SNDL Inc.

Good morning and welcome to SNDL's first quarter 2026 financial results conference call. This morning, SNDL issued a press release announcing their financial results for the first quarter of 2026 ended on March 31st, 2026. This press release is available on the company's website at SNDL.com and filed on Egger and Sadar as well. The webcast replay of the conference call will also be available on the SNDL.com website. SNDL has also posted a supplemental investor presentation. In addition to the conference call presentation, we will be reviewing today on its SNDL.com website. Presenting on this morning's call, we have Zach George, Chief Executive Officer of and Alberto Peradero, Chief Financial Officer. Before we start, I would like to remind investors that certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's financial reports and other public filings that are made available on CDAR and EDGAR. Additionally, all financial figures mentioned are in Canadian dollars unless otherwise indicated. We will now make prepared remarks and then we'll move on to the analyst questions. I would like now to turn the call over to Zach George. Please go ahead.

Welcome to SNDL's Q1 2026 Financial and Operational Results Conference Call. During the first quarter of 2026, SNDL faced notable challenges beyond the usual seasonality that typically results in the lowest demand at the start of each calendar year. After 16 consecutive quarters of operational improvement, both our liquor and cannabis markets experienced declines in same-store sales. The downward trend in the liquor market is a familiar issue, but the softness that began to emerge in the cannabis market during the second half of the previous year has developed into a more significant and persistent challenge. Our results for the quarter were further affected by suboptimal execution on working capital management within our upstream cannabis operations. This issue has since been addressed and remedied following the close of the quarter. Despite these headwinds impacting our financial performance, We remain encouraged by the proactive actions taken by our teams. They have responded with focus and determination, taking control of the situation and implementing necessary initiatives that support our ongoing efforts to build a successful, sustainable, and profitable growth model. We continue to invest in growth platforms during the quarter. One notable example is our exclusive contract for the production and commercialization of Jeter, a leading US cannabis brand. This exclusivity was formally assumed in April, but production activities and inventory pipeline development had already commenced in March with initial shipments delivered to provincial boards. Additionally, both of our retail segments, liquor and cannabis, reported improvements in gross margin. Our teams achieved these gains by enhancing promotional efficiency, maintaining pricing discipline, and optimizing product mix management. Periods of adversity are a true test of a management team's resilience and determination. The S&DL team has demonstrated these qualities by thinking creatively and implementing several profit enhancement initiatives. These actions are expected to boost profitability and improve commercial execution, generating more than 20 million in incremental operating income over the remainder of the year. As previously communicated during our Q4 and full year 2025 earnings call, we continue to leverage our board approved share repurchase program. In the first quarter of 2026, SNDL repurchased a total of 4.5 million shares. Last week, US authorities took a significant step towards rescheduling cannabis by moving certain state licensed medical marijuana to schedule three. While this does not constitute federal legalization, it is an important regulatory development. This step is particularly relevant for S&DL due to our credit exposure through the Sunstream vehicle in the U.S., especially for Parallel, a licensed operator active in key medical markets such as Florida and Texas. The regulatory change is constructive for Parallel as its restructuring process continues to progress with only a limited number of outstanding conditions remaining. Over now to Alberto for more insights on our first quarter financial performance.

Thank you, Zach. I want to remind everyone that the amounts discussed today are denominated in Canadian dollars unless otherwise stated. Certain figures referred to during this call are non-GAAP and non-IFRS measures. For definitions of these measures, please refer to SMDL's management discussion and analysis document. Before moving on, I would like to highlight the small accounting presentation change following the adoption of amendments to IFRS 7 and IFRS 9. As of 2026, cash in transit is no longer classified as cash and cash equivalents, and it is instead reported as a receivable. This change has no impact on liquidity, cash generation, or underlying economics, but it does affect the comparability of reported cash balances. Specifically, the $213.4 million of cash reported on our March 31, 2026 balance sheet does not include any cash in transit. Whereas the $252.2 million reported at December 31st, 2025 included $12.1 million of cash in transit. Net revenue of $196 million in the first quarter of 2026 represented a 4.4% year-over-year decline driven by market contractions impacted our different segments. Gross profit of $53 million is a reduction of 3.8 million, or 6.8%, compared to the same period of prior year. While most of this reduction is driven by the revenue decline, we also reported a consolidated gross margin decline of 70 basis points. This margin decline is purely driven by our cannabis operation segment, as both our retail segments expanded margins. Both adjusted and unadjusted operating income, while negative due to the seasonality impact in the first quarter, saw an improvement compared to prior year, as the reduction in gross profit is more than offset by OPEX improvements and the absence of prior year downstream valuation reduction. Free cash flow of negative $7.6 million in the quarter was partially driven by seasonality impact. Compared to the prior year, it represents a reduction of $6.5 million, mainly driven by working capital increases in cannabis operations, as well as additional CapEx investments across retail and operations segments and increased list costs. Our historical quarterly performance clearly reflects the seasonality typically impacting the first quarter. That said, despite the modest year-over-year improvement in operating income, net revenue, gross profit, and free cash flow declined compared to the prior year, as previously discussed. Looking ahead, we expect to see improvements in revenue growth year-over-year as of the second half of 2026, driven in part by the impact of our initiatives and also as we begin to lap softer revenue comparisons for the second half of the year. Looking more closely at segment level contributions across our key financial KPIs, and starting with net revenue, the overall decline was driven primarily by liquor retail and cannabis operations, while cannabis retail was essentially flat. I will expand further on the drivers by segment in a few minutes. But at high level, liquor retail declines were driven by challenging market conditions, Cannabis retail was able to offset market softness through growth from new store openings, and cannabis operations declined due to market stocking and the timing of contract sales. Gross profit followed similar dynamics, although both retail segments were able to partially offset revenue pressure through continued margin improvements. Adjusted operating income showed a modest improvement, as the operating income declined driven by lower gross profit in cannabis operations was upset by the absence of the prior year downstream valuation reduction and ongoing corporate cost savings. The declining free cash flow compared to the same period last year was driven by lower earnings, primarily reflecting reduced gross profit, as well as higher capital expenditures to support store openings and differences in the timing of lease payments relative to the prior year. Moments in working capital were broadly consistent with the prior year. As we will see in the next slide, two offsetting dynamics largely netted each other out. Looking more closely at free cash flow, there are a few takeaways. First, the combined impact of net income and non-cash at-backs was negative. This is what we refer to as earnings on the previous slide. In simple terms, when net income improved by 4.8 million compared to the same period last year, That improvement was driven by non-cast items. After adjusting for these non-cast effects, the overall contribution from earnings was negative. Second, inventory increased more in 2026 than in the prior year, largely offset by improvements elsewhere in working capital. Inventory typically builds in the first quarter due to seasonality. And this year, the increase was more pronounced as a result of the inventory build related to the gear allowance in cannabis operations. Other working capital, primarily the net impact of receivables and payables, represented an improvement year over year, reflected continued optimization of collections and payment terms. We also saw capital expenditures and lease payment increase by $3.6 million compared to the same period last year. driven by initial investments to support new store openings, as well as differences in the facing of lease payments between the first and the second quarters relative to last year. Finally, the chart on the right-hand side of the slide clearly illustrates the seasonality of free cash flow, highlighting the typical differences between the first and second house of the year. When reviewing each commercial segments individually, I would like to begin by highlighting a change in the way we're reporting segment results. As of 2026, we have started allocating shared service costs to the respective segments, which were previously recorded within corporate. This change allows investors to better assess the fully loaded profitability of each segment. For comparability purposes, we have also restated the segment information for 2025. Additional details on these adjustments are provided in our management discussion and analysis. Starting with liquor, net revenue in this segment continued to be impacted by demand softness and broader market declines. This resulted in a 6.1% decline in same-store sales, which was partially offset by new store openings, leading to a net 4.9% year-over-year decrease in revenue. The decline in gross profit during primarily by lower revenue was partially offset by a 20 basis points improvement in gross margin. To this last point, In addition to pricing and promotional optimization, we continue to improve our product mix by increasing the penetration of private label offerings at the credit margins. Operating income was negative in the quarter, largely due to seasonality and moderately lower than the prior year, as DNA efficiency improvements were more than offset by the gross profit decline and higher sales and marketing expenses. Cannabis retail was also impacted by market demand softness, although to a lesser extent than the other two commercial segments. A 2.5% decline in same-store sales was partially offset by new store openings and the integration of five-cost cannabis locations. Gross profit of $20.4 million increased by 3.7% year-over-year, supported by 100 basic points expansion in gross margin driven by pricing actions, improved promotional effectiveness, and favorable product mix management. This gross profit improvement did not translate into operating income growth despite additional SMA cost efficiencies due to the impact of approximately $1 million in unadjusted one-time charges incurred during the quarter. That said, the segment still delivered positive operating income of $1.1 million in the quarter. Cannabis operations experienced a large relative decline during the quarter. Net revenue of $29.4 million represented a 14% year-over-year decrease, driven primarily by this stocking activity and temporary changes in the timing of business-to-business orders. These declines were partially offset by a strong growth in international sales, which increased from $1.8 million in the first quarter of 2025 to 3.5 million in the first quarter of 2026. Gross profit was impacted by both lower revenue and a 7 percentage point decline in gross margin. The margin compression was primarily driven by inventory adjustments and under-absorption resulting from lower production volumes. The declining gross profit also weighted on adjusted operating income. Operating expenses were largely flat compared to the prior year, as SD&A efficiency improvements were more than offset by one-time unadjusted charges, including an incremental breakdown related to the idle federal term facility. As a reminder, we applied a very stringent definition of adjustments, and only restructuring-related charges and impairments of intangible assets are adjusted. Over to you, Zach, for additional comments related to our strategic priorities.