SNDL Inc.

Good morning and welcome to SNDL's second quarter 2026 financial results conference call. This morning, SNDL issued a press release announcing their financial results for the second quarter of 2026 ended on June 30th, 2026. This press release is available on the company's website at SNDL.com and filed on EDGAR and CDAR as well. The webcast replay of the conference call will also be available on SNDL.com website. SNDL has also posted a supplemental investor presentation in addition to the conference call presentation we'll be reviewing today on its SNDL.com website. Presenting on this morning's call, we have Zach George, Chief Executive Officer, and Alberto Paredero, 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 cause actual results are detailed on 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 will move on to analyst questions. I will now turn the call over to Zach George. Please go ahead.

Welcome to S&DL's second quarter 2026 financial and operational results conference call. During the second quarter of 2026, S&DL continued to operate through a challenging market environment across both liquor and cannabis. Net revenue declined 3.7% year over year to $235.8 million, reflecting persistent demand softness and broader market headwinds. While these conditions pressured results, We stayed focused on discipline execution, cost optimization, and initiatives that strengthen our long-term earnings power. Profitability was impacted by lower net revenue, new product production ramp-up costs in cannabis operations, and a relatively small Sunstream valuation adjustment. At the same time, we continued to exercise financial discipline and maintained a relentless focus on spend management, which partially offset these pressures. Importantly, we continued to generate positive operating cash flow and improved free cash flow compared to the same period last year. Free cash flow was negative 6.7 million in the quarter, an improvement of 1.2 million year over year, despite seasonal payments and a 2.7 million increase in cash in transit. We also continued to act on our strategic priorities. During the quarter, we accelerated our share repurchase activity deployed profit enhancement initiatives expected to drive more than 20 million of incremental operating income, mostly over the remainder of the year, and completed a significant milestone in the parallel restructuring. The parallel restructuring is particularly important because it opens the door for S&DL to obtain direct exposure to and control over U.S. medical cannabis operations in Florida, Texas, and Massachusetts. subject to satisfying the remaining legal, regulatory, accounting, and NASDAQ requirements. Periods of market pressure require sharper focus and disciplined execution. Our teams are responding with targeted commercial and operational initiatives, including improved promotional discipline, operational efficiency, and targeted investments in high-performing platforms while preserving balance sheet flexibility. Consistent with our board-approved share repurchase program, we repurchased 11.7 million common shares during the second quarter. Since the fourth quarter of 2024, total repurchases have exceeded 29 million shares, representing approximately a 7% reduction in shares outstanding. We remain encouraged by the strategic optionality created by our balance sheet. With 183.2 million of unrestricted cash No outstanding debt as of June 30th, 2026 and a portfolio of cannabis related investments with a carrying value of $415.2 million. SNDL is well positioned to pursue disciplined growth, strategic investments, acquisitions, and continued return of capital to shareholders. Over now to Alberto for more detail on our second quarter financial performance.

Thank you, Zach. Before moving on, I'd like 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 and reconciliations where applicable, please refer to SMDL's management discussion and analysis on the earnings press release issued today. Net revenue was $235.8 million in the second quarter of 2026. representing a 3.7% decrease compared with the same period of the prior year. The decline was driven by market headwinds across both liquor and cannabis segments. Gross profit was 56.3 million, a decline of 11.3 million, or 16.6% year over year. Gross margin was 23.9%, down 3.7 percentage points, mainly driven by cannabis operations and liquor retail, partially offset by margin expansion in cannabis retail. Operating loss was $7.8 million in the quarter, and adjusted operating loss was $7 million. The year-over-year reduction was driven primarily by the impact of new product production ramp-up costs in cannabis operations, revenue and margin decline in liquor retail, and the absence of prior year impairment reversals in cannabis retail and a $2.3 million reduction in the downstream valuation, partly offset by lower corporate overhead costs. Free cash flow was negative $6.7 million, improving by $1.2 million compared with the same period last year. The result was primarily driven by the $6.9 million annual payment of the 2025 management incentive and a $2.7 million increase in cash in transit. Our second quarter performance reflects continued market pressure across the portfolio. Net revenue and gross profit declined year-over-year, and adjusted operating income was impacted by the lower gross profit, production ramp-up cost, and the downstream valuation impact. Looking ahead, our focus remains on driving sustained profitability and free cash flow growth, while continuing to invest selectively in our strategic growth agenda and shareholder value creation. Looking more closely at segment-level contributions across our key financial KPIs, consolidated net revenue declined by $9 million year-over-year. The largest contributor was liquor retail, which declined by $7.2 million, followed by cannabis operations, which declined by $3.6 million, and cannabis retail, which declined by $1.2 million. Cannabis eliminations partly offset the decline by $3 million. Gross profit declined by 11.3 million year-over-year. Liquor retail contributed a 2.7 million decline, while cannabis operations contributed an 8.7 million decline. Cannabis retail gross profit was essentially flat, increasing by 0.1 million year-over-year. Adjusted operating income declined by 12.8 million year-over-year to a loss of 7 million, primarily reflecting declines in liquor retail, Cannabis Retail, Cannabis Operations, and Investments, partially offset by a $1.4 million improvement in corporate costs. Pre-cash flow improved 15.2% year-over-year, from negative $7.9 million to negative $6.7 million. The improvement was supported by more favorable working capital and differences in timing of rent expenses compared to prior year, even as earnings represented a year-over-year headwind. The chart on the right-hand side of the slide illustrates the seasonal nature of free cash flow, with Q2 historically impacted by seasonal payments and the second half typically representing a stronger cash flow generation period. Turning to the commercial segments, I will begin with Licorito. As a reminder, starting in 2026, we began allocating applicable direct and indirect overhead costs from corporate to each operating segment. within general and administrative expenses. The comparative periods have been restated to reflect this allocation. Liquor retail net revenue was 134.7 million, a decline of 7.2 million, or 5.1% year-over-year. The decline was driven by persistent softness in market demand, which impacted same-store sales by 6.2%. despite the contribution of two new Why Not Beyond stores opening Q4 2025 and private label sales outperforming national brands by 13 percentage points in the quarter. Gross profit was 33.8 million, down 7.4% year-over-year, and gross margin was 25.1%, down 60 basis points. The margin decline was driven by increased promotional activity aimed at the stimulating sales volume. Adjusted operating income was $3.2 million, down $3.5 million year-over-year. The decrease was driven by lower revenue, increased promotional support, and higher SD&A expenses associated with the recent YNAB on-store openings. Cannabis retail net revenue was $83.2 million, down $1.2 million, or 1.4% year-over-year. The decline was driven by negative same-store sales of 4.6%, reflecting market contraction in Alberta and Ontario. partially upset by new store openings and value-backed store conversions. Gross profit was $22 million, increasing slightly by $0.1 million year-over-year, while gross margin expanded 50 basis points to 26.4%. This improvement was supported by promotional efficiencies, pricing actions, and product mix management. Adjusted operating income was $3 million, down $1.2 million year-over-year, The decline was primarily due to prior year asset impairment reversals, which upset the current year benefits from market expansion and overhead efficiency. Cannabis operations net revenue was $32.2 million, a decline of $3.6 million, or 10.1% year-over-year. The decline was driven by market headwinds and the absence of business-to-business flower deliveries, as some of our partners are also experiencing demands of shortfalls. These impacts were partially offset by a $1.2 million increase in international sales, which reached $5 million in the second quarter of 2026. Gross profit was $0.6 million, down $8.7 million year over year, while gross margin was 1.8%, a decline of 24 percentage points from the prior period. In addition to the revenue decline, we experienced significant inefficiencies associated with the jitter production ramp-up during the second quarter. While we're working closely with our partners to implement process improvements and increase labor efficiency, some of these cost headwinds are expected to persist over the coming months. Adjusted operating loss was $9 million compared with an adjusted operating loss of $2.8 million in the prior year. The decline was primarily due to the production ramp-up in efficiencies impacting gross profit. Over to you, Zach, for additional comments on our capital allocation priorities and strategic milestones.