said about the regulatory consciousness of BAT because as we focus on driving more profitability out of Canada, given the growth rate in Canada, I could see that being a difficult proposition. So in your view, what are sort of the unlocks for Organigram perhaps from a regulatory perspective or an operational perspective that you think can help us drive further margin out of a market that's sort of growing at a slower rate?

Yes. I think there's a number of things. When I have engaged with different government entities in the provincial or at the federal level, I think some of the things that could really help the industry out, one is excise reform; two is standardization of the excise stamps across the different provinces because it's just sort of an unnecessary cost and bureaucracy. I think treating the industry is more normal sort of from an export point of view would be fantastic. And ideally, from the 2 categories I mentioned in my speech were around edibles and beverages. I think these are ones where there's demand that I think it is responsible. These are things people would choose. But if they have to go to dispensary, it doesn't happen.

It's an alternative in the case of beverages for alcohol consumption, for example. I think you can significantly grow the industry. But I think to get any of those things done, you need to think about the industry differently than I think the regulators have done in the past where it was about reducing illicit trade. It was about taking the criminal elements out of it. Think about these sorts of numbers for an industry and take the fact that it's cannabis out of it. It's an industry that contributes about $8 billion to the economy directly about $16 billion when you put in sort of all the ancillary spend we do. We are the leading exporter to the biggest and fastest-growing market outside of Canada in the world that's federally legal.

Canadian companies dominate -- well, they have 46% of those exports from 2025. If you have that kind of industry in Canada today where the whole goal of the government is to drive exports to grow the economy, to reduce dependence on the U.S., just take the word out of cannabis, and this is something we should do. And all of those policies I mentioned, I think, should -- would make it more feasible for companies like Organigram as well as other companies in Canada to drive the profitability to reinvest to make sure that Canada doesn't lose that lead globally that it has today.

And as you mentioned, Canada is that stable, low-risk regulatory market that provides the foundation of the company. Curious, Finn, from your perspective, do you see any regulatory risks out of Germany? What's the regulatory framework there like as someone operating in the market?

I mean we have a very solid medical framework these days. So obviously, in 2024, as I mentioned earlier, the market opened up. The controlled substance law was changed in a way that actually cannabis was not classified as a narcotic anymore, and this will not change anymore. So we are very confident that we can continue to run the company in Germany under the same legal framework as we do right now. So I don't think there's a big risk. I mean, obviously, political majorities can change over time. You never know that. That can always happen in every country.

But at the moment, I think Europe is going only one way, and that's more towards further liberalization. We see Switzerland probably legalizing within the next 2 to 3 years. We see the Netherlands experiment going on. We see Czech Republic going forward. We see actually things happening in France and Ukraine. So I really think it's not always straightforward, but I think we have a lot of reason to be optimistic about the regulatory framework in Europe going forward.

And are you also optimistic about some of the larger economies in Europe as you mentioned France, the U.K. I think when investors look at the portfolio that sanity is starting to play in, Czechia, Poland, Ukraine, they look -- they see those as smaller markets. I think investors look at markets like France and potentially Brazil in the future as sort of these big unlocks. How confident are you that, that pans out over the next few years?

Well, to be very honest, I'm very confident that these markets will develop, but the problem is always a time line because things take normally always longer than they expected in cannabis, like, for example, the Swiss government announced a legalization for 2027, then it was 2028. Now it maybe turns in 2029. So that's something that obviously we have to price in, that you always have to wait a bit longer than you originally anticipate. However, I think the macro trend is clear. Most of the countries are thinking more towards liberalization and not towards restriction.

And regarding the big and the small markets, look, Poland might have been seen as a small market, but don't forget that Poland has 50 million people living there. It's, I think, by population size, the third or the fourth biggest European country. So I wouldn't underestimate the Eastern European countries in terms of size. Today, Poland is the third biggest market after Germany and the U.K. So I really think there's a lot of countries that are very attractive that are not obvious today.

I want to zoom back into the P&L for a second, Greg, and toss a question your way. So we've talked about Canada a mature, highly competitive and heavily taxed market. If you were just to take Canada, I think we had 39% consolidated gross margin at the end of Q3. But if you were going to just look at Canada, I'm curious what you think the margin profile of the business can look like once Organigram executes on its operational and sort of SKU and brand level optimizations.

Yes. I mean first of all, as James mentioned about regulatory reform in Canada, we spend a significant amount on excise duties, about CAD 40 million per quarter. So that does have an impact on our margins. However, we've done some significant investments in our cultivation facility in Moncton that have really improved the efficiency over the last 2 years. Just last year, we did a significant investment in our LED lights that really improved our yields. So we're able to get more cultivation out of the facility, the same size without increasing our operating expenses, which is really a huge driver of future margins going forward.

So in terms of where should margins be, in the mid-40s is what we're aiming for. And that's going to be achieved in a couple of ways. We've talked about SKU rationalization. What that means is we're going to be optimizing where the raw materials within our production processes go and making sure that we're really optimizing and prioritizing products that have higher profitability, which will drive towards that mid-40 margin. Then some products which maybe don't have enough volume or more expensive to produce, we'll get out of those products in a controlled fashion to take away some of the drag that those products can create.

So on improving fundamentals and operational performance, Organigram has clearly improved a lot on a year-over-year basis, but the equity valuation hasn't necessarily reflected that improvement. What specifically can management do over the next, say, 12 to 24 months to change the market's perception of the company?

Yes. I mean, look, we're delivering revenue growth. We're delivering improved gross margins. We're delivering improved EBITDA. Those are the 3 of the key metrics that our investors want to see and the capital markets want to see in terms of driving share price value. The challenge for us is to do this consistently. I think markets reward predictability, a demonstrable track record of delivering and executing on our strategy. So I think we're at the early stages of that.

We've had a bit of volatility in our results. I'm expecting to see a bit more stability subject to our normal seasonal variation, of course, but I'm expecting to see more consistency with developing additional revenue growth stabilizing and improving margins and really driving positive adjusted EBITDA, which ultimately should result in improved cash flow, which we'll be able to invest back into the business.

And you've had a lot of experience in capital markets, and you've seen how the investor landscape has evolved over time. So is it just consistency at the end of the day? Or when do you see institutions and strategics coming back into play as they were, say, 2019, 2020?

I mean there's a couple of factors to think about. First, we have to get those basics, right, being consistent in delivering and executing on our strategy and gaining that credibility that investors want to see so they don't think we're going to come out with a negative surprise at some point. But part of it is also a factor of size. And right now, our market cap is not that big. For us to really attract bigger investors, the company needs to be bigger. We need to have a larger float.

So as the company grows, we're going to deliver on our results and what we're telling investors, share price will go up, float will increase. And that can create an opening point for some bigger institutions to get into the stock. And that doesn't apply just to us. I mean that's all cannabis companies. So as the sector grows, we'll grow with it, hopefully at a greater rate than many of our peers. And then it will create openings for larger institutions to come in.

And speaking of investor sentiment, I mean, probably the biggest headline right now is what's going on in the U.S. with cannabis rescheduling, the potential for DEA export permits. Finn, I'm curious how you view the U.S. And if federal reform creates an opening for Organigram, what parts of that market could we play in moving forward? And what parts of the portfolio, the infrastructure are actually exportable to the U.S. market?

Yes. So I think to be honest, it's probably quite depending on how the regulation will look like at the end. I think there are a lot of different ways this can play out. However, I think what's pretty clear from what we see, number one, what's definitely possible could be to import product from the U.S. So you have a lot of U.S. players who are very price efficient and sourcing additional product that is EU GMP compliant for our global markets could be also a great opportunity for us to diversify our supply chain. On the other hand, what I also think will be definitely possible will be in the mid- to long term to play in the medical market in the U.S.

So the medical market is seeing the biggest change right now. And there can be digital, like, business models, for example, teleclinics which can operate across different states in the U.S. that could be very interesting. And once it's clear if you can basically cultivate also cross state in the U.S., that might be also something that could be interesting at some point when you could theoretically also export into the U.S. So I think that's probably far in the future, but I think there's a lot of opportunities that might open up over the next 2 to 3 years. And I think we will be very curious to see what's happening. And obviously, we look very close at the U.S. market.

So predominantly medical for now. And it seems like the majority of the world is sort of moving towards a medical framework. And just given all the capabilities that you've spoken of, James, when it comes to playing in every category, do you see a future where Organigram starts to be more of like a medical vehicle? Do all of the experiences and capabilities we've gained in recreational translate over to medical?

I think -- look, I think just the way the markets are evolving and regulations in different parts of the world, I think at least in the short term, there will be more momentum on the medical side. So naturally, I think the makeup of the Organigram business, the more internationally go is likely to become more medical than today. I think in terms of the capabilities we've built here in Canada, I think the experience in recreational across all of the different categories of products will put us in good stead for any sort of medical market out there. I mean a lot of these are different formats that aren't as popular in the recreational segment, but we have experience making distillates, different sort of drops, all sorts of things that we could do with our infrastructure.

So yes, I think it will. And I think combine that with sort of the experience that the team in Sanity has in medical markets in addressing pharmacies and knowing what sort of data, what sort of sales support you need is something that we get from that side. So I think combined, the 2 -- the company has that ability to grow medical. And I do -- for the short term, I did say I think that international will probably outpace Canadian growth just because of the place that it's at. And because of the fact that it's medical, I think the company will kind of inevitably become more medical in its footprint.

And how does the product development collaboration with BAT play into that?

Yes. I mean it's a great collaboration. I think it's one of those things where we get the benefit of the science expertise from BAT because they have obviously quite a large R&D facility in Southampton and people and scientists who are working in our facilities. I think that, combined with our own R&D plus the knowledge that's been built in the Sanity Group can help us build that R&D and scientific base that I think will hold us in good stead. It helps on engagement because we actually have the knowledge of what the products actually do that would be better than the industry. When we're talking to doctors or pharmacists or patients, over time, you'll have more credibility.

And I think also you can -- we have that ability with the PDC with their testing in labs and those capabilities to really make sure whatever we're putting in the market, we're absolutely sure of the quality and the standards that go out there. And I think that's a capability we need to sort of lean on to build trust among all the stakeholders, whether it's the doctors and pharmacists or the patients themselves.

And speaking of stakeholders, we are here for an Investor Day. We're also getting a little bit long in the tooth in terms of this entire presentation.

We're generally long in the tooth.

We're generally long in the tooth. So I'd like to hand it over to you, Finn, and maybe we'll work our way back this way. Can you leave us with one thing that you're really excited about in terms of Organigram and the future of cannabis?

I really think that Organigram is a very strong player in the Canadian market historically. And I think what happened over the last 1 to 2 years that Organigram really turned global. With the acquisition of Sanity Group, now more than 30% of the sales of Organigram are already outside Canada. And I think going forward, what I'm really excited about, I really believe that the macro situation is that the cannabis industry will grow globally. And I think that we grow stronger than our peers over the next years. That's what I'm really excited about. And I think if we are smart and if we do the right things and have the right expansion strategy, I'm really excited for the next years within Organigram.

Thank you. Greg?

I think when you look at the cannabis market globally, Canada is a mature market today. It's growing at roughly 3-odd percent per year. We're growing at a rate in excess of that. So we're going to continue to defend our Canadian base with the SKU rationalization we talked about. But where I'm really excited is the future growth that's going to come from global markets. Our name is Organigram Global. We're planning on expanding in as many global markets as we can.

We started with Germany, and that's really going to be the launch pad for the rest of our European and global ambitions. The global cannabis markets are growing at tremendous rates. And we've already seen the benefit of that in our last quarter with Sanity contributing about $40 million to our net revenue. So that's what really gets me excited about the future is the growth that's going to come as we rebalance that portfolio into a diversified global business split between Canada and the rest of the world.

Thank you. James?

Yes. I'm really excited. I only joined the company 8 months ago now. I think when I joined the company, it was a Canadian business, a strong Canadian business with good capabilities and a little bit of international exports, which was growing already. And I think it was a fantastic place to join because the opportunity is to build the business and to shape the industry itself was there. So from an investor point of view, that's the way you would have been looking at Organigram just 6 months ago. I think when you -- with the Sanity Group now part of Organigram Global, it's a completely different company. And I've said the word transform a few times. It is really a completely different company than it was before.

And then you combine sort of the footprint and the growing international part of the business with the fact that we now have brought in some fantastic capabilities with Finn and Adrian and built the team around that with a very clear plan on where we want to go. I'm really, really excited. And I really believe we can deliver that -- those consistent numbers, we can deliver the growth, and we have enough discipline across the entire team to make sure that we don't do that in a way that's not prudent or overstretches the business. I think we have the elements there. There's still work to do, but I'm really, really excited about where we can take this company and transform it once again.

Thanks, James, and thanks, gentlemen, for being here today. I also want to thank Caramel Lab, our production team for helping put together this event, the team, the broader team at Organigram and of course, our investors for helping support the company through the last several years.

I just want to remind investors that should they have any questions that we didn't answer in today's event, they can e-mail me directly at [email protected]. And they can also follow us on all of our social media, LinkedIn, X, Instagram, we're active pretty much everywhere.

So with that, I will conclude Organigram's second Organigram Global Investor session. Thank you.

Good morning. My name is Matthew, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Organigram Global Third Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] Thank you. I'll now turn the call over to Max Schwartz, Director of Investor Relations.

Thanks, Matt. Good morning, everyone, and thanks for joining us today. As a quick reminder, this call is being recorded and a replay will be available on our website within 24 hours. Today's call will include forward-looking statements and actual results could differ materially due to a number of risk factors outlined in our filings and the cautionary statements included in our Q3 fiscal 2026 press release and MD&A.

We'll also reference certain non-IFRS measures such as adjusted EBITDA, adjusted gross margin, and free cash flow. Definitions and reconciliations are available in our disclosure materials. Unless otherwise noted, market share data is sourced from Hifyre, Weedcrawler, provincial boards, retailers, and our internal sales tracking. Discussing our results today are James Yamanaka and Greg Guyatt, CEO and CFO of Organigram Global.

I once again welcome you to today's call. And with that, I'll turn the call over to James.

Thank you, Max. And good morning, everyone. Thank you for joining us today. Q3 represents an important milestone for Organigram. For the first time, our financial results include almost a full quarter of contributions from Sanity Group, providing a clearer picture of a larger, more diversified, and increasingly international cannabis business. Before I discuss the business, I'd like to recognize our teams across Canada and Germany. Together, they delivered the highest quarterly net revenue and adjusted EBITDA in Organigram's history.

Organigram today is a fundamentally different company than it was earlier this year. We are larger in scale, broader in geographic reach, and better positioned for long-term profitable growth. This quarter demonstrates that our strategy is beginning to translate into stronger financial results, which we believe reset the trajectory of the company to achieve higher margins and profitability in the coming periods. I'll begin with Canada, where I'll discuss the progress we've made recovering share in vapes and infused pre-rolls following the challenges we experienced in Q2, before turning to our international business and the integration of Sanity. Greg will then walk you through the financial results in greater detail.

Starting us off with Canada. As of quarter end, Organigram held an 11.1% share of the Canadian recreational cannabis market. Several of our core categories continued delivering strong growth while the corrective actions we implemented during Q2 related to vapes and infused pre-rolls began gaining traction in June. At the same time, we've become more disciplined with our portfolio. Compared to last year, we've reduced our SKU count by roughly 10%. Rather than chasing shelf space through product proliferation, we're positioning ourselves to gradually invest behind fewer, stronger brands with clear consumer positioning and less overlap. We believe this approach reduces complexity, strengthens execution, improves operational efficiency, and ultimately creates more durable brands.

Beginning with vapes, we completed the rollout of our new all-in-one hardware platform and higher-potency Liquid Diamond products near the end of Q2. These products are now broadly distributed across Canada alongside the enhanced quality control processes we discussed on our previous call. The earlier results have been straightforward. During June, our all-in-one vape share increased by 1.1 percentage points month over month, while declines in the 510 segment began to reverse. While one month doesn't establish a trend, we believe it provides encouraging evidence that the product improvements we've made are resonating with consumers.

Infused pre-rolls also returned to growth, gaining 0.3 share points month over month, while regular pre-rolls also improved, resulting in overall pre-roll growth. While the category has become Canada's largest and most competitive segment, representing more than 36% of total industry sales, as quality, consistency and potency continue improving, we believe there is opportunity to expand our share further. BOXHOT infused pre-rolls were a particular highlight this quarter, growing 0.8 percentage points year-over-year.

Our strongest performance, however, continues to come from flower. Driven by continued advances in cultivation, genetics, and plant science, Organigram ended the quarter with a 12.5% share of the flower category, up 2 percentage points year-over-year. We also achieved a higher service share in the important 3.5-gram format. These gains reflect years of investment in cultivation excellence. During Q3, average THC potency for Moncton reached a record 30.4%, while harvested kilograms remained above 30,000 per quarter, up approximately 25% year-over-year.

Outside of flower, we also delivered strong growth in beverages and concentrates. In beverage, Organigram ranked 4th nationally with an 8.6% category share, up 3.1 percentage points year-over-year, exiting June above 10% share as SHREDs, sodas, and Shotz continued gaining consumer traction. In concentrates, we strengthened our leadership position as Canada's #1 LP, finishing the quarter with 17.9% share, up 3.3 percentage points year-over-year, driven by continued success in whipped diamonds and hash.

One category where performance softened modestly was edibles. While share remained relatively stable year-on-year, we experienced sequential pressure from lower-priced live rosin and competitors. Our response is a broader rollout of our ingestible innovation platform across the edibles portfolio beginning in September. Looking ahead, we are entering what has historically been our strongest seasonal period, supported by successful summer retail programs, improving category momentum, and positive consumer response to our refreshed vape and infused pre-roll portfolios. Overall, we're gradually shifting the orientation of our Canadian business toward increased competitiveness and efficiency and are progressing initiatives to reinforce revenue and margin stability here as we expand into more emerging markets internationally.

Now turning to the international part of the business. Q3 marks the first quarter of consolidated financial results from Sanity and the business demonstrated strong performance. As we indicated when announcing the acquisition, we expected Sanity to average approximately EUR 25 million of quarterly revenue. Since consolidating on April 15, the business delivered EUR 24.5 million, contributing more than CAD 40 million of net revenue to our consolidated results, and generated EUR 25.5 million during the full fiscal quarter.

While Canada remains the foundation of our business, approximately 35% of our consolidated revenues was generated internationally this quarter, compared to roughly 10% prior to the acquisition. This represents a structural evolution of Organigram's business model and significantly diversifies both our revenue base and future growth opportunities. We believe Europe increasingly represents the largest near and long-term growth opportunity for the company, and we now have a vertically integrated supply chain from Canada to Europe.

Demand across Sanity distribution platform continues to grow. Our priority is expanding access to compliant product through our own production improvements and additional supply partnerships. In Moncton, we're continuing to improve our international flower pass rates while standing up EU-GMP compliant remediation pathways. Facility-wide pass rate initiatives have been implemented while we simultaneously identify cultivars that have high levels innate resistance to microbes.

Commercially, Sanity also continued expanding its platform throughout the quarter. The business continued preparations for an additional Swiss recreational pilot project, advanced its entry into Poland, launched branded products in the U.K. through new strategic partnerships, established a new Swiss medical partnership, and recorded its first medical cannabis sales in Switzerland. Regarding the recent German regulatory changes disallowing medical cannabis reimbursements, we expect minimal impact on Sanity as approximately 1% of historical sales were reimbursed through government insurance programs.

Outside Europe, Australia remains an attractive long-term growth market. Our Australian portfolio is now broadly available and we're focused on driving physician adoption and prescription growth as the market continues to develop. In the United States, the regulatory environment remains uncertain in light of the upcoming ban on hemp-derived THC products. There are efforts to delay the ban by four weeks to December 11, which we view as a positive step. Our business development activities in this segment are effectively paused until we receive regulatory clarity. That said, we are bullish on rescheduling and federal legalization efforts in the U.S., and we continue to closely monitor opportunities for Organigram to participate in relevant segments of the market as it evolves. Our primary international focus right now, however, will remain Europe and Australia, where we believe the opportunities are both larger and more visible over the medium term.

To summarize, Q3 demonstrated three important things. First, the integration of Sanity is progressing according to plan, and it's already meaningfully reshaping Organigram's financial profile with record net revenue and adjusted EBITDA, and an improving margin profile. Second, the corrective actions we've taken across our Canadian business are beginning to produce encouraging results, particularly in categories where we experienced temporary execution challenges earlier this year. And third, Organigram today is a significantly larger, more diversified, and more internationally positioned company than at any point in our history.

While execution remains our priority, we're confident in the opportunities ahead as we continue building a cash-generating global cannabis business. Finally, I would like to recognize Paolo De Luca, who will be departing Organigram after 9 years of exceptional leadership and service. During his tenure as both Chief Financial Officer and Chief Strategy Officer, Paolo played an instrumental role in many of the company's most transformative transactions, helping lay the foundation for Organigram's evolution into a global cannabis company.

On behalf of everyone at Organigram, I thank Paolo for his many contributions and wish him every success in the future. With that, I'll turn the call over to Greg to walk through the quarter in more detail.

Thanks, James. We are pleased to report that with the addition of Sanity to our consolidated results, Organigram delivered the largest revenue quarter in the company's history, improved adjusted gross margin both sequentially and year-over-year, and generated record adjusted EBITDA. As James noted, international revenue now represents more than 1/3 of our total revenue. That marks a fundamental shift in Organigram's business profile. We are now operating as a diversified global cannabis platform with meaningful scale across multiple markets.

With that, let's turn to the detailed results. Net revenue for the quarter was $105.8 million compared to $70.8 million in the prior year period, representing a year-over-year increase of 49%. The increase in net revenue was primarily attributable to contributions from Sanity Group, partially offset by slightly lower Canadian market share year-over-year due to lower vape and pre-roll share as well as our intentional reduction in SKU count, an ongoing project to simplify our portfolio and ultimately improve margins. Sanity's contribution since the close of our acquisition on April 15, 2026, contributed EUR 24.5 million or approximately $40 million to Organigram revenue.

For the entire quarter, including the 2 weeks that we did not own them, Sanity's revenue exceeded EUR 25 million, in line with expectations at the time of acquisition, with the stage set for additional growth over the course of the remainder of the year and into fiscal 2027. The adjusted gross margin was 37%, an increase of 300 basis points year-over-year, and 600 basis points sequentially. The increase was primarily driven by contributions from Sanity and improvements in Canadian operations compared to both comparison periods. It is important to note that the underlying cost structure of Organigram's Canadian operations is expected to continue improving. Cultivation yields, potency improvements, and portfolio rationalization remain positive contributors, and we expect these to become more visible as we continue optimizing the business.

G&A expenses for the quarter were $20.6 million compared to $15.7 million in the prior year period, an increase of 31%, primarily attributable to the inclusion of Sanity expenses and the amortization of intangibles related to the acquisition, partially offset by a $3 million recovery of a previously recorded bad debt provision. As a percentage of net revenue, G&A was approximately 19%, representing a decrease of approximately 300 basis points year-over-year and 600 basis points sequentially. The reduction compared to both prior periods was primarily due to operational leverage from the consolidation of the Sanity Group.

Sales and marketing expenses in the quarter increased to $12.1 million versus the prior year period amount of $8.8 million. The increase was, once again, driven by the inclusion of Sanity expenses, as well as higher investments in advertising and promotional activities in line with seasonality, our Summer of SHRED campaigns, and new product launches. Overall, SG&A in the quarter was $32.7 million versus $24.5 million in the prior year period. As a proportion of net revenue, SG&A declined from 34% in Q3 of last year to 31% in the current period, a decrease of approximately 300 basis points.

Our record adjusted EBITDA for Q3 was $13.4 million compared to $5.7 million in the prior year period. The 136% increase was primarily driven by Sanity Group as well as efficiencies in Canada. Net income for the quarter was $105.5 million compared to a loss of $6.3 million in the prior year period. This substantial increase in net income in the current period was primarily attributable to higher fair value gains on derivative liabilities, preferred shares, and other financial assets of $105.8 million.

Cash provided by operating activities before working capital changes was $6.2 million compared to cash used of $0.7 million in the prior year period. This improvement primarily reflects stronger underlying operating performance, including higher net revenue, better product mix, and higher gross margin. Cash used in operating activities was $4.3 million compared to cash provided of $14.6 million in the prior year period. Despite stronger cash generation before working capital changes, operating cash flow was more than offset by working capital investments during the quarter, part of which was building inventory to address German demand issues and the timing of sales during the quarter.

Free cash flow was an outflow of $3.9 million for the quarter compared to an inflow of $5 million in the prior year period. Underlying cash generation improved meaningfully before working capital changes and capital expenditures were substantially lower than the prior year period. However, these benefits were more than offset by working capital investments associated with the company's increased scale and growth expectations. Regarding liquidity, as of June 30, Organigram had cash and cash equivalents of $11.7 million and total liquidity of $49.2 million, including our debt facilities.

To conclude, we are very pleased with our strong financial performance this quarter, highlighted by record revenue, record adjusted EBITDA, and resumed margin expansion. We are delighted with the performance of Sanity Group thus far, as well as the growth we are expecting in the coming quarter, which we believe will further strengthen our earnings profile while expanding our international platform.

Although working capital investments impacted cash flow during the quarter, they were largely a function of supporting a substantially larger and growing vertically integrated global business.

We continue to expect revenue to exceed $350 million for the full year of fiscal 2026, adjusted gross margin and adjusted EBITDA to meaningfully exceed fiscal 2025 levels. The underlying earnings profile of the business has strengthened, but working capital requirements associated with integrating Sanity and supporting a much larger business are expected to result in negative free cash flow for the full year this year. Importantly, we continue to expect positive free cash flow in the fourth quarter, which we believe is a better indicator of the business's ongoing cash-generating capacity. With that, we'll open the call for questions.

[Operator Instructions] Your first question comes from the line of Aaron Grey with AGP, Alliance Global Partners.

First question for me, just in terms of, now that you've closed Sanity Group, it would be great to get any early learnings or what you're seeing now as a wholly consolidated entity for a longer period of time, a full quarter, and what opportunities you might feel present themselves well internationally as it remains a top priority for you as well as many of your other Canadian LP peers.

Sure. Thanks, Aaron. This is James. I'll tackle the first part of that and maybe let Greg say a little more at the end if he'd like to. I think over the first several months of having Sanity in the group, there are a number of key learnings I think so far. Number one is that it has completely changed the profile of the group where the focus is more on the international, although Canada remains the core of the business. Two, I think there's -- the growth rate there is putting stress not just on organizations but I think a lot of other suppliers in terms of flower supply, but we're addressing those through our activities in Moncton, as well as looking at different suppliers, partnerships that we can do to make sure we satisfy that.

And I think the cultural fit between the two companies and the lack of overlap is making it easier for us to move forward, although I think like any new partnership, there are teething problems along the way, but I think we sorted through most of those. Greg, I don't know if you wanted to add anything else to that.

No, I would just add that we were really happy with the performance in the first quarter of consolidation. Getting to that EUR 25 million benchmark was really an important achievement for us. And now that we've sorted out some of our flower challenges that we had last quarter, we're expecting that growth to continue, looking forward to a strong Q4 that's going to outperform what we did in Q3.

Okay, great. Really appreciate the color there. And then just on the Canadian side, maybe talk about how you're prioritizing, capacity allocation. Obviously, you have international as a driver, but, you've made it clear you want to maintain your market leadership within Canada. So talk about how you're allocating capacity accordingly to be able to do that.

Okay, yes, thanks. That's a good question. First of all, I think when we're looking at the overall Canadian portfolio, as I mentioned earlier, what we're trying to do is simplify the portfolio. We've already reduced the SKU count by about 10% to simplify, both from, to reduce the complexity on the back end across all the different product categories. And you can see that we've been able to address a lot of the issues from last quarter around vape and IPRs, and it's only a month, but the trajectory is good.

I think in terms of the allocation, it's always going to be a trade-off between international and domestic, but we're confident that with the different activities we're doing both within our own supply with partnerships, and other mechanisms where we are increasing the flower supply, we'll be able to satisfy the needs of both Canada as well as international markets. Greg?

No, I totally agree with that. Obviously, looking at how we optimize our margins and balancing our mix between internally sourced flower and sourcing flower from third-parties. But clearly, there is a strong benefit towards allocating as much as we can to Sanity while protecting Canada.

Your next question comes from the line of Frederico Gomes with ATB Cormark.

Congratulations on a record quarter here. First question I want to ask again about Sanity performing in line, I guess, with your revenue expectation. But I'm curious if you could talk about margins from Sanity and how is the competitive environment for distributors in Germany looking like from a margin perspective and how do you expect that margin profile to evolve over the next two quarters?

Yes, maybe I can tackle that. Yes. So as of right now, our margins are operating in line with what we expected as well along with revenue. To your point about the competitive environment in Germany, right now there's a ton of demand, and we haven't seen significant price compression over the last quarter. And in fact, we probably haven't been able to even satisfy all the demand that was there. So there had been, I think, a quarter or two about potential risk of price compression in Germany. And we have expected some, but really it's been minimal at this point. So at the moment, margins continue to be solid and we continue to be stable going forward over the course of the next couple of quarters.

In terms of margins in Canada, you know, overall we hit 37% this quarter, which was a significant improvement over last quarter. You know, the drivers are both the contributions from Sanity, but also in Canada, you may recall in Q2, we had a higher than normal rate of return, particularly with some of our vapes in Canada. Those issues have now been resolved. We've launched new vape hardware. And as James mentioned in his comments, those products, the initial results have been very strong.

So we expect margins to continue improving as we go into Q4 and into next year. Obviously, we're always looking at efficiency improvements and how we can produce from Moncton more efficiently, but also from our manufacturing operations. So some of the SKU rationalization initiatives we're looking at, we expect that to really provide some optimization where we eliminate some of the lower performing profitability products and really double down on the strong performers to improve our margins over the course of the rest of this year and going into next year as well.

Appreciate that. Second question. You mentioned the EU-GMP, I guess audit at Moncton. Can you give us an update on that in terms of maybe some timelines here and also remind us how much of an impact on margins could that have once you get the EU-GMP certification?

Right. So, unfortunately, with the EU-GMP, we don't have any new news. As you recall from the last quarter, we put in the application in April. What we've been doing since then, we had an audit back in November last year. We addressed any issue that was raised at that time. We resubmitted in April and we are speaking constantly to the regulator to try and get a response. I'm wary of giving a timeline because we're just waiting on when the regulator would do. We know they are looking at it, starting this month, and we'll give you updates as soon as we know. Greg, did you want to go on the margin side?

Sure. From a margin perspective, we've never actually quantified on any of our calls the exact impact we expect, other than to say that it is meaningful once the EU-GMP comes in by not having to use a processor in Europe as we ship to Germany. In terms of margin expectations going forward, though, we think that it's probably going to start as soon as the EU-GMP comes in and we'll see the improvement then.

Your next question comes from the line of Kenric Tyghe with Canaccord Genuity.

And allow me to echo the congratulations on the beaten quarter. If I could, just with respect to the comment on flower, is it as simple as a supply or a quality of supply issue? Because one of the discussions that has come up through this earnings season has been one of pushback by the German authorities. So if you could sort of speak to both the quality of supply into Germany and then perhaps also address the quality of supply within the domestic market, just so we can help tease out the dynamics there.

Sure. I did mention. I think with the growth of the German market over the last several years, there is certainly a tight supply for EU-GMP flower going into Germany. And with that said, we're addressing it with the improvement in flower that passes microbial count at Moncton. We have new suppliers as well, and we have opened up different remediation pathways into Europe.

You know, some of the German authorities have tightened up EU-GMP to an extent, but with the new activities we've been doing, we're confident we can supply most of the demand that Sanity requires, but it is a tight market for the EU-GMP quality supply into Germany at the moment. For Canada, the EU-GMP issue doesn't exist, so the quality is sufficient for the Canadian market. I don't know if you wanted to add anything onto that, Greg.

No, totally agree with that. I mean, obviously we've seen some significant improvements over the last 4 or 5 months. So we expect that to really drive future profitability as we get into Q4 and Q1 of next year.

Great. And then Greg, just to follow up with respect to sort of the cadence of spend, how much of the sort of spend in Germany, was there any pull forward? Was there any sort of spend required that we won't see being repeated in this first sort of full quarter post-integration? Just trying to sort of work through again expected SG&A type cadence or SG&A type margins out of that business?

Yes, no, I think the spending there was in line with what was expected, and I think that on a normalized basis, the spend that we've seen there is probably what we would expect going forward. If anything, I would expect revenue to increase meaningfully, but operating expenses to stay relatively low, and really start to see that P&L leverage start to come into effect. So when we look at our SG&A as a percentage of sales, we've seen that coming down fairly consistently over the long term here, and we expect that to continue going forward. So I wouldn't forecast major increases in expenditures there.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

At this time, I would like to welcome everyone to the Organigram Global Second Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] I'll now turn the call over to Max Schwartz, Director of Investor Relations.

Thank you very much. Good morning, everyone. Thank you so much for joining us today. As a reminder, this call is being recorded and a replay will be available on our website within 24 hours. Today's call will include forward-looking statements. Actual results could differ materially due to a number of risk factors outlined in their filings and cautionary statements included in our Q2 fiscal 2026 press release and MD&A. We'll also reference certain non-IFRS measures such as adjusted EBITDA, adjusted gross margin and free cash flow. Definitions and reconciliations are available in our disclosure materials. Unless otherwise noted, the market share data shows high-fire wheat caller, potential boards, retailers and our own internal sales tracking. Discussing our results today are James Yamanaka and Greg Guyatt, CEO and CFO of Organogram Global, respectively. Once again, I welcome you to today's call.

And with that, I will turn the call over to James.

Thank you, Max, and good morning, everyone. Thank you for joining us today. It's now been about 4 months since I joined Organigram. And after an initial period of deep operational review across the business, my focus remains on execution, leveraging our strengths, addressing areas for improvement and fully realizing the financial and strategic contributions of Sanity Group in Q3 and beyond.

Overall, the company has meaningfully repositioned itself for expansion. However, Q2 was a challenging quarter with the Canadian recreational market growth being called down from 5% to 2.2%. Operational issues temporarily impacting our performance in Vapes and infused pre-rolls and improving but elevated levels of atopic international flower, which we continue to work through. Before getting into our quarterly highlights, I'll walk through these challenges and how we are addressing them.

In pre-rolls, coated IPR quality inconsistencies following the internalization of pre-rolled production at Elmer and the use of new production equivalent introduce higher variability and fill rates and lower overall product consistency as we calibrated our processes. The result was lower repurchase rates and a 1.6 point share loss in overall pre-rolls versus the prior year period, that is not acceptable to us.

In response, we tightened quality control processes and implemented production changes to enhance insistent suite. Pre-rolls coming off the line today are already more consistently filled and coded and we expect to introduce IPR coding automation in the near term to ensure consistency remains at acceptable levels. In vapes, segments of our portfolio fell below competitive benchmarks on both pricing and potency, contributing to share erosion across [ 510 and all ones ]. A key driver of the 6.1 point year-over-year share decline was our over-indexing towards lower potency 1.2 gram vape, as consumer demand shifted toward higher potency 1-gram format.

To address this, we are launching higher potency offerings in refreshing both product and hardware including BOXHOT liquid diamond all ones in the coming weeks. On international flower, on-spec pass rates have improved from Q1 due to adjustments we've made to our [ post-ori processes ] quarter-over-quarter growth in international sales from $5 million in Q1 to $6.1 million in Q2 reflects that progress However, there is more work to be done here to bring our on-spec volumes up to international levels.

We expect continued improvement in Q3, supporting both revenue and margin expansion in the back half of the year. To cite these challenges, we delivered strength across a number of other areas. In flower, we gained 2.2 share points year-over-year, driven by strong performance from Big Bag O’ Buds and [indiscernible] such as purple PunchOut and Ultrasour as well as very strong reception for our new [indiscernible]. These gains reflect continued improvements in flower quality and consistency, strength we expect to carry into upcoming pre-roll and [indiscernible] launches and our Summer SHRED retail activations.

In edibles, we gained 1.8 share points year-over-year, while beverages and content trades grew 0.7% and 3.1 points, respectively. We attribute this growth to innovation including new beverage launches such as shred shots, featuring our fast technology as well as continued momentum in products like SHRED'ems [indiscernible] and BOXHOT with Diamond. While we saw increased competition in mill flower and modest share declines year-over-year, we returned to growth sequentially and held a leading 38.9% share in that segment.

Overall, organic and remains the #1 LP in Canada on market share in Q2. We maintained leadership positions in the key markets of Ontario, British Columbia and Alberta, while continuing to build momentum in Quebec. We now ranked #3 in the province, reaching 11.3% market share as of the end of March, [ 1.6 point ] increase year-over-year and are the fastest grow in Quebec fiscal year-to-date. This performance has been driven by strong Quebec vape and Flower Hills, contributing approximately $25 million in retail sales in the province during the quarter.

Across our portfolio of industry-leading brands, Tread, BOXHOT and Big Bag O’ Buds ranked within the top 8 brands nationally. Big Bag O’ Buds, but it's the fastest-growing flower brand in the country. BOXHOT is the #1 concentrate and #2 vape brand and SHRED alone would rank as the top 10 LLP by its market share. Taken together with the operational remediation and product enhancements underway in vapesVapes and infused fuels, we are confident in our ability to regain share and drive stronger growth in the back half. Moving on to our international business.

The completion of our Sandy acquisition in April marks a significant milestone for Organigram putting a combined entity with leadership positions in the world's 2 largest federally legal cannabis markets, Canada and Germany with growth initiatives underway in Switzerland, the U.K., Pola and the Czech Republic. Sanity is expected to generate on average approximately EUR 25 million in quarterly revenue over the next year and services and platform to scale across Europe as the market continues to evolve toward more structured medical framework works.

From an integration standpoint, Sanity will operate fairly independently in the first year, allowing the team to remain focused on execution and growth within its core markets while receiving strategic support and supply from global organic Gram resources where appropriate. Outside of Europe, we continue to supply flower to partners in Australia, where we also recently launched vape in medical SKUs under our BOXHOT and Edison brands, expanding beyond wholesale flower into branded sales. Our products are expected to be available to more than 4,000 pharmacies nationwide as distribution rolls out.

Regarding recent cannabis rescheduling in the U.S., we are watching closely. It is too early to determine which path ways, if any, to accessing the U.S. medical markets are viable for us. Our two U.S. strategic investments will likely benefit from these developments, and we continue to evaluate opportunities as the regulatory landscape evolves.

Finally, with respect to EU GMP certification, in April, we provided all additional documentation requested by the regulator to date to support the closure of all major findings identified in our certification audit. Given the increased scrutiny of licensed producers, CTU GMP status, it is difficult to predict timing, but we expect an update on certification in the coming months.

Turning to operations. notwithstanding the quality control improvement we've already implemented in IPR production. We are seeing continued improvement in several areas. In Q2, we achieved a record quarterly harvest of over 32,000 kilograms supported by yield improvements, while average TSC at our [indiscernible] facility reached 29.8%, the highest level to date.

Looking back at Q2 last year, our yield improvement equate to a 56% increase in capacity without expanding our facility footprint and reducing our cultivation costs. While we also continue to enhance our genetics programs, including the identification and deployment of powder [indiscernible] resistant cultivar as discussed last quarter. Two resistant cultivars were launched in March. These advancements are contributing to lower plant care requirements, reduced input costs and improved yields.

We are now expanding the program to target additional traits, including terpene and aroma expression color and broader resistance to mold and use. This work also dovetails with our seed-based cultivation strategy, which remains a key focus area. In Q2, approximately 25% of our harvest is grown from seed and we continue to evaluate opportunities to expand this approach to further reduce costs and increase consistency.

Finally, in Winnipeg, we continue to ramp up our beverage production line to meet the growing demand of the market, and we are already seeing a strong reception for our recently launched red sodas, which are expected to drive additional beverage growth in Q3. Overall, Q2 presented challenges that impacted our results and required us to move quickly to employ competitive and operational adjustments that we expect will support more sustainable performance over the back half of the year. Those adjustments are being closely monitored and early indicators suggest the actions already completed and underway are beginning to improve execution and stabilize performance across the impacted business segments.

With stronger execution expected in our core business, further improvements, international performance, typical seasonal tailwind and and the addition of Sanity's financial contributions in Q3, we expect a stronger back half of the year supported by both revenue growth and margin expansion.

With that, I'll turn over the call to Greg to provide additional details on our financial results.

Thanks, James. As James outlined, Q2 reflected a combination of market softness and more significantly some execution-driven challenges in dates and infused pre-rolls. Further, while we made progress improving the proportion of international flower meeting EU specifications, International growth in the quarter was constrained by lower than typical on spec volumes.

Net revenue for the quarter was $59.8 million compared to $65.6 million in the prior year period, representing a year-over-year decline of about 9%. Quarterly revenue was primarily impacted by share erosion in Vapes and infused pre-rolls, but partially offset by continued strength in other parts of the portfolio.

International revenue for Q2 was $6.1 million, which was flat year-over-year and up from $5 million in Q1. International shipments in the first half equaled $11.1 million, up from $9.4 million in the first half of fiscal 2025, an 18% improvement year-over-year. We expect the second half of fiscal 2026 to represent a material step change in international growth, especially as proportions of international flower meeting specifications continue to improve and we have the consolidated financials of Sanity Group in Q3.

Adjusted gross margin for the quarter was $18.4 million compared to $21.9 million in the prior year period, representing a decline of [ 16% ]. Our adjusted gross margin rate was 31%, a decrease of 200 basis points year-over-year. The decline was primarily driven by more value products representing a higher proportion of our mix and higher than typical returns on dates, infused pre-rolls and international flower. While margin performance in the quarter was below our expectations, it is important to note that the underlying cost structure continues to improve.

Cultivation yields and realized synergies remain positive contributors and we expect those to become more visible as we regain competitiveness in Vapes and infused pre-rolls, and our international volume continued its previous growth trajectory. G&A expenses for the quarter were effectively flat compared to Q2 fiscal 2025 at $14.9 million. G&A reflected lower ERP implementation expenses, offset by higher professional fees and a credit provision of approximately $800,000 due to the insolvency of a customer.

As a percentage of net revenue, G&A was approximately 25%, representing an increase of approximately 300 basis points year-over-year largely due to lower revenue base in the quarter. We continue to expect G&A to trend down as a percentage of revenue as we move through the second half of the year. Sales and marketing expenses were $8.7 million compared to $7.5 million in the prior year period, representing 14.5% of net revenue. The increase reflects higher investments in advertising, promotions and trade marketing initiatives to support new product launches in the current period.

Overall, SG&A as a percentage of revenue was 39%, an increase of 500 basis points year-over-year. Adjusted EBITDA for Q2 was $0.9 million, compared to $4.9 million in the prior year period. The decline was primarily driven by lower recreational revenue, while operating expenses increased as a proportion of net revenue as well as lower gross margin.

Net loss for the quarter was $0.9 million compared to net income of $42.5 million in the prior year period. The decrease in net income in the current period is primarily attributable to lower fair value gains on derivative liabilities and preferred shares, lower net revenue and gross margins and an impairment of $5.8 million on our hemp-derived products business in the U.S. due to the change in the regulatory environment in the U.S.

From a cash flow standpoint, cash used by operating activities was $6.8 million compared to cash used of $16.6 million in the prior year period, representing favorable changes in working capital, partially offset by lower adjusted EBITDA. It's worth noting that between Q1 and Q2 last year, our inventory increased significantly due to the Motif integration and new product launches. In Q2 of this year, inventory was flat compared to the prior quarter, reflecting tighter inventory management with clearer demand visibility.

Free cash flow represented an outflow of $7 million in the quarter compared to an outflow of $23.1 million in the prior year period, primarily attributable to lower investment in working capital and lower capital expenditures. Regarding our liquidity position, as of the end of Q2, Organigram had cash and equivalents of $54.8 million, including $4.3 million of unrestricted cash. Subsequent quarter end, we deployed the majority of our cash to fund the acquisition of Sanity Group and secured [ $60 million in ] financing from ATB Financial to maintain financial flexibility. This includes $20 million nonrevolving term loan used in part to fund the acquisition, a $30 million revolving facility to support the Sanity earnout obligations and general corporate purposes and a $10 million operating facility for general corporate purposes.

Following the transaction, we had approximately $40 million of available liquidity on our credit facilities. The financial impact of the competitive and operational challenges we experienced earlier in the year was largely realized in the first half of fiscal 2026, and we are now seeing performance stabilize in the second half of fiscal 2026.

While margins and profitability were impacted in the quarter, the underlying cost structure continues to improve, supported by significantly higher yields, efficiency gains and prior investments in automation, which positions us well to continue our previous trajectory of margin improvement and profitability.

As we move into the second half of the year, we expect improvements in net revenue and adjusted gross margin, along with sequential international revenue growth. Following the acquisition of Sanity Group, we are adjusting our fiscal 2026 guidance, now projecting net revenue to exceed $350 million in fiscal 2026 with adjusted EBITDA and adjusted gross margin exceeding our fiscal 2025 performance, free cash flow approximately breakeven and less than $10 million in capital expenditures based on assumptions that we continue to have a strong innovation pipeline, increasing international sales, high cannabis quality and higher potency and receipt of our EU GMP certification.

With that, we'll open up the call for questions.

[Operator Instructions] Your first question comes from the line of Aaron Grey at AGP.

I guess, first, to start off, you gave a lot of color in the prepared remarks, but just kind of take maybe high to you to make sure we have an understanding. You've obviously done a lot of work to improve the yields over the past 2 years. So just as we understand some of the issues that occurred during the quarter, just give us some of the confidence that you feel like you are on the other side of it, and you're going to start to see some of the improvements that you talked about in terms of pre-roll and others. I know some of it was bringing it in-house. So just some of the confidence that you have that it was more of a short-term hiccup and you're going to be able to rebound back to some of the market share dynamics that you've had in Canada?

Sure. I can take that question. This is James. The issues that happened in the quarter, as you mentioned, on the IPR line, what happened is we in-house and we had to do it a little quicker than we wanted to because the CCA status of the previous supplier. We've gotten on top of it. We've taken a look. We've already taken a lot of remediation actions, and we're already seeing an improvement in the quality, which we think we'll be able to continue to improve over Q3 and Q4.

In terms of vapor, there was an issue with the new device component, again, which we have identified and are fixing and again, confident that will improve in Q3 and Q4. When it comes to the out of spec, yes, there was great performance, I think, in terms of improving the yields. It did put pressure on the downstream drying capacity, but we're seeing sequential improvement in the past time rate over time. And I think you could see it in the quarterly increase in the shipments that we had internationally.

It's one of those things that the micro issues are one of those things that you have to be constantly on top of, but I think in all 3 of the operational areas, which unfortunately all happened to happen at the same time, we have identified the fundamental issues. And I think we're already seeing some initial indicators in all 3, and we do expect improvement over Q3 and Q4.

Okay. Second question for me. Just as we think about the U.S. and rescheduling, how should we think about the opportunities, particularly given the invent vehicle that you have shared with BAT? Does this open up more opportunities, particularly on the medical side to make more investments, potentially even consolidate them? And do you think more now about plant-touching state legal medical markets given the language within the rescheduling?

Yes. I think that you remember, we're not a plant-touching player in the U.S. at the moment. We are looking into it. And I think we'll look at what might be some viable options for us in the U.S. I think for the moment, though, the focus of the business is really on operational fixing the issues that we had in Canada in the previous quarter and really supporting the Sanity group to grow into the second half of the year.

I think with the growth in the European markets and in Germany, in particular, we want to focus on really growing in that part of the business because it's the best short-term opportunity and midterm opportunity for that matter. But we will, of course, be monitoring and we're looking at what options are in the U.S. at the moment. But as a nonplanned player at the moment and [indiscernible] player at the moment. It's not an immediate impact on us.

Your next question comes from the line of Kenric Tyghe at Canaccord Genuity.

Your commentary sort of calls out largely internal issues with respect to your [indiscernible]. But what I'd like to focus on you could perhaps sort of bucket for us is how much of the impact was also a competitive intensity based? So a few of your key competitors launching some very successful product in market in those categories. So it sounds if it was a combination of the manufacturing issues you've called out, but also a step change in competitive intensity. How do you address the competitive intensity piece of this, given that by your comments at [indiscernible] like dealing with your internal issues?

Yes. I mean, like in any quarter, there were competitive issues. I'd say if I was looking at the issues, this is probably 70-30 on the internal issues versus competitive issues. The way we're addressing it is very specifically in vapes. We now have a competitive product. We're launching a few new products to make sure that we're competitive in terms of the potency levels.

And in vaping, we also have new devices and liquids that we're going to be putting into the market. So we have a direct response, which I think we have a fair amount of confidence in that these will be well accepted in the market. And in terms of IPRs, I would say that was primarily the internal issues that happened when we moved the -- we had to step up the internalization of the IPR production in the market. So yes, there is always competition. But I think we need to fix our quality issues, and I think we're putting into the market in the next few months, offers that will be quite competitive and supported by the campaigns and the usual seasonal impact of the Q3 and Q4 growth.

Just a quick follow-up for me. With respect to international, is this a function of how much supply there is in markets that the regulators are being just that much more particular around the requirements, not because the requirements have changed, but that the margin of error as perhaps decreased? Or was this very specifically challenged that you faced in quarter with [indiscernible] the market?

Yes. I think it's a combination of two things. I think the European regulators are certainly looking at -- in terms of regulation, they are stepping up their assessment of the things coming in. I think some of this, so, again, it's always challenging to manage the microbes. And you'll see that many competitors, many of the players in the industry have similar issues.

At the same time, we, I think, have identified some of the main drivers in the -- particularly in the drawing capacity and procedures to be able to address those issues. And as I mentioned earlier, we are sort of seeing sequential improvements in pass rates and we are able to -- we were able to ship more to our international business in Q2 versus Q1, and we're expecting that continue at the same time, we're looking at different remediation pathways to manage the risk over time so that we can continue to supply both Sanity Group and our other International competitive -- international customers.

Your next question comes from the line of Frederico Gomes at ATB Cormac Capital Markets.

Just going back to International. Do you have any estimate of what international sales would have been, if not for the out-of-spec product?

I don't have a specific figure for it. Greg, do you have anything on that? I mean it would have been higher, I don't have a specific number. Greg, do you have that?

Yes. I think in terms of the sales opportunity, there was probably about $4 million to $5 million of international sales that we missed out on as a result of the off-spec product. So a meaningful amount.

And then just a broader Canadian market. You mentioned, I guess, the overall market sort of slowed down recently. I think we've seen that in the market data. Can you talk about that? Do you expect a recovery in the overall market in terms of growth? Or do you think we're going to be flat for this year? And how is that impacting potentially consumer behavior in terms of a shift in product mix, maybe higher-priced product versus a lower-priced product? Any color on the overall use of the market?

Yes. I think as we did mention that the market did grow about 2.2% versus the 5% we expected at the beginning of the year, which is an impact if you take our fair share of about $9 million in net revenue for us alone. I don't expect sort of a ramp-up into double digits again, but I would say something between the 2% to 4% rate would not be unreasonable as looking at the market going forward. You are seeing some impacts in specific areas, in Ontario, for example, in the parts of the of the market where -- which are heavily impacted by the U.S. tariffs, you are seeing lower sort of basket purchase rates in those markets.

And some level of down trading, but it's not sort of -- we haven't seen it at a national level, but there are certainly pockets of the country, which are impacted by the current economy where you're seeing different consumer behavior again, but at the moment, it does seem confined to a specific area, but it's something to watch going forward.

Your next question comes from the line of Pablo Zuanic, Zuanic & Associates.

Look, I just want to go back to the guidance commentary on the -- moving from $300 million to $350 million. How much of that $50 million, it's coming from the higher spread capture now, which we have been from OGI product right now being sold towards the downstream and how much of a $50 million would be sales that Sanity was doing or selling from other suppliers? Can you just roughly break that out?

Sure. Thanks, Pablo. So out of the increased sales, we're expecting EUR 25 million roughly on average from Sanity Group. So strong growth there. In terms of adding back from the $300 million guidance that we had before, we have to take out the amount of sales that we had previously recognized on direct shipment of Sanity and recognize it upon sale to the ultimate customer by Sanity Group. So I'd say the majority of the increase is from Sanity Group partially offset by some softness in the core Organigram business.

Right. And then just a follow-up. I mean, when you announced the deal, if I'm not mistaken, the sales that were given for Sanity were EUR 50 million, with EUR 19 million in the fourth quarter, right? So that we have been like roughly, what, EUR 76 million, in Canadian dollars it would have been about $120 million. I'm just -- there seems to be a bigger drop off in the sales number of Sanity or maybe my math is wrong.

No. I think the number you're referring to was the run rate as of Q4. It wasn't their actual annual number.

No, I know. I know the annual number was EUR 50 million, but the fourth quarter run rate was [ EUR 19 million to EUR 476 ], right? That would have been about CAD 120 million. But -- so I'm just trying to recognize the $120 million and with a new number. But my math could be wrong.

No. So for the next 2 calendar -- for the next 2 calendar quarters, we're expecting EUR 25 million from Sanity, so an average of [ EUR 50 million ] for the back half of the year. So that brings you to at least EUR 100 million versus what they had last year.

Right. Okay. No, that's good. And then just if I may, -- in the case of Sanity can you expand in terms of their opportunities or their current presence in markets outside Germany, particularly in the U.K. and in the case of Switzerland, if you can just give us a reminder of what they have and the potential for growth there?

Do you want to take that one, James?

Yes, sure. I can take that one. So Sanity Group does export medical product to the U.K. and they'll continue to do that. And organic RAM also separately was exporting flower to the U.K., and we'll look how to consolidate those businesses going forward. In Switzerland, it's actually quite an exciting opportunity where there is a recreational pilot. Sanity is in two of the cantons as one of the only players in the market where they have -- they're working on the pilot, and we expect that the recreational market in Switzerland will open around 2028, and it's a very interesting, small, but very high-margin market.

So it's an exciting sort of pilot there, that sanity is in lean position on. We're also -- they are also selling into Poland and the Czech Republic. And we'll continue to support those efforts to expand into those markets. But the focus of Sanity Group is Germany as the main one because this is by far the biggest growth potential in the largest market in Europe. But I think there's some interesting opportunities, particularly in Switzerland and the U.K. to drive additional revenue and margin through the future.

Right. And if I may, I want to just add one more question here. I know there's a lot of TBD in the case of what happens in the U.S., how the rules change. But assuming that they do not allow exports and that they do not allow interest rate trade. Would you still be interested in investing in the medical operators with every state being their own island -- or for you, exports and interest rate trade would be a necessary requirement for you to invest in the U.S.

Look, I think we'll continue to look at all of the opportunities. I think the key for us is to really look at where -- if we did invest, what is the real potential, what optionality does it give us? Does it give us a real chance to compete long term in those markets or not. And I think we'll be prudent in where we go. And we'll have to weigh it against the opportunities to invest in all the markets at Sanity is talking about and what's that return on investment, we'll get from those.

I mean the U.S. is obviously for the largest market in the world. But I think we'll invest if there's an opportunity at the regulatory situation is right. If the cost is right, and we think we have a legitimate chance to build some optionality to grow for the future. But we'll always balance it against the other options we have, whether it's domestically in Canada and probably more likely over the next few years in Europe using the resources, the capabilities of the Sanity Group.

We've now reached the end of the Q&A session. I'll turn the call back to James for closing remarks.

Thank you very much, everyone, for your time. Just to sum it up, it was a challenging quarter. It was driven by -- primarily by specific operational issues that we are addressing, and we have great confidence in our ability to turn that around in Q3 and Q4, and we're very excited about the growth potential of sanity in our other markets in the world. Thank you very much once again for your attention and for the questions that we received. Have a good day, everyone.

This concludes today's call. Thank you for attending. You may now disconnect.

[Audio Gap] I'm pleased to act as Chairman of this Special and Annual Meeting of Shareholders. Before we begin the formal proceedings, I would like to introduce James Yamanaka, our new Chief Executive Officer and a member of the Board of Directors.

In addition to myself and James, we are also pleased to have the following members of our current Board of Directors participating at today's meeting, and I would like to introduce them. Geoffrey Machum, Sherry Porter, Stephen Smith, Marni Wieshofer, Simon Ashton, Karina Gehring and Craig Harris.

On behalf of the Board, I would like to thank those shareholders who have chosen to attend the meeting in person and those who submitted their proxies in advance. In order to ensure we have a complete record of votes present, I would ask anyone who has not yet given his her or their name to the scrutineer to please do so now. I would also like to remind all of those present that this is a meeting of the shareholders of Organigram Global, Inc. and that although other persons are present who we are pleased to welcome at the meeting, only registered shareholders and proxy holders are entitled to participate in the business of the meeting.

Please note that for those shareholders who are unable to attend the meeting in person, the company has made an audio-only telephone conference available for shareholders to listen to the meeting. No questions or voting will occur on the audio conference. Please also note that there may be slight delays throughout the meeting with different speakers beginning or as we respond to questions. With the permission of the meeting, I would like to begin with the formal matters to be dealt with at this meeting.

First of all, appointment of Secretary and Scrutineer. With the consent of the meeting, I will ask Helen Martin, our Chief Legal Officer and Corporate Secretary to act as the Recording Secretary of the meeting; and Rosa Garofalo of TSX Trust Company to act as the scrutineer of the meeting.

We have received an affidavit from the transfer agent as to the mailing of the notice calling this meeting, which states that the notice of the meeting, together with the Management Information Circular and the form of proxy were mailed to each shareholder of record as of February 23, 2026, the record date for this meeting. I ask that the secretary keep a copy of the affidavit with the minutes of the meeting.

I have been provided with a preliminary scrutineers report indicating that a quorum is present. As such, I declare that this meeting has been duly convened and constituted. When the formal report of the scrutineer is available, it will be kept with the minutes of the meeting. Each share represented at this meeting is entitled to 1 vote. In order to make the best use of our time today, certain individuals have been asked to move and second various motions. This is not intended to limit in any way your right to participate in the meeting. A valid vote will be held for certain matters being voted on. Otherwise, unless a ballot is demanded Voting on all other matters will be conducted by a show of hand.

I will now proceed to the first item of business for the meeting and present the audited financial statements of Organigram Global Inc. for the year ended September 30, 2025, which, together with the auditors report on such statements had been filed on SEDAR+ as well as on EDGAR. I would ask that the Secretary attach the financial statements and auditors report as a schedule to the minutes of the meeting. Shareholders do not have to take any action regarding the financial statements.

The next item of business is the election of directors for the ensuing year. The Board currently has 10 directors whose term of office will expire at the end of this meeting. Management proposes to nominate 10 persons for election to the Board. These persons are all described in the management information circular sent to shareholders, and all of the nominees have agreed to stand for election. In addition to myself, the nominees for election are James Yamanaka, Dexter John, Geoffrey Machum, Sherry Porter, Stephen Smith, Marni Wieshofer; Simon Ashton, Karina Gehring and Craig Harris. If elected, these nominees will hold office until the next Annual Meeting of Shareholders or until his or her successor is elected or appointed.

I will now ask James Yamanaka to move and Greg Guyatt to second the motion for the nomination of the directors of the company.

Mr. Chairman, I nominate each of the 10 nominees listed in the management information circular as directors of Organigram.

I second the motion.

Thank you very much. I've been advised that no other nominations have been made in accordance with Organigram's advanced notice bylaw. Accordingly, I declare the nominations closed.

We'll next proceed with the election of directors. Pursuant to the Canada Business Corporations Act, shareholders are required to vote for or against as opposed to 4 and withhold nominees for the Board at an uncontested meeting. If a nominee does not receive a majority of votes cast for their election, the nominee will not be elected and the Board position will remain open or if in the case of incumbent directors, such director may continue in office until the earlier of the 90th day after the election or the day on which his or her successor is appointed or elected. Based on the proxies received for the election of directors, each of the 10 nominees has received a majority of the votes cast for their election.

I will now ask James to move and Greg Guyatt to second a formal motion for the election of each of the 10 persons nominated as directors of the company.

Mr. Chairman, I move that each of the 10 persons nominated be hereby elected as directors of Organigram to hold office until the next Annual Meeting of Shareholders or until they resign or their successors are elected or appointed.

Mr. Chairman, I second the motion.

Thank you. I declare the motion carried. The nominees listed in the management information circular have been duly elected as directors of the company until the next Annual Meeting of Shareholders or until they resign or their successors are elected or appointed.

The next item of business is the appointment of auditors for the ensuing year and the authorization of the directors to fix their remuneration. On February 5, 2026, the directors on the recommendation of the Audit Committee determined you would not ask PKF O'Connor Davies, LLP to stand for reappointment and proposed to appoint PricewaterhouseCoopers LLP as auditor of the company until the next annual meeting of the shareholders or until their successor is duly appointed and that the directors be authorized to fix their remuneration.

James Yamanaka, may I have a motion to appoint the auditors and authorize the directors to fix their remuneration, please.

I move that PricewaterhouseCooper LLP, chartered accounting at Toronto office located at 18 York Street, Suite 2500, Toronto be appointed as auditor of the company to hold office until the close of the next Annual Meeting of Shareholders or until the successor is appointed and that the directors be authorized to fix their remuneration.

Mr. Chairman, I second the motion.

Thank you. We will now vote on the motion. All in favor, please raise your hand. Contrary, if any, please raise your hand.

Thank you. I declare the motion carried.

The next item of business is to consider and if deemed advisable to approve an ordinary resolution approving all unallocated options, restricted share units, performance share units and deferred share units under the company's long-term omnibus equity incentive plan dated January 23, 2020, as more particularly described in the management information circular for this meeting. The full text of the unallocated awards resolution is set forth in Appendix A to the Management Information Circular. In order to become effective, the unallocated awards resolution must be passed by a simple majority of the shareholders of the company present or represented by proxy at the meeting.

James Yamanaka, may I please have a motion to approve the unallocated awards resolution is set out in Appendix A to the Management Information Circular.

Mr. Chairman, I move that the unallocated awards resolution as set out in Appendix A to the management information circular to be approved.

Mr. Chairman, I second the motion.

Thank you. We will now proceed with a ballot vote. Only shareholders of record of the company or their proxy holders are entitled to vote on this matter. If you have previously delivered your proxy, there is no need for you to cast the ballot as your proxy holder will vote on your behalf. Please raise your hand if you would like a ballot. Please record your vote on the motion before the meeting by indicating for or against as the case may be in the space provided on the ballot and then sign and print your name legibly at the bottom of the ballot.

If you're voting as a proxy holder, please indicate on whose behalf you are voting and also note the number of shares be voted on the motion. The scrutineer will then proceed to collect the ballots.

Would the scrutineer please collect the ballots and prepare a report.

Thank you. I declare the ordinary resolution carried.

The final item of business is to consider and if deemed advisable to approve an ordinary resolution approving, one that indirect acquisition by the company of all the issued and outstanding shares of Sanity Group GmbH; and two, the issuance of the company of up to 96,287,602 common shares to the shareholders of Sanity Group GmbH and to BT DE Investments, Inc. In connection, the transaction as more particularly described in the management information circular for this meeting.

The full text of the transaction resolution is set forth in Appendix B to the Management Information Circular. In order to become effective, the transaction resolution must be passed by a simple majority of the shareholders of the company present or represented by proxy at the meeting, excluding the votes attached to the common shares beneficially owned or over which direction is exercised by BT DE Investments, Inc. and its associates, affiliates and their respective directors and officers who held common shares of the company as of the record date, whose votes must be excluded in accordance with the requirements of multilateral instrument 61-101, protection of minority shareholders in special transaction and the rules of the Toronto Stock Exchange.

James may I please have a motion to approve the transaction resolution as set out in Appendix B to the management information circular.

Mr. Chairman, I move that the transaction resolution as set out in the Appendix B to the management information circular be approved.

Mr. Chairman, I second the motion.

Thank you. We will proceed with a ballot vote. Only shareholders of record of the company or their proxy holders are entitled to vote on this matter. If you have previously delivered your proxy, there is no need for you to cast the ballot as your proxy holder will vote on your behalf. Please raise your hand if you would like a ballot. Please record your vote on the motion before the meeting by indicating for or against as the case may be in the space provided on the ballot, and then sign and print your name legibly at the bottom of the ballot. If you're voting as a proxy holder, please indicate on whose behalf you are voting and also note the number of shares to be voted on the motion. The scrutineer will proceed to collect the ballots.

Would the scrutineer please collect the ballots and prepare report.

Thank you. I declare the ordinary resolution carried.

Now that everyone has had the opportunity to vote, I declare the voting for the Organigram Annual General and Special Meeting of Shareholders closed. We have been informed by the Secretary of preliminary vote report shows that each of the proposals presented for approval today has been duly passed. The final voting results will be available after the meeting and posted to the company's SEDAR+ profile and on EDGAR. We have now completed the business for the meeting. If there are no further -- if there is no further business, I will now ask James Yamanaka for a motion to determinate the meeting.

Mr. Chairman, I move that the meeting be terminated.

Mr. Chairman, I second the motion.

Thank you very much. I declare the motion carried and the meeting concluded. On behalf of the company, I would like to thank everyone for attending today.

Thank you.

Hello, everyone. Thank you for joining us, and welcome to the Organigram Global Q1 Fiscal 2026 Earnings Call. [Operator Instructions]

I will now hand the call over to Max Schwartz, Director of Investor Relations. Please go ahead.

Very much, Kaira, and good morning, everyone. Thanks for joining us today. As a brief reminder, this call is being recorded, and a replay will be available on our website within 24 hours.

Today's call will include forward-looking information, forward-looking statements, and actual results could differ materially due to a number of risk factors outlined in our filings and the cautionary statements included in our Q1 fiscal 2026 press release and MD&A.

We'll also reference certain non-IFRS measures such as adjusted EBITDA, adjusted gross margins and free cash flow. Definitions and reconciliations are available in our disclosed materials. Unless otherwise noted, market share data is sourced from Hifyre, Weedcrawler, provincial boards and retailers and our own internal sales tracking.

Discussing results today are James Yamanaka, CEO of Organigram; and Greg Guyatt, CFO of Organigram Global. And as a reminder, any investor inquiries not addressed on today's call can be directed to [email protected].

And with that, I'll now turn the call over to James. Please go ahead, James.

Thank you, Max, and good morning, everyone. Thanks for joining us today. This is my first earnings call as CEO of Organigram, and I've been encouraged by what I've seen so far. The scale of our operations, the quality of the team and the depth of capability across the business make it clear why Organigram has grown into Canada's leading cannabis company.

Over the past month, I focused on understanding where Organigram is genuinely strong and where processes can be fine-tuned. I've traveled to our key facilities, met with colleagues across the organization, and I'm learning a great deal while also noting where my 20 years of experience in global strategy within highly regulated markets can be applied.

Being part of a leading company in a developing industry is genuinely exciting for me. Unlike in more mature industries where the market dynamics are less fragmented and tend to be -- tend to move more gradually, cannabis is still very much taking shape. Canada sits at the center of that evolution with global leadership in research, product development, cultivation science, quality and export activity, areas where Organigram has built meaningful strength, while thoughtfully managing the risks associated with maturing markets, regulatory uncertainty and fragmentation.

I'm optimistic about the long-term growth of the cannabis industry, and I'm confident in Organigram's ability to compete and lead as that growth continues.

With that, let's turn to some of the developments since last quarter. In Canada, we continue to hold the #1 market share position with 11.3% total share in Q1 and 11.7% over the past 12 months. Compared to last quarter, we saw market share decline of approximately 500 basis points, largely due to the impact of the 8-week BC General Employee Union strike, which ended on October 26. After a brief period, brief inventory restock period, our recovery in BC is now complete, and we've regained historical distribution levels.

Competition in vapes and IPRs also contributed to the fluctuation in market share, partially offset by growth in flower and concentrate. Nationally, 3 of our brands, SHRED, BOXHOT and Big Bag O' Buds maintained their top 10 brand status in Q1, generating over $67 million in retail sales.

In Canada's largest markets, we continue to compete strongly, holding the #1 position in Ontario, British Columbia and Alberta. In Quebec, we moved up to the #3 position with 9.9% market share for the quarter, exiting December at 10.1%, driven by the success of our vape launches.

We also continue to outperform in most other provinces in Q1. Notably, we held 33.1% market share in New Brunswick, 21.9% in Newfoundland, 30.4% in Saskatchewan and 12.2% in Nova Scotia. Category performance varied during the quarter compared to the prior year period. Vapes and IPRs remain the most competitive segments. We maintained the #1 position in overall vapes with a 20.4% market share, while in overall pre-rolls, we moved to the #2 position at 7.7%, primarily reflecting increased competition in IPRs.

In beverages, market share increased 80 basis points year-over-year to 5.9%. In concentrates, BOXHOT Whipped Diamonds and Organigram Innovation became the #1 dabbable concentrate in Canada, contributing to a 15.5% category share. In edibles, we gained 2.4 points year-over-year to reach 17.9% share with SHRED becoming the #2 gummy brand in the country in December. Finally, in whole flower, market share increased 90 basis points year-over-year to 7.3%, driven by continued strength in our Big Bag brands.

Our new innovation pipeline is beginning to reach distribution in the second quarter. This includes new competitive coated IPRs and the launches of SHRED Soda and SHRED Shots, powered by a fast-acting soluble technology developed in the product development center.

A key differentiator for SHRED Shots relative to comparable products is our on-package claim of a 15-minute onset. We believe this meaningfully lowers the barrier to trial for consumers, supports retailer decisions around shelf space and with a smaller liquid format paired with a fast predictable dose, positions shots as a discrete and convenient option that competes effectively with other ingestible categories, including gummies.

Turning to operations. Operations, we continue to make progress in plant science and scale. In Q1, we harvested over 28,000 kilograms of flower, representing a 43% year-over-year increase. This growth was a result of improving yields driven by our LED lighting conversion project, which was partially funded by opportunities New Brunswick as well as ongoing refinements to our nutrient programs.

Alongside these gains, continued progress in our breeding efforts drove average flower THC levels to a quarterly high of over 29%, achieving that level of potency at our operating scale is meaningful. In addition, 38% of lots tested in Q1 exceeded 30% THC.

Today, we are also announcing a proprietary breakthrough in powdery mildew resistance. Our plant science teams have identified a genetic marker that can be screened in early seeding population, allowing us to avoid investing time and capital in plants that will never express this resistance trait. Previously, confirming mildew resistance required approximately 90 days. With this discovery, screening can now occur within 10 days, enabling a total -- enabling early removal of out-of-spec populations and reducing downstream crop loss and waste. This screening tool is proprietary and applicable across a wide range of genetics, unlike existing markers that are limited in scope.

When combined with our seed-based breeding initiatives, which represent approximately 30% of harvest in the quarter, these advances support more stable genetics, higher realized yields and improved cost efficiency, contributing to our expected margin expansion over time.

On the manufacturing side, we continue to optimize our hydrocarbon extraction and pre-roll production. 100% of our extraction is now hydrocarbon-based with capacity up 87% year-on-year and lower associated COGS. Focusing on hydrocarbon extraction allows us to meet increasing derivative needs internally, while expanding B2B opportunities. In Winnipeg, we have completed commissioning of our beverage line and are beginning in-house production for a portion of our beverage portfolio to support its expansion.

As we move further into fiscal 2026, the benefits of these improvements should begin to flow more meaningfully through our P&L, as lower cost inventory moves through a more efficient distribution due to the ongoing optimization of our recent ERP upgrades.

Moving to our international business. In Q1, we generated $5 million in international sales, up 55% from Q1 fiscal 2025. We did see an unanticipated sequential decline in the international volumes during the quarter. This was primarily driven by higher-than-expected proportion of flower that did not meet international specifications. While some level of out-of-spec product is expected, we've taken steps to remediate this temporary issue, return to normal operating parameters and reduce the risk of future variability. We remain optimistic about international momentum and continue to expect meaningful international sales growth in fiscal 2026 as demand remains elevated.

Regarding our expected EU GMP certification, we are preparing follow-up responses and information from the regulator in response to feedback received in January 2026. Following provision of this information, the company expects to await confirmation of certification or any required next steps.

On international branded sales, we continue to make progress. In Australia, we shipped input materials for vape production and distribution in December, completing the first production run in January and now are in the process of launching. In the U.S., we launched Collective Project and Fetch in Illinois and Wisconsin through new distribution partners, expanding our retail footprint to 11 states.

We are also continuing to pursue marketing and distribution expansion for our happly gummies. In both cases, our penetration in the U.S. has been slower than anticipated, reflecting a rapidly evolving market with increasing competition and ongoing regulatory developments. With Collective Product, Fetch and happly products collectively available in over 20 states through DTC and retail channels, we do anticipate the incremental growth in line with the market, but we are not relying on the U.S. market for growth. We continue to closely monitor regulatory changes in the U.S. and are closely following recent efforts from lawmakers to amend or extend existing limitation on intoxicating hemp products.

So overall, we are pleased with our year-over-year growth and despite sequentially lower international sales, typical seasonality and the impact of the BC labor strike, we maintain adjusted gross margins in line with our record-breaking Q4 and fiscal 2025. As the year progresses, we remain confident in our ability to deliver against our previously issued guidance.

With that, I'll turn over the call to Greg to walk through our financial performance. Greg?

Thank you, James. Great to have you on board for our first earnings call together. Good morning, everyone.

Before getting into the numbers, I'll briefly frame Q1. Results reflected strong year-over-year revenue and adjusted EBITDA growth alongside the usual seasonal reset from Q4 as we discussed last earnings call, with some incremental pressure from the operational and market factors James mentioned. Importantly, none of these dynamics change our expectations for the rest of the year.

Our business has historically delivered stronger fundamental performance in the second half of the fiscal year, particularly in Q3 and Q4. Based on our recent visibility and execution -- based on our current visibility and execution plans, we remain on track to deliver against our full year guidance.

With that, let's turn to the quarter. In Q1, net revenue increased 49% to $65.3 million from $42.7 million in the same prior year period, primarily due to growth in our Canadian business, the integration of Motif and higher international sales. International sales for Q1 were $5 million, up 51% over Q1 last year. Sequentially, net revenue decreased 21%. The decrease was primarily due to our seasonally lower Q1. As James mentioned, Q1 was also negatively impacted by the BC employee strike, increased competition in vapes and pre-rolls and sequentially lower international sales.

Adjusted gross profit for the quarter increased 67% to $23.9 million versus $14.3 million in Q1 last year due to our significantly higher revenue base, international sales growth and incremental efficiency gains. We are pleased to report that despite seasonal and competitive impacts on revenue as well as lower levels of high-margin international sales, adjusted gross margin remained stable sequentially at 38%, an increase of 500 basis points over Q1 last year.

Adjusted gross margin was supported by higher yields, lower cultivation costs and Motif synergy realization as we started to sell through lower cost inventory. This demonstrates that our investments in efficiency are having a positive impact on cost per gram and margins, which we anticipate continuing to expand as international volumes scale throughout the year.

In Q1, G&A costs were $15 million versus $11.2 million in the prior year period. The 33% year-over-year increase in G&A is primarily associated with the consolidation of Motif's costs for the full quarter, incremental ERP and professional fees, higher depreciation and amortization, but partially offset by cost savings initiatives. As we're in the final phases of ERP implementation, we expect the associated costs with that project to roll off after the second quarter.

As a proportion of net revenue, G&A costs represented roughly 24% of net revenue in Q1, which was down approximately 200 basis points from the same prior year period. Sales and marketing costs were $9 million versus $5.8 million in the same prior year period. Similar to G&A, the year-over-year increase is primarily attributable to supporting the addition of Motif and Collective brand project -- Collective Project brand portfolios.

Sales and marketing costs represented 14% of net revenue, up approximately 500 basis points year-over-year. Overall, SG&A declined by 200 basis points year-over-year as a percentage of net revenue, reflecting continued scale and operating leverage, partially offset by higher trade investment to support competitive activity. Our expectation remains that SG&A costs will continue declining incrementally relative to net revenue as the year progresses, all else being equal.

Total operating expenses for the quarter were $26.7 million or 42% of net revenue, a year-over-year decrease of 600 basis points, primarily due to lower proportional G&A costs and lower R&D spending. Adjusted EBITDA in Q1 was $5.3 million, up 273% from $1.4 million in the prior year period, driven by increased scale, higher international sales and proportionately lower operating expenses. Sequentially, adjusted EBITDA declined primarily due to our lower international sales, the now resolved revenue disruption in British Columbia and as previously mentioned, our normal seasonal dynamics.

Net income for the quarter was $20 million compared to a net loss of $23 million in the same prior year period. The $43 million year-over-year improvement was primarily due to changes in the fair value of derivative liabilities and top-up rights associated with our follow-on BAT investment.

From a cash flow perspective, in Q1, cash provided by operating activities before working capital changes was $0.3 million compared to cash used of $6.3 million in the prior year period, demonstrating improved cash generation from the core business, supporting our full year guidance of positive free cash flow. Cash used by operations after working capital changes was $16 million versus cash used of $4.2 million in Q1 last year. The increase in cash used was driven by investments in working capital related to higher inventory levels as we completed the migration of our new ERP enhancements and the timing of excise duties and Health Canada licensing payments that occurred in the first quarter.

Finally, as of quarter end, we held total cash and short-term investments of $63 million, including $7.6 million of unrestricted cash. We are confident in our ability to generate cash from operations and free cash flow in the near term and are assessing nondilutive sources of capital to support liquidity and financial flexibility.

To wrap up, in Q1, we delivered strong year-over-year growth in revenue and adjusted EBITDA, maintained stable sequential margins at 38% and continue to demonstrate operating leverage as the organization continues to scale. Our margin performance this quarter underscores the progress we're making on efficiency, cost structure and Motif integration, and we expect these benefits to become increasingly visible as higher-margin international volumes scale through the back half of the year.

While working capital weighed on cash usage in the quarter, cash generation from the core business continues to improve, and we remain confident in our ability to deliver positive free cash flow for the full year. We remain on track to deliver against our full year guidance of revenue exceeding $300 million, supported by improving fundamentals, expanding margins and a disciplined approach to capital and liquidity.

With that, we'd be happy to open the call for questions.

Sorry all, we'll get to questions in a moment. Our moderator just having an issue on their end. Just give us one moment to resolve.

This is Devin from Q4. I'm going to sub in for Kaira right now. She's just having some technical difficulties. So going ahead with the Q&A, we have Aaron Grey currently on stage.

Aaron, if you're muted locally, just please unmute yourself. You're still on stage.

Can you guys hear me, okay?

There we go. Yes, we can hear you.

Okay. Perfect. All right. Fantastic. James, welcome aboard. Great to have you back in the industry now.

So I guess first question for me is, now that you've kind of started to get your feet, I know it's still early days, but it sounds like you've been growing a lot of facilities and getting a better feel for the business. It would be great to kind of hear in terms of where are you seeing some of the lower-hanging near-term opportunities versus some of the initiatives that might be more long-term in nature? And how we should think about maybe how your level setting prioritization of those initiatives?

Sure. First of all, thank you. It's great to be in here. And like you said, it's been about a month since I've actually gotten into the role. And what I have been doing is looking -- is visiting a lot of the facilities, meeting with the people and the observation to me is it's a very strong company, good people, good capabilities and a strong ability to grow into the future.

In terms of the priorities, overall, look, I don't think it's a massive change after my first month. It will always be focused on consumers, on the innovation and on international expansion in the future to grow the business.

In terms of the short-term priorities and the things that I think we need to focus on in the short term, it really is about operational execution, making sure that we really have a focus on executing with precision, focusing on the cost base, improving the margins and make sure we deliver to the market.

In the longer term, I think one of the reasons I was brought into the role was that over 20 years of international experience I've had. In fact, my entire career has been in international markets. And it's really looking at what are those future opportunities, balancing off sort of the risk, not overextending ourselves, but making sure we take advantage of the growth opportunities in the future.

But to sum it up, the fundamentals don't change. The biggest focus is about execution and making sure we deliver on the numbers and improve our margins over time and also focusing on the cost base. Longer term, it's about -- mid- to longer term, it's about expanding into those international markets prudently and making sure that we are able to grow the business sustainably.

Okay. Great. I appreciate that color. Second question for me, just...

Our next question comes from the line of Kenric Tyghe with Canaccord Genuity.

James, congrats on the appointment. With respect to international volumes, could you provide some insight on perhaps a little more color around what happened? And second to that, also on any indications of what was left on the table on the back of those flower issues. Essentially, what actions have you taken to address and perhaps what did it cost in the quarter?

Yes. I think the first thing to note is that the requirements on international flower and the process that you can take in terms of processing the product are far more stringent in a lot of the international markets and particularly in Germany, which is the fastest-growing and largest of the international markets at the moment.

What has happened is, as we mentioned, we had a fantastic increase in yields over the past year, which has meant we've had a lot more flower on hand, which has caused some issues in microbial growth. We have identified what we believe are the core drivers. We're working on it to fix it. I do believe it's a temporary issue, and we should get back to supplying the market in the future.

So that's what it is today. You asked as well about the exact effect. I might have to refer over to Greg for that, if there is an answer for that, Greg?

Yes. Sure, James. Kenric, we think that the impact of that was probably about $3.5 million on revenue of international. So if you think about the fact that we hit $5 million in Q1, which is a 50% improvement over last year, if we sort of had the normal on spec for flower, it would have been a pretty significant improvement relative to last year.

Appreciate the granularity.

We have a question again from Aaron Grey with Alliance Global Partners.

I'll ask a second one here. So I appreciate the color on the international market now. So just a follow-up on that real quick, and then I'll go into my second question.

Can you then utilize potentially that product? Can you reallocate it? I'll ask it that way. And then kind of turning towards the Canadian market, do you feel a bit more confident in terms of the snapback? It sounds like it was twofold. Number one, obviously, you guys had BC. So it sounds like that was more of a snapback. But then second, we talked about more of the competitive nature -- increased competitive nature of vapes and pre-rolls. Could you maybe talk about those 2 issues and how we should think about the recovery within the Canadian market?

Sure. I'll take those in different orders. So in terms of BC, yes, I think we're back -- we are back up to the traditional distribution levels. So you would expect the sales to snap back in BC.

In terms of the micro -- I mean, the non-spec international. As I said, we've identified what we believe are the core drivers of that, which is very much about the good work the team has done on the yield has created some issues. We are working on it. It's a top priority, and we expect that we will be resolving this issue. We don't think it's a proven issue.

And finally, as I mentioned in my statement in terms of the increased competitiveness, we do have new launches. We're fighting -- we will fight back with new innovations and try to get there. But this is a very competitive part of the market. So I would say this would be one where we balance out the amount of investment we want to put in to get that share back, balancing off the margins and making sure that we make the right decisions to get back to some growth there.

Aaron, Greg here. May I'll just jump in with a little bit of extra color on your question about the international flower that was out-of-spec, and can it be reallocated to other markets? Absolutely. So we have taken that flower and repurposed it towards the Canadian market. And there's no issues with it. It just didn't meet the needs for our international customer. So we're not expecting any inventory write-offs as a result of that.

Perfect.

Our next call comes from Brenna Cunnington from ATB Capital Markets.

So just regarding the pending EU GMP certification, it's good that you got like some feedback, some news is better than new news, right? We know that it's hard to predict, like as we all know, regulators are unpredictable at best. But what type of time line might we see for this coming through?

Yes. Where we are in the process right now, we've received some feedback back from the regulators in January where they had some additional questions. We're working closely with them to resolve those issues and to answer those questions.

In terms of time lines, we're working forward the fastest we possibly can in conjunction with them. But like you said, these are regulators. So all we can do, we are doing our best to get it done as quickly as possible, but I can't give you a hard time line at the moment. But we are working on the specific concerns they had and not concerns, but questions they had and clarifications they asked for, and we will -- we're working with them to try to get it as quickly as possible.

Our next question comes from the line of Pablo Zuanic from Zuanic and Associates.

Can I ask a question regarding route-to-market in Europe? I understand you work obviously with Sanity Group in which you have an investment, BAT also has an investment in them, but you also work with other distributors. So I'm just trying to understand going forward, as you enter other markets, do you go direct? Do you go through Sanity? If you can just expand in terms of how you think about that.

Okay. I'll start off with that, and maybe I'll hand over to Greg, who obviously has more time in the business than I do.

I think the answer is that it will be a mix. Some of it, obviously, we sell to Sanity Group, which we do have an investment in. But as opportunities arise, there will be other models in different markets. So sometimes it will be direct sales. sometimes it will be to Sanity. And it will just depend on what the regulations require and what the best option, the most cost-effective way and sustainable way depending on the market it is. So I don't have a direct answer that would be consistent across all of them.

Greg, do you have any comment on that?

Yes. I mean -- thanks, Pablo. I mean we ship direct to Germany, obviously, through our partner, Sanity. We also ship directly to the U.K. at the moment. I think as far as other markets in Europe, such as look at the likes of Czechia, Poland and some of the others that are opening up, we have the ability to ship there directly. But we also -- we've got a great relationship with Sanity Group. So we're always in discussions about what the best way for us to go-to-market is. But at the moment, we ship direct to whichever markets we're competing in.

Okay. And then just a quick follow-up regarding the U.S. I know it's hard to predict how the regulatory environment will evolve there, but you are one of the few Canadian LPs that's actually operating in the Canadian -- in the U.S. market indirectly, right, through the 2 brands that you mentioned.

In my opinion, the U.S. market would consolidate very quickly. So how do you get ahead of that? I mean, can you make investments? Can you set up guardrails to do that and preserve your NASDAQ listing? Just trying to understand, again, how do you think about accelerating M&A in the U.S. market? And how do you protect your NASDAQ listing as you do that?

Well, I think, first of all, the NASDAQ listing does not allow us to do full investment in the U.S. across all of the categories because of the state-by-state nature and the lack of federal regulation around it. So that would be a constraint on what we could invest in the U.S. as a start.

In terms of the current regulations, first of all, remember that the U.S. is actually a relatively immaterial part of our business today. I think it's less than 1% of our revenues, and it's not crucial to the growth plans for Organigram.

In terms of the regulatory situation, your guess is as good as ours. We -- under the current legislation, which is meant to go into effect in November, we're speaking with lawmakers as are other parties, and we're hoping that we find a good resolution to this. But at the moment, we're creating different plans to make -- how we protect our current business in the U.S. and set it up for -- make sure that we're there should federal regulation change at some point in the future.

Again, Greg, do you have any other comment on that?

Yes. Thanks, James. I think you hit most of the key points there. The one additional thing I would add is given the regulatory uncertainty; we're not investing really heavily in the U.S. right now. We're kind of waiting to see what happens. We're continuing to support the existing business, investing in sales and marketing and so forth. But really until we start to see some clarity around regulation, I think we're going to be prudent as to how much capital we deploy in that market, particularly given the size of that business for us today.

Obviously, we hope that things get clarified in the coming months. But right now, I think we just need to kind of wait and see what happens, and we'll continue to focus on other international markets where we see the bigger growth opportunities for us in the short term.

[Operator Instructions] Our next call comes from Kenric Tyghe from Canaccord Genuity.

Apologies for the follow-up. Just with respect to the increased competition that you called out in pre-rolls, did that also translate into increased promotional intensity in the quarter? And was that increased competition across all markets and pretty broad-based? Or was it pretty narrow and only in specific markets?

On this one, Greg, can you provide some color? Again, I apologize, it's been a month in. Greg, do you have any color on that one?

Yes. No problem, James. Yes, Kenric, I'd say it's a competitive space in general, like all the categories have pretty intense competition. I think when it comes to pre-rolls and IPRs, we're seeing the value proposition really evolving across the entire industry. Similar to what we've seen in prior quarters, the potencies are increasing, pricing has become more competitive. We're confident that we have great offerings coming and in the pipeline that are going to address those challenges, but that's sort of what we're seeing across the category, pricing coming down and potency being the key challenge.

The rest of the industry, I mean, we're seeing sort of similar levels of competition across vapes versus what we had in the prior quarter. Flower is always competitive. We think we've got a really great foothold there. And then in the beverage space with the shots coming out, we're very optimistic about that and the current product portfolio. We think there's some good growth opportunities there. So really looking forward to the new offerings coming and higher potencies in -- across pre-rolls, which I think will position us really well to compete effectively in all of those categories.

There are no further questions at this time. I will now turn the call back to James Yamanaka, CEO, for closing remarks.

First of all, thank you for joining the call today, and thank you for the questions. I'm looking forward to more of these going forward. And as I get my feet on the table a bit more to be able to give you a little more clarity on some of the future of the business.

So thank you very much for your attendance today, and I'll pass it back over to the moderator.

Thank you. This concludes today's call. Thank you for attending. You may now disconnect.

Good morning. My name is Tiffany, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Organigram Global Fourth quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] I'll now turn the call over to Max Schwartz, Director of Investor Relations.

Thank you, Tiffany. Good morning, and thank you very much for joining us today. As a reminder, this call is being recorded, and a replay will be available on our website within 24 hours. Today's call will include forward-looking statements. Actual results could differ materially due to a number of risk factors outlined in our filings and the cautionary statements included in our Q4 fiscal 2025 press release and MD&A. We'll also reference certain non-IFRS measures such as adjusted EBITDA, adjusted gross margin and free cash flow. Definitions and reconciliations are available in our disclosure material. Unless otherwise noted, market share data is sourced from Hifyre, Weedcrawler, provincial boards and retailers and our own internal sales tracking. Discussing results today are Tim Emberg, President of Organigram Canada; and Greg Guyatt, Chief Financial Officer; and we're also joined by our Executive Chair, Peter Amirault for closing remarks. As a reminder, investor inquiries not addressed on today's call can be directed to investors at organogram.ca. With that, I'll now turn the call over to Tim.

Thanks, Max, and good morning, everyone. We are really excited to share our Q4 and full fiscal year '25 results with you. Fiscal '25 was a busy and redefining year for Organigram. We strengthened our Canadian market share leadership, achieving the #1 market share position. We advanced our operational capabilities and significantly accelerated our international business. In Q4, we delivered record quarterly gross and net revenue, along with our highest adjusted gross margin and adjusted EBITDA since the end of 2019. In fiscal '25, we achieved record gross and net revenue, adjusted EBITDA, adjusted gross profit and record international sales. A key driver of this growth was our acquisition of Motif Labs, which unlike many transactions in the sector did not result in market share dilution in fiscal '25. This was a really big win for us and a true reflection of a full team effort. With Motif, we added a centralized distribution hub in Ontario, along with advanced extraction and production facility for vapes and pre-rolls.

Today, with our 5 facilities operated across the country, we have greater control over our supply chain and are well positioned to address evolving consumer needs in Canada and abroad. In fiscal '25, we materially increased our overall yields and annual capacity at our Moncton facility without expanding our physical footprint. We achieved this by implementing more advanced cultivation practices, improved plant care methods and seed-based cultivation. We also continued to advance research and cultivation programs that support better quality and lower cost. A good example of this is the identification of genetic markers for powdery mildew that is now being bred into certain cultivars. Our investments in cultivation and plant care allow us to deliver the largest capacity output in company history, and we expect to increase flower output further into fiscal '26.

We are also grateful to Opportunities New Brunswick for supporting our facility enhancements with a recent $2 million grant and by extension, supporting the economy of New Brunswick, where we currently employ roughly 700 Organigram staff. If we look at the Canadian market, in Canada, we currently hold the #1 market position with 11.9% market share in fiscal '25. Nationally, 3 of our brands, SHRED, BOXHOT and Big Bag O'Buds were among the top 10 cannabis brands in fiscal '25 by retail sales. For the 3 months ending September 2025, we held strong share in Canada's 4 largest markets: Ontario, Quebec, British Columbia and Alberta. We are #1 in all these markets with the exception of Quebec, where we ranked fourth in fiscal '25, but to continue to grow. We saw even higher market share across almost every other province, notably 34.2% in New Brunswick, 23.7% in Newfoundland, 14.9% in Saskatchewan and 12.2% in Nova Scotia. Category performance varied throughout the year.

We saw gains in whole flower, edibles, beverages, non-hash concentrates and infused pre-rolls, while competition increased in vapes, milled flower and overall pre-rolls. Looking ahead to fiscal '26, we have several opportunities to grow in Canada. In Quebec, we recently launched our vape portfolio with very positive indicators to date and are extremely excited about other opportunities in the province, such as expanding our infused pre-roll line offerings and launching beverages. In line with our consumer-centric approach and dedication to innovation, we also have several compelling products launching this year that we know consumers will absolutely love. We are preparing to launch a new family of coated infused pre-rolls, new all-in-one vape hardware and in beverages, consumers can expect new formats and flavors, including the exciting launch of SHRED Soda.

To support our beverage business, our manufacturing line in Winnipeg is now ramping up and expected to begin production over the coming months. The key focal point for us really in the Canadian business this year is increasing the margin profile of our domestic product mix and continue to optimize our operational footprint for capacity, throughput and streamlined logistics, work that also directly supports our international growth objectives. It's worth noting though that in Q1 of this fiscal year, we experienced a temporary market share impact as a result of the 8-week BC General Employees' Union strike, which ended on October 26. During the strike, only small-scale local growers were able to ship products directly to retail stores into the province, which affected the market share of most large LPs. We are already seeing a strong rebound towards a historical share in the province though. From an international front perspective, earlier this year, we formalized an international business unit focused on expanding our global footprint.

The team's focus in fiscal '25 was on accelerating our international wholesale business and exporting our brands -- expanding our brands into new markets. We achieved 3 major international milestones in fiscal '25. First, we delivered the highest international sales in the company's history, reaching $26.3 million, up 171% from $9.7 million in fiscal '24. This growth was supported by our partnership with Sanity Group in Germany, along with flower shipments to customers in the U.K. and Australia. Second, we commenced sales in the United States with hemp-derived THC beverages under our Collective Project and Fetch brands. These products are now available in multiple bricks-and-mortar locations in 12 states and online in 24 states through our DTC platform. Third, we expanded our U.S. portfolio with the launch of happly, a functional edibles lifestyle brand. These products combined cannabinoids of functional ingredients, leveraging our FAST technology for faster onset and predictable effects.

Given the recent provision in the U.S. Federal Funding Act that would effectively ban hemp-derived THC by November 13, 2026, we are monitoring efforts to repeal, replace or delay the amendment though the outcome remains uncertain at this time. Our U.S. business does not currently represent a significant share of our revenue. If the provision stands, we do not expect a material adverse economic impact to Organigram. We are also monitoring recent media reports regarding cannabis rescheduling in the U.S. While no regulatory decisions have been finalized, Organigram is encouraged by the direction of these discussions and recognizes that meaningful federal reform could positively impact the operating and investment environment for the global cannabis sector by reducing regulatory friction and supporting more sustainable industry growth long term. As the global cannabis trend continues, we see strong growth potential for our flower, our brands and innovation products in international markets outside of the U.S.

In the near term, investors can expect to see us launch branded vapes and gummies in Australia and expanded flower exports. Our pending EU-GMP application. In October 2025, we submitted additional clarifying information as requested by the regulator, and we await the determination on our application. Regarding our Jupiter fund, which currently has $59 million available for deployment, we have identified several compelling opportunities. The fund allows us to deploy capital strategically to leverage opportunities in markets outside of Canada. Overall, we believe Organigram is exceptionally well positioned to benefit from the continued global shift towards regulated cannabis markets. From an advocacy perspective, we've seen meaningful progress in our industry advocacy this year. Provinces like New Brunswick and Ontario have demonstrated a clear understanding of both the opportunities and the challenges in the sector.

They have shown support for advancing discussions with the federal government on critical issues such as excise reform and strategies to strengthen the legal cannabis market. While there's still a lot of work ahead, this growing alignment is an encouraging sign of constructive dialogue and a shared commitment to finding practical forward-looking solutions. In closing, we've made some strong progress in fiscal '25 across cultivation, market execution and international expansion, which translated into record financial performance for Organigram. As we move into fiscal '26, we will continue to build off that success and focus our efforts on disciplined execution and fundamentals with a clear emphasis on sustainable growth, margin expansion and continued leadership in the markets where we operate. With that, I'll turn the call over to Greg to walk us through the financials in more detail. Greg?

Thank you, Tim. We are pleased to once again report record results, and we're very excited to build upon our fiscal 2025 success in the coming year. In Q4, net revenue increased 79% to $80.1 million from $44.7 million in the same prior year period. Similarly, full year fiscal 2025 net revenue increased 62% to $259.2 million from $159.8 million in the prior year. These results were driven by contributions from our Motif and collective project acquisitions, which were completed on December 6, 2024, and April 1, 2025, respectively. We maintained our #1 position in Canada's growing market through broad portfolio coverage and coast-to-coast distribution and the scale-up of our international business, which in Q4 grew 31% sequentially over Q3 and 137% year-over-year to reach $9.7 million. For the full year fiscal 2025, international sales hit a record $26.3 million, a 171% increase versus the prior year.

As Tim mentioned, we are anticipating continued growth in both our domestic and international businesses in fiscal 2026, supported by increasing distribution of vapes and pre-rolls, exciting renovations in our product portfolios and increasing international demand. Given the maturing dynamics in Canada and single-digit growth rate, we anticipate international sales to grow at a significantly higher rate in the coming year. Adjusted gross profit for the quarter increased 85% to $30.6 million versus $16.5 million in Q4 last year due to our significantly higher revenue base, international sales growth, incremental efficiency gains, partially offset by higher biomass costs. On a full year basis, adjusted gross margin was 35%, in line with our fiscal 2025 guidance and a 100 basis point increase from last year. This translated into record adjusted gross profit of $91 million versus $53.9 million last year. Adjusted gross margin in Q4 rose by 400 basis points over Q3 to 38%.

While we are pleased with this progress, we see further margin improvement in fiscal 2026, driven by several key factors. First, we are realizing synergies from the Motif acquisition. In fiscal 2025, we achieved approximately $7.1 million in cost savings, which on an annualized basis reflects more than $15 million in savings, in line with our previously disclosed target. We did see some offsets during the year, including higher biomass costs, a temporary disruption to our OTIF performance related to the Motif ERP integration, which we discussed last quarter and higher benefits costs for legacy Motif employees. In addition, a portion of these savings relates to lower consumables and production costs, which will only flow through earnings as the associated inventory is sold. With the majority of the integration now complete, we expect operational leverage from the Motif acquisition to continue building through fiscal 2026.

Second, we continue to optimize our cultivation methods to increase output per square foot in Moncton, benefit from our recent LED lighting upgrades and reduced labor costs associated with plant care. Third, we anticipate incremental margin lift from the continued international growth. These drivers support our expectation that adjusted gross margin will continue to improve in fiscal 2026 with full year margins higher than fiscal 2025, in line with previous guidance. In Q4, G&A costs were $17.6 million versus $9.5 million in the prior year period. The year-over-year increase in G&A of approximately $8.1 million was primarily associated with the consolidation of Motif's costs, incremental ERP and professional fees, partially offset by some cost savings initiatives. As a proportion of net revenue, G&A costs represented roughly 22% of net revenue in Q4, which was flat sequentially and up approximately 100 basis points from the same prior year period. In fiscal 2025, G&A costs of $59.5 million represented 23% of net revenue, down from 28% of net revenue last year.

Selling costs for the quarter, including marketing, were $8.9 million versus [Technical Difficulty]. As a percentage of net revenue, selling and marketing expenses remained flat sequentially and year-over-year at approximately 12%. In fiscal 2025, these expenses of $31.1 million represented 12% of net revenue, approximately 400 basis points lower than in fiscal 2024. Overall, SG&A has declined year-over-year as a proportion of net revenue as we continue to scale the business and realize the benefits of greater operational leverage. Total operating expenses for the quarter increased 8.5% to $30.6 million from $28.3 million in the prior -- than the prior quarter, representing approximately 38% of net revenue, down approximately 200 basis points sequentially. Compared to the prior year period, total operating expenses as a percentage of net revenue were effectively flat.

Adjusted EBITDA set a company record in fiscal 2025. In Q4, we reported adjusted EBITDA of $9.8 million, an increase of 72% sequentially and 69% year-over-year. In fiscal 2025, adjusted EBITDA was $21.9 million, up 160% from $8.4 million in 2024. We're very pleased with this performance, which we expect to build upon in the future. An interesting fact is that Q4 adjusted EBITDA exceeded the entire year of fiscal 2024. The increase in adjusted EBITDA, both in the quarter and for fiscal 2025 is attributable to our larger scale, increased international sales and proportionately lower operating expenses. Our net loss for the quarter was $38 million compared to a net loss of $5.4 million in the same prior year period. The increase in net loss of roughly $32.5 million year-over-year was primarily due to a higher noncash mark-to-market adjustments in the fair value of derivative liabilities, preferred shares and other financial assets.

This change was partially offset by higher sales and improving gross margins in Q4 fiscal 2025, reflecting operational efficiencies, product mix optimization and ongoing cost management initiatives. For the fiscal 2025, net loss decreased 46% to $24.8 million from $45.4 million in the prior year period. The decrease in net loss from fiscal 2024 is primarily due to higher sales at higher adjusted gross margins and a deferred tax recovery that was reported in fiscal 2025. From a cash flow perspective, in Q4, cash provided by operating activities before working capital changes was $3.1 million compared to $1.2 million in the prior year period. In fiscal 2025, cash used by operating activities before working capital changes was $5.5 million compared to cash used of $11.1 million in the prior year period. This improvement in both periods was attributable to our higher adjusted EBITDA.

We previously estimated free cash flow to be positive for Q4 fiscal of 2025. The company had free cash flow just shy of positive at negative $0.7 million in Q4 fiscal of 2025, which was lower than projected, primarily due to higher investment in working capital than previously planned. Finally, as of year-end, we had total cash and short-term investments of $84.4 million, of which $28.2 million was unrestricted. While we believe our near- to medium-term capital position is healthy, we regularly evaluate our capital structure to ensure we're maintaining appropriate long-term financial flexibility. We feel very confident in our outlook for fiscal 2026.

This is supported by our record financial performance in fiscal 2025, our margin improvements and the continued expansion of our international business. We expect to deliver very strong year-over-year growth in Q1, while noting that consistent with prior years, we anticipate a seasonal sequential reduction versus our typically strong Q4 results. For fiscal 2026, we are projecting continued strong net revenue growth expected to exceed $300 million, along with further improvements in adjusted gross margin and adjusted EBITDA compared to fiscal 2025. We also expect to generate free cash flow in fiscal 2026 with capital expenditures expected to be less than $10 million. To conclude our prepared comments, I'd like to turn the call over to our Executive Chair, Peter Amirault. Peter, over to you.

Thank you, Greg, and thank you, everyone, for joining us today. Look, I just want to close by acknowledging a couple of things. First of all, I want to talk about the strong momentum that Organigram has built this year. We delivered record revenue. We delivered our highest gross margin and adjusted EBITDA since 2019, and we continue to be the #1 position in the Canadian marketplace, while accelerating our international growth and shipments. I'd also like to talk just quickly about the Motif Labs acquisition. As many of you know, M&A transactions are difficult. Data would suggest that up to 75% of these transactions never achieve their financial targets. Well, Motif has been a clear outlier. The integration strengthened our capabilities, contributed meaningfully to our financial performance and importantly, we did so without losing any market share.

So as we look ahead, we also expect continued growth as Greg has said, supported by a stronger platform, expanding international opportunities and the operational discipline that has driven our recent success will help drive our margin. And one other point, we'll also be fairly focused on our SG&A expense as well. Before closing, I want to do 2 things. I want to extend our sincere thanks to Beena Goldenberg, Beena and her leadership and steady hand through a dynamic period for both Organigram and the industry. Her contributions have positioned us very well for the next phase. Finally, we're also very pleased to welcome our new CEO, James Yamanaka, who will be coming in early January. James brings a wealth of experience. He has a deep global strategy experience with BAT and a proven record of scaling international businesses, and we believe his leadership is timely and will be invaluable as we advance our domestic priorities and clearly look to work to expand our global footprint. With that, I'll now open the call for questions.

[Operator Instructions] Your first question comes from the line of Aaron Grey with Alliance Global Partners.

Congrats on the strong quarter to finish the fiscal year. First question for me, I want to talk about international. Strong quarter here. I want to talk about how good of a base this might be to build off of. I know you talked about significant growth in fiscal year 2026. How much -- and then also more color in terms of how much of that enhanced cultivation, I believe you said 14,000 kilograms last quarter. Have you started to realize that? Or is that still to come? Because I know that was pegged for international. So any commentary on international growth expectations you expect going forward and then maybe some of the supply-demand dynamics you're seeing within those markets?

Yes. Maybe -- thanks for the question, Aaron. Maybe I'll kick that off. So yes, we're starting to realize this increased capacity already. We recently increased -- we're looking at about a 14,000 kilograms annual capacity increase with the changes that we just made. That includes our LED light switchover to high-density LED lights turnover time lines on our rooms and some nutrient programs that we've been rolling out along with our seed-based growth. So we have 14,000. We expect to grow further capacity in fiscal '26. I think from a supply and demand perspective, we're well positioned for fiscal '26. Obviously, Germany is growing exponentially right now.

We feel very comfortable in our supply growth that we have right now to be able to shift that into Germany and other international markets. And we are seeing more capacity come online even from a competitive landscape. So we are seeing more volume that's going into these markets and more capacity that's coming online from a competitive perspective. But overall, we are taking a disciplined approach to capacity expansion, and we do believe that our planned increase in fiscal '26 is appropriate in the near term. We are evaluating other options to expand flower capacity further though. So if we need it, we will move as the market continues to grow.

Tim, is it also fair to add that we've also got some derivative products that will be shipped internationally in fiscal '26?

Yes. That's a whole other -- we are looking at other categories to expand out as well. Australia, for example, like Germany is really flower right now in oil. So -- but with countries like Australia and other international markets, they're opening different categories up. Vapes, for example, and gummies. So we are -- we've lined up with very strong strategic partners in Australia, and we will be launching branded vapes into the Australian market along with gummies into the Australian market in the coming months. So we're excited about that as well. So it's not just flower as more categories open up, that also gives us other opportunities to grow the business internationally.

Appreciate that color. That's helpful. Second question for me, just on the gross margin. I know you talked about the expectation for it to be better than 2025, 35%. So just want to get some more color given the strong 4Q of 38%. Were there some one-offs in 4Q that could moderate during 2026? Or is it fair to say that there might be some conservatism maybe within the gross margin improvements going forward? And I just want to clarify that does not include any further enhancement once you receive the EU-GMP.

Thanks, Aaron. Yes, the 38% that we had in Q4 was obviously something we're very happy with. It is a 100 basis point improvement over the same period last year. So going into fiscal 2026, we're expecting that to continue improving. I would say Q1 is traditionally not our strongest quarter from a seasonality perspective. So we expect less scale to benefit from in Q1. But over the course of the year, we expect a positive trend in gross margin, really driven by the operational improvements that Tim talked about. We've been able to pretty significantly increase our capacity without making major capital investments and physical changes to the facility.

And all of that is really bringing down our cost per gram, which is driving those margin improvements. Also, we mentioned the Motif acquisition. We're starting to realize the synergies from that. That's a further improvement to adjusted gross margin. And then finally, when we do eventually get our EU-GMP, which we're waiting on patiently, that's going to have another positive as well because that will drive further margin on our international business. So overall, I think last year or last quarter, I guided towards margins approaching the 40% range, and that still holds. We're expecting margins to continue to grow over the course of the next year.

And just one quick comment. It's Peter. I would say the 38%, we're happy with, but we're not satisfied. We think there's more.

Yes. Another lever that we have is from the commercial side of the business. Obviously, we're looking at SKU rationalization and emphasizing more on our high-margin categories, which is a big focus for us, but also taking price when earned. We took 2 different price points -- price increases in fiscal '25, and we just took another one early fiscal '26. Now if you look at the overall category from a pricing perspective, price compression is only really impacting AIOs or all-in-one vapes over the past year. We've seen an increase in the ASP pricing on flower over the past year as there's this balance between supply and demand in the Canadian market and LPs have taken price, and we're one of them. So I think that definitely helps to drive margins as well.

Okay. That's great to hear. I appreciate the color. I'll go and get back in the queue.

Your next question comes from the line of Brenna Cunnington with ATB Capital Markets.

Congrats on the quarter. Just continuing on the line of thought with the Motif synergies materializing and approaching 40% margins next year, roughly how much of this margin improvement do you think would be from further synergies from Motif versus cultivation improvements and other improvements in just general fundamentals?

Yes. I think when you look at the scale of our Moncton facility and the cultivation, that's going to drive the majority of the margin improvement that we're seeing. I mean, look, we've already recognized a fairly significant amount of Motif synergies in the back half of last year. We do expect it to continue. But I'd say more of the synergies are going to come from operational improvements in Moncton independent from the acquisition. Just the cost per gram itself is coming down, and that just drives a significant amount of margin improvement.

Got you. And then, yes, we also noticed that the yield per plant improved in the last quarter as well. So that's good to see. And then our second question is just regarding CapEx plans. You're sitting on a decent amount of cash, specifically with the restricted cash that's preserved for investment. Could you just run us through again some of the plans for investments in the next year?

Yes. So last year, we spent -- invested a pretty significant amount into the business of around $17 million. For fiscal 2026, we expect that to be significantly lower, less than $10 million. We're obviously always evaluating new opportunities for investment in the facilities. But right [Technical Difficulty] foundation of what we have today, along with just sort of sustaining capital expenditures to keep advancing the business. Last year, we did look at doing an expansion in Moncton. We ultimately put that on hold because we were able to achieve those objectives through process improvement and through the LED light project. So I'd say CapEx plans are modest for the next year, but it's something we'll continue to evaluate as opportunities come up.

Okay. Perfect. Those are my questions. I'll hand it back.

That concludes our question-and-answer session. I will now turn the call back over to Tim Emberg for closing remarks.

Thank you. Well, listen, I just want to thank everybody for your time today. Obviously, we're extremely excited of the quarter that we just had in the year we just had. We're pumped for fiscal '26 as we feel we're going to continue to take that momentum to drive growth, both from a domestic side and the international side. I'd like to take a moment to wish you all a very happy holiday season as we're getting close to the holidays now. And we look forward to relooping in February for our Q1 results. So thank you.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.