SNDL Inc. Q1 FY2026 earnings call

• Faced challenges in liquor and cannabis markets with same-store sales declines, suboptimal working capital management in cannabis operations but addressed. • Notable growth platform investment: exclusive contract for Jeter cannabis brand. • Retail segments saw gross margin improvements. • Implemented profit enhancement initiatives expected to generate over $20M incremental operating income. • Leveraged share repurchase program, repurchased 4.5 million shares. • U.S. cannabis rescheduling is a relevant regulatory development for SunStream and Parallel. • Started allocating shared service costs to segments for better profitability assessment.

Net revenue for the quarter was $196 million, a 4.4% year-over-year decline. Liquor retail: net revenue down 4.9% YoY, gross profit decline partially offset by 20-basis-point gross margin improvement. Cannabis retail: same-store sales down 2.5%, net revenue impacted but offset by new store openings, gross profit $20.4 million up 3.7% YoY with 100-basis-point gross margin expansion. Cannabis operations: net revenue down 14% YoY, gross profit impacted by lower revenue and 7-percentage-point gross margin decline.

• Expect revenue growth year over year starting 2026, driven by initiatives and lapping softer revenue comparisons from 2025 second half. • Jeter launch and other initiatives expected to contribute to growth.

• Market demand softness in liquor and cannabis markets. • Suboptimal working capital management in upstream cannabis operations previously. • Macro factors like energy price increases impacting discretionary spend which could affect retail sales. • Volatility in contract orders and inventory levels in cannabis operations.

Q: Question about capital allocation and U.S. investment post-rescheduling.

A: Recent rescheduling is positive for SunStream, focused on completing foreclosure before additional investments, working on operational improvements in Parallel.

Q: Follow-up on share repurchases with high net cash.

A: Will continue share buyback as stock trading below underlying value.

Q: Operational color on underperforming cannabis operations.

A: Factors include destocking in retail channel, weak contract sales, ramp-up inefficiencies in Jeter manufacturing, one-time items.

Q: Question on SunStream portfolio and Nasdaq listing.

A: Can retain Nasdaq listing with structural options if DEA registration allows.

Q: On cannabis retail same-store sales softness.

A: Driven by market maturity, competition, macro factors like energy prices, but have profit enhancement plan to improve performance