Good morning. My name is Ed and I'll be your conference operator today. At this time, I would like to welcome everyone to the Organogram Global Second Quarter Fiscal 2026 Earnings Conference Call. After the speaker's prepared remarks, there'll be a question and answer session. Please limit yourself to one question and one follow-up. You may re-queue for additional questions. Thank you. 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 materials due to a number of risk factors outlined in our 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, market share data is sourced from high fire, weed crawler, 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 four 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 and 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 out-of-spec 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, coded IPR quality and inconsistencies following the internalization of pre-roll production at Aylmer and the use of new production equipment introduced higher variability in 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-rollers versus a prior year period. That is not acceptable to us. In response, we tightened quality control processes and implemented production changes to enhance consistency. 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 5.10s and all-in-ones. A key driver of the 6.1-point year-over-year share decline was our over-indexing toward lower-potency 1.2-gram vapes as consumer demand shifted toward higher-potency 1-gram formats To address this, we are launching higher potency offerings and refreshing both product and hardware, including Boktot, Liquid Diamond, all of 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-opterous 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. Despite 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 of buds and key cultivars such as purple punch out and ultra sour as well as very strong reception for our new root beer cultivar these gains reflect continued improvements from flower potency quality and consistency strengths we expect to carry into upcoming pre-roll and milled flower launches and our summer shred retail activations in edibles we gain 1.8 share points year over year while beverages and concentrates 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 Shredom's Max 10s and Box Hot with Diamonds. While we saw increased competition in mills flower and modest share declines year-over-year, we returned to growth sequentially and held a leading 38.9% share in that segment. Overall, Organigram remains the number one LP in Canada by market share in Q2. We maintain leadership positions in the key markets of Ontario, British Columbia, and Alberta, while continuing to build momentum in Quebec. We now rank number three in the province, reaching 11.3% market share as of the end of March, a 2.6-point increase year-over-year, and are the fastest-growing LB in Quebec fiscal year-to-date. This performance has been driven by strong Quebec vape and flower sales, contributing approximately $25 million in retail sales in the province during the quarter. Across our portfolio of industry-leading brands, Shred, Box Hot, and Big Bag of Buds were all ranked within the top eight brands nationally. Big Bag of Buds is the fastest growing flower band in the country. Box Hot is a number one concentrates and number two vape brand and Shred alone would rank as a top 10 LLP by its market share. Taken together with the operational remediation and product enhancements underway in vapes and infused pre-rolls, 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 Sanity acquisition in April marks a significant milestone for Organogram, creating a combined entity with leadership positions in the world's two largest federally legal cannabis markets, Canada and Germany, with growth initiatives underway in Switzerland, the UK, Poland, and the Czech Republic. Sanity is expected to generate on average approximately 25 million euros in quarterly revenue over the next year and serves as a 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 organogram resources where appropriate outside of europe we continue to supply flour to partners in australia where we also recently launched vape and edible skus under our box hot and edison brands expanding beyond wholesale flour 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 pathways, 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 value 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 license producers seeking EU GMP status, it is difficult to predict timing, but we expect an update on certification in the coming months. Turning to operation, 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 TFC at our Moncton facility reached 29.8%, the highest level to date. Looking back at Q2 last year, our yield improvements equate to a 56% increase in capacity without expanding our facility footprint and reducing our cultivation costs. While we also continue to advance our genetics programs, including the identification and deployment of powdery mildew-resistant cultivars 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 yeast. This work also dovetails with our seed-based cultivation strategy, which remains a key focus area. In Q2, approximately 25% of our harvest was 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 shred 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 implement 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 tailwinds, 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 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 vapes 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 add 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. This decline was primarily driven by more value products representing a higher proportion of our mix and higher than typical returns on vapes, infused pre-rolls, and international flour. 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 continues 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 GNA 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 to 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 non-revolving term loan used in part to fund the acquisition, a $30 million revolving facility to support sanity, earning out 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 stabilized 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 break-even, 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.

We'll now begin the question and answer session. Please limit yourself to one question and one follow-up. You may re-queue for additional questions. If you'd like to ask a question, please press star 1 to raise your hand, and to withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Aaron Gray at AGP. Your line is open. Please go ahead.

Good morning, and thank you very much for the questions. I guess first to start off, you gave a lot of color in the prepared remarks, but it's going to take maybe a high level of view to make sure we have an understanding. You've obviously done a lot of work to improve the yields over the past two 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 dominance that you've had in Canada.

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 of 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 a new device component, again, which we have identified and are fixing, and again, confident that we'll 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 pass rate time over time. And I think you can see it in the quarterly increase in the shipments that we had internationally. It's one of those things that, you know, the micro issues are one of those things that you have to be constantly on top of. But I think in all three of the operational areas, which unfortunately all happen to happen at the same time, we have identified the fundamental issues. And I think we're already seeing some initial indicators in all three. And we do expect improvement over Q3 and Q4.

Okay, thanks for that color, James. Second question for me, just as we think about the U.S. and rescheduling, how should we think about the opportunities, particularly given the investment 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, you know, plant-touching state legal medical markets, given the language within the rescheduling?

Yeah, 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 that part of the business because it's the best short-term opportunity and mid-term opportunity for that matter. But we will, of course, be monitoring and we're looking at what options there are in the U.S. at the moment. But as a non-plied player at the moment, plied touchy player at the moment, it's not an immediate impact on us. Okay, great.

Thanks for the call. I'll go ahead and jump back in the queue.

Your next question comes from the line of Kenrick Tai at Canaccord Genuity. Your line is open. Please go ahead.

Thank you. Good morning. Your commentary sort of calls out largely internal issues with respect to your IPR and VATS. What I'd like to focus on, you could perhaps sort of like it for us, is how much of the impact was also competitive intensity based. You saw a few of your key competitors launching some very successful product in market in those categories. So it sounds like 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, it sounds like you're largely dealing with your internal issues?

Yeah, I mean, you know, like in any quarter, there were competitive issues. I'd say if I was looking at the issues, this is probably, you know, 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. We had to step up the internalization of the IPR production in the market. So, yes, there is always competition. But I think, you know, 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.

Thanks, James. And just a quick follow-up for me. With respect to international, is this a function of how much supply there is in market, that the regulators are being just that much more particular around the requirements? It's not because the requirements have changed, but that the margin of error has perhaps decreased, or was it very specifically a challenge that you faced in quarter with flower and two in the market?

Yeah, I think it's a combination of two things. I think the European regulators are certainly, you know, looking at, in terms of regulation, they are, you know, stepping up their assessment of the things coming in. I think some of this, though, again, is it's always challenging to manage the microbes, and you'll see that, you know, 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 and particularly in the drawing capacity and procedures to be able to address those issues. As I mentioned earlier, we are sort of seeing sequential improvements and pass rates, and we are able to ship, we were able to ship more to our international business in Q2 versus Q1 and we're expecting that to 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 customers. Great.

Thanks so much. I'll get back in queue.

Your next question comes from the line of Federico Gomez at ATB Cormac Capital Markets. Your line is open. Please go ahead.

Hi, good morning. Thanks for taking the questions here. 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?

Yeah, I think in terms of the sales opportunity, there's probably about four to five million of international sales that we missed out on as a result of the off-spec product, so a meaningful amount.

Perfect. Thanks for that. And then just a broader on the Canadian market, you mentioned, And I guess the overall markets have 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 shifting in product mix, maybe higher-priced product versus lower-priced product, any color on the overall use of the market? Thank you.

Yeah, I think, you know, as we did mention, the market did grow about 2.2 percent versus the 5 percent we expected at the beginning of the year, which is, you know, an impact if you take our fair share of about nine million in net revenue for us alone. You know, I don't expect sort of a ramp up into double digits again, but I would say something between the two to four percent rate would not be unreasonable as looking at the market going forward. You are seeing some impacts in specific areas, say, you know, in Ontario, for example, in the parts of the market which are heavily impacted by the U.S. tariffs, you are seeing lower sort of basket purchase rates in those markets and, you know, some level of down trading. but it's not sort of, we haven't seen it at a national level, but there's 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 specific areas, but it's something to watch going forward. Perfect.

Thank you very much.

Your next question comes from the line of Pablo Zuanek at Zuanek and Associates. Your line is open, please go ahead.

Good morning, everyone, and thank you for taking the questions. Look, I just want to go back to the guidance commentary on the moving from 300 to 350 million. How much of that 50 million is coming from the higher spread capture now, which will have been from OGI product right now being sold towards the downstream? And how much of a 50 million would be, you know, 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 25 million euros roughly on average from Sanity 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 shipments to Sanity and recognize it upon sale to the ultimate customer by Sanity Group. So I'd say, you know, the majority of the increase is from Sanity Group, partially offset by some softness in the core organogram business.

Right. And then just to follow up on, I mean, when you announced the deal, if I'm not mistaken, the sales that were given for sanity were 50 million euros with 19 million in the fourth quarter, right? So that would have been like roughly what, 76 million euros in Canadian dollars that would have been about 120. 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 50 euros but the fourth quarter run rate was 19 million transport 76 euros right that would have been about 120 million canadian but so i'm just trying to reconcile the 120 million canadian with a new number but but again my math could be wrong thanks no the so for the the next uh two calendar for for the next two calendar quarters we're expecting 25 million euros from Sanity, so an average of 50 million for the back half of the year.

So that brings it to at least 100 million euros versus what they had last year.

Right. 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 UK and in the case of Switzerland, if you can just give us a reminder of what they have and the potential for growth there. Thank you.

Do you want to tackle that one James?

Sure I can take that one. So Sanity Group does export medical product to the UK and you know they'll continue to do that and Organigram also separately was exporting flour to the UK and we'll look at 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, is one of the only players in the market where 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 the lead position on. 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 a main one, because this is by far the biggest growth potential and largest market in Europe. But I think there's some interesting opportunities, particularly in Switzerland and the UK, to drive additional revenue and margin through the future.

Right. And if I may, I'm going to 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 interstate trade, would you still be interested in investing in the medical operators with every state being their own island? or for you, exports and industry 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, you know, in all the markets that Sanity is talking about and what's that return on investment we'll get from those. I mean, the U.S. is, you know, obviously by far the largest market in the world. But I think, you know, we'll invest if there's an opportunity, if 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. Thank you.

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 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. So thank you very much once again for your attention and for the questions that we all received. Have a good day, everyone.

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