Organigram Global Inc. Q3 FY2026 earnings call

Core Strategic Milestone

• This quarter marks the first full partial consolidation of Sanity Group, transforming Organigram into a larger, more geographically diversified global cannabis business with record quarterly net revenue and adjusted EBITDA in company history.
• Integration of Sanity Group is progressing on plan, with early operational challenges resolved and strong cultural alignment between the two firms.

Canadian Business Updates

• Completed corrective actions for Q2 execution issues in vapes and infused pre-rolls: rolled out a new all-in-one vape hardware platform and higher-potency products with enhanced quality controls, which delivered a 1.1pp month-over-month share increase for all-in-one vapes in June, and a 0.3pp month-over-month share gain for infused pre-rolls.
• Implemented portfolio rationalization, reducing total SKU count by ~10% year-over-year to reduce operational complexity, eliminate low-margin products, and focus investment on stronger, clearly positioned brands to improve long-term efficiency and margin.
• Achieved cultivation milestones in Canada: average THC potency from the Moncton facility hit a record 30.4%, with quarterly harvested volume exceeding 30,000 kilograms, up ~25% year-over-year.

International Business Updates

• Sanity Group delivered strong operational progress across Europe: preparations are underway for a Swiss recreational pilot project, entry into the Polish market has advanced, branded products launched in the UK via new strategic partnerships, a new Swiss medical cannabis partnership was established, and the first Swiss medical cannabis sales were recorded.
• Recent German regulatory changes eliminating medical cannabis reimbursements are expected to have minimal impact, as only ~1% of Sanity Group's historical sales came from government-reimbursed products.
• Australian medical cannabis products are now broadly available, with the firm focused on driving physician adoption and prescription growth as the market develops.
• U.S. business development activities are paused pending regulatory clarity on the upcoming ban on hemp-derived THC products, though management remains bullish on long-term federal rescheduling and legalization efforts.

Consolidated net revenue for Q3 fiscal 2026 was $105.8 million, a 49% year-over-year increase from $70.8 million in the prior year period. Adjusted gross margin reached 37%, up 300 basis points year-over-year and 600 basis points sequentially. Record adjusted EBITDA was $13.4 million, a 136% year-over-year increase from $5.7 million, while SG&A as a percentage of net revenue declined 300 basis points year-over-year to 31%.

• Canada Segment: Contributed approximately 65% of total consolidated net revenue, equal to ~$68.77 million. The segment saw overall market share of 11.1% as of quarter end, with share gains in core high-margin categories: 12.5% share in flower (up 2pp year-over-year), 17.9% share in concentrates (up 3.3pp year-over-year, maintaining Canada's #1 LP position), and 8.6% share in beverages (up 3.1pp year-over-year). Edible share remained stable year-over-year but faced sequential pricing pressure.

• International Segment: Following the acquisition of Sanity Group, this segment contributed approximately 35% of total consolidated net revenue, equal to ~$40 million (from €24.5 million of consolidated Sanity Group revenue since the April 15, 2026 acquisition close). Sanity Group's full Q3 revenue hit ~€25.5 million, in line with pre-acquisition expectations of ~€25 million quarterly average revenue.

• Full fiscal 2026 net revenue is still expected to exceed $350 million, maintained from prior guidance.
• Full fiscal 2026 adjusted gross margin and adjusted EBITDA are still expected to meaningfully exceed fiscal 2025 levels, maintained from prior guidance.
• Full fiscal 2026 free cash flow is expected to be negative, due to working capital investments required to integrate Sanity Group and support the larger scaled business; positive free cash flow is still expected for Q4 fiscal 2026, which management frames as a better indicator of the business's ongoing cash generation capacity.
• Sanity Group revenue growth is expected to continue into Q4 fiscal 2026, with Q4 results expected to outperform Q3's strong performance.
• Canadian margins are expected to continue improving into Q4 fiscal 2026 and beyond, driven by resolved vape production issues, portfolio rationalization, and ongoing operational efficiency improvements at the Moncton cultivation facility.
• Sanity Group margins are expected to remain stable over the next two quarters, with operating expense leverage expected as revenue grows, driving further margin expansion over time.

• There is tight global supply of EU GMP-compliant flower for the German market, which creates supply constraints for Sanity Group's growth and has put stress on Organigram's supply chain.
• The U.S. regulatory environment for hemp-derived THC products remains uncertain, pausing the firm's business development activities in the market until clarity is achieved.
• EU GMP certification for the Moncton facility is delayed, as the firm is still waiting on regulatory review of its resubmitted application, with no confirmed timeline for approval. Delays in certification mean the firm must continue relying on third-party European processors, limiting margin expansion for European supply.
• There is ongoing market risk of potential price compression in the German cannabis market, which could pressure Sanity Group margins if competitive dynamics shift.
• Canadian edible segment faces sequential pricing pressure from lower-priced competitor products.
• Working capital investments for growth and integration negatively impacted near-term free cash flow in Q3.

Q: What key early learnings has Organigram had from consolidating Sanity Group, and what opportunities does the firm see now? / A: Consolidating Sanity Group has fundamentally shifted Organigram's business profile to a more international focus, while Canada remains the core business. Strong Sanity Group growth has created supply constraints for EU GMP-compliant flower, which the firm is addressing via Moncton facility improvements and new third-party supply partnerships. There is strong cultural alignment between the two firms, and most initial integration teething issues have been resolved, with Sanity hitting its expected €25 million quarterly revenue benchmark as planned.

Q: How is Organigram prioritizing Canadian production capacity allocation between domestic and international demand? / A: The firm is focused on simplifying its Canadian portfolio to reduce operational complexity, which has helped resolve prior execution issues for vapes and infused pre-rolls. The firm is balancing capacity allocation between Canadian domestic demand and Sanity Group's international needs, and is increasing total flower supply via internal improvements and third-party partnerships to meet both sets of demand. Margins are optimized by balancing internally-sourced and third-party flower, while the firm prioritizes Sanity allocation as much as possible without leaving Canadian demand unmet.

Q: What is the current margin profile for Sanity Group, how is competition in Germany impacting margins, and how will margins evolve? / A: Sanity Group's current margins are in line with pre-acquisition expectations. Despite prior market concerns about German price compression, demand has outpaced current supply, so price compression has been minimal to date. Margins are currently solid and expected to remain stable over the next two quarters. Overall consolidated margins will continue improving driven by Sanity contributions and resolved Canadian production issues, plus portfolio rationalization that eliminates low-profit products.

Q: What is the update on EU GMP certification for the Moncton facility, and what margin impact will certification deliver? / A: The firm resubmitted its EU GMP application in April after addressing all issues from a prior November audit, and regulators are scheduled to begin reviewing the application this quarter. No firm timeline for approval is available, as the firm is waiting on regulator action. Once approved, certification will deliver a meaningful margin improvement by eliminating the need to use third-party European processing for flower exported to Germany, with improvements realized immediately after certification.