Q2 2025 SNDL Inc Earnings Call
Yewon Kang: Good morning and welcome to the SNDL's second quarter 2025 financial results conference call. This morning, SNDL issued a press release announcing their financial results for the 2025 second quarter ended June 30th, 2025. This press release is available on the company's website at snndl.com and filed on EDGAR and CDAR as well. The webcast replay of the conference call will also be available on the snndl.com website. SNDL has also posted a supplemental investor presentation in addition to the conference call presentation we will be reviewing today on its snndl.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.
Good morning and welcome to the S and DLS, second quarter, 2025 Financial results conference call this morning, sndl issued a press release announcing their financial results for the 2025 second quarter ended June 30th 2025. This press release is available on companies on the company's website at sndl.com and filed on Edgar and Cedar 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.
Yewon Kang: 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 analyst questions. I would now like to turn the call over to Zach George. Please go ahead.
Presenting on this morning's call, we have Zach, George chief executive officer and Alberto, padaro 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 or detailed in the company's Financial reports and other public filings that are made available on Cedar and Edgar,
Additionally, all Financial figures mentioned in our in Canadian dollars. Unless otherwise indicated, we will now make prepared remarks and then we'll move on to analyst questions. I would now like to turn the call over to Zach George. Please go ahead.
Zach George: Welcome to SNDL's Q2 2025 financial and operational results conference call. The second quarter of 2025 marks a pivotal milestone for SNDL as we report positive operating income and net earnings for the first time in our history, highlighting the effectiveness of our strategic improvement agenda. We experienced growth across all operating segments during the quarter, led by our cannabis business, which expanded at nearly three times the rate of the Canadian recreational market and ahead of our direct competitors. Our liquor retail segment also posted revenue growth, albeit marginal, for the first time in several quarters. Each segment delivered year-over-year gross margin expansion, and on a consolidated basis, we matched the record high margin achieved in the first quarter of 2025. Our teams continue to demonstrate strong productivity improvements, including synergies resulting from the Indiva acquisition.
Welcome to sndl Q2 2025 financial and operational results conference call.
The second quarter of 2025 marks, a pivotal milestone for us in DL as we report, positive operating income, and net, earnings for the first time in our history, highlighting the effectiveness of our strategic Improvement agenda.
We experience growth across all operating segments, during the quarter, led by our cannabis business, which expanded at nearly 3 times, the rate of the Canadian recreational market and ahead of our direct competitors.
Our liquor, retail segment also posted Revenue growth albeit marginal for the first time in several quarters.
Each segment, delivered year-over-year, gross margin expansion, and on a Consolidated basis. We matched the record high margin achieved in the first quarter of 2025,
Zach George: We've maintained a disciplined focus on cost management, extending to G&A expenses, including share-based compensation, which resulted in an absolute reduction of $5 million year-over-year despite inflationary pressures and continued investments in growth. This robust performance gives us the confidence to continue investing in our business and people, affirming that we are on the path to delivering sustainable long-term value to our shareholders. Our operational improvements are undeniable. Coupled with a strong balance sheet, unlike many of our peers, we believe this represents a highly compelling investment thesis as we continue building a resilient and growth-oriented company. With no debt and over $200 million in unrestricted cash, we are uniquely positioned to pursue a range of high-return organic and inorganic growth opportunities.
our teams continue to demonstrate strong productivity improvements including synergies resulting from the indivi acquisition.
We've maintained a disciplined focus on cost management, extending to GNA expenses, including share-based compensation, which resulted in an absolute reduction of 5 million dollars year-over-year. Despite inflationary pressures, and continued investments in growth.
This robust performance gives us the confidence to continue investing in our business and people affirming that we are on the path to delivering sustainable long-term value to our shareholders.
Improvements are undeniable.
Coupled with a strong balance sheet. Unlike many of our peers. We believe this represents a highly compelling investment thesis as we continue building a resilient and growth-oriented Company.
Zach George: Beyond strengthening our competitive position in Canada, we are actively monitoring the United States market through our exposure to markets like Florida and Texas, while continuing to expand our international footprint. Today, we are proud to be serving patients in the UK and continental Europe through the export of both branded finished goods as well as wholesale flour. Now I'll turn the call over to Alberto for more insights on our second quarter financial performance.
With no debt and over 200 million in unrestricted, cash, we are uniquely positioned to pursue a range of high return organic and inorganic growth opportunities.
Beyond strengthening our competitive position in Canada. We are actively monitoring the United States Market through our exposure to markets, like, Florida, and Texas.
While continuing to expand our International footprint today, we are proud to be serving patients in the UK and Continental Europe. Through the export of both branded finished goods as well as wholesale flower.
Alberto Paredero: 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 SNDL's management discussion and analysis document. Our second quarter financial results demonstrate continued progress in overall performance, with notable improvements visible in the income statement. Net revenue in the second quarter of 2025 reached $245 million, reflecting a 7.3% increase compared to Q2 of last year. This growth was driven across all segments, as our cannabis business continues to outperform the market significantly, and we also saw our liquor retail segment returning to top-line growth.
Now I'll turn the call over to Alberto for more insights on our second quarter financial performance.
Thank.
Dollars, unless otherwise stated.
Certain figures refer to during this call are non-gaap and non-ifrs measures.
for decisions of these measures, please refer to license the management discussion and Analysis document
Our second quarter Financial results, demonstrate continued progress and overall performance with notable improvements visible in the income statement.
Net revenue in the second quarter of 2025 rates, 245 million, reflecting 7.3% increase compared to Q2 of last year.
This growth was driven across all segments, as our capitalist business continues to outperform the market significantly, and we also saw our leaker retail segment returning to Topline growth.
Alberto Paredero: Gross profit of $67.6 million represents a $9.4 million increase, or 16.2% growth year-over-year, resulting in a 210 basis point improvement in gross margin, helping us match the record gross margin of 27.6% reported in the previous quarter. All segments contributed to this margin expansion. The biggest highlight is the achievement of positive operating income for the first time in SNDL's history. The $5.8 million adjusted operating income represents a $10.4 million year-over-year increase, a 226% growth. It is important to note that we only adjust operating income for restructuring-related charges and intangible asset impairments. In Q2, we recorded $0.8 million in restructuring charges and no intangible impairments, resulting in an unadjusted operating income of $5 million. This milestone underscores the effectiveness of our strategic focus and continuous improvement agenda.
Gross profit of 67.6 million represents a 9.4 million increase or 16.2% growth year-over-year, resulting in a 210 basis. Point Improvement in Gross, margins.
helping as much, the record growth margin of 27.6% reported in the previous quarter,
Or assessments contributed to this margin expansion.
The biggest highlighted the achievement of positive operating income for the first time in SNL's history.
The 5.8 million adjusted operating income represents a 10.4 million year-over-year, increase at 226% growth.
It is important to note that we only adjust operating income for restructuring related charges and entanglements.
In Q2, we recorded 0.8 million in restructuring charges and no, intangible impairments, resulting in an unadjusted operating income of 5 million.
Alberto Paredero: Free cash flow was negative by $7.9 million in the second quarter, as the strong P&L performance was more than offset by working capital investments to support our international growth in the second half of the year, annual payments related to incentive programs and insurance premiums, as well as capital expenditures for the upcoming store openings. Our historical quarterly performance continues to display a clear upward trajectory, reflecting our sustained focus on growth and operational efficiency. Additionally, we observe that free cash flow tends to be impacted in the first half of the year due to seasonal factors. Looking at the contributions from each segment across our main financial KPIs, we can see how each segment is contributing to net revenue and gross profit growth.
This Milestone underscores the effectiveness of our strategic focus and continuous Improvement agenda.
Free cash flow was negative by 7.9 million in the second quarter as the strong. Pnl performance was more than upset by working capital Investments. To support our International growth. In the second half of the Year, annual payments related to incentive programs and insurance premiums, as well as capital expenditures for the upcoming and store openings.
Our historical quarterly, performance continues to display a clear upward trajectory reflecting. Our sustained focus on growth and operational efficiency.
Additionally, we observe the free cash flow tends to be impacted in the first half of the year due to seasonal factors.
Alberto Paredero: Most of this growth is driven by our cannabis segments, although we are also pleased to see the liquor retail segment returning to growth during the second quarter. The revenue elimination for cannabis is related to the sales from the cannabis operations segments into our own retail. This elimination is increasing as a result of the cannabis business growth. Adjusted operating income shows similar trends, with all operating segments reporting clear improvements compared to the second quarter of 2024. The corporate segment reflects the positive impact of our ongoing restructuring and cost optimization initiatives, while the investment segment, although reporting a positive absolute operating income in the second quarter of 2025, was affected in the comparison to the same period in prior year by lapping a 2024 favorable downstream valuation adjustment. In the second quarter of 2025, no material valuation changes were recorded in our investment portfolio.
Looking at the contributions from each segment across our Main Financial kpis. We can see how each segment is contributing to net, revenue and gross profit growth.
Most of this growth is driven by our kind of segments, although we are also pleased to see the Linker retail segment returning to growth during the second quarter.
The revenue elimination for cannabis is related to the cells from the Cannabis operation segments into our own retail.
This elimination is increasing as a result of the Cannabis business growth.
Adjusted operating income. So similar Trends with all operating sentiments reporting clear improvements compared to the second quarter of 2024.
The corporate segment, reflects the positive impact of our ongoing restructuring and cost optimization initiatives while the investment segments, although reporting a positive absolute operating income in the second quarter of 2025 was affected in the comparison to the same period in Prior year by lapping at 2044 favorable sunscreen valuation adjustment.
In the second quarter of 2025, no material. Valuation changes were recorded in our Investment Portfolio.
Alberto Paredero: Free cash flow for the quarter was negative $7.9 million, slightly below the prior year level despite notable earnings improvements. This was primarily driven by working capital investments supporting international growth plans for the second half of the year, alongside capital expenditures for future store openings. As was the case last year, the second quarter was also impacted by seasonal payments associated with annual incentive programs and insurance premiums. In the second quarter of 2025, free cash flow was influenced by several key factors. Earnings made a significant positive contribution, with net income plus non-cash outbuys totaling $19.6 million. However, this strong earnings contribution was outweighed by working capital and capex investments, as well as seasonal cash outflows. Inventory growth in Q1 and Q2 was largely driven by the scale-up of our at-the-will cultivation facility in support of increasing international export volumes.
Free cash flow for the quarter, was -7.9 Million, the slightly below the prior year level despite notable earnings improvements.
Primarily driven by working capital Investments supporting International growth plans for the second half of the Year alongside Capital expenditures for future store openings.
As was the case. Last year, the second quarter was also impacted by seasonal payments. Associated with annual incentive, programs and insurance premiums.
In the second quarter of 2025 free cash, flow was influenced by several key factors.
Earnings made a significant positive contribution with net income, plus non-cash, Outbacks totaling in 19.6 million.
However, this, a strong earnings contribution was outweigh by working capital and Catholics Investments, as well as seasonal cash. Outflows.
Alberto Paredero: In Q2, we made our annual management incentive payout and insurance premium payments, resulting in a seasonal cash outflow of $12 million. Capex and lease payments rose during the quarter, reflecting our continued organic expansion of the retail network ahead of anticipated openings in the second half of the year. Despite this growth in investments, year-to-date we're still $3 million ahead of prior year. The liquor retail segment delivered net revenue of $141.9 million in the second quarter, marking a 1% year-over-year increase. This modest growth was partly supported by a calendar shift in Easter timing, which favorably impacted our consumer demand compared to the prior year, driving a 2.7% growth in same-store sales. Notably, our wide and beyond banner stood out with a robust 7.2% growth, contributing meaningfully to the segment performance.
inventory growth in q1 and Q2 was largely driven by the scale up of our ASO Bill cultivation, facility in support of increasing, International export volumes,
In Q2, we made our annual management incentive payout. And as soon as premium payments resulting, in a seasonal, cash outflow of 12 million,
Capitalist payments Rose during the quarter reflecting, our continued organic expansion of the retail Network ahead of anticipated and openness in the second half of the year.
Despite this growth Investments during today were still 3 million ahead of Prior year.
The liquor retail segment delivered, net revenue of 141.9 million in the second quarter.
Marking a 1% year-over-year increase.
This model Scrolls was partly supported by a calendar shift in Easter timing, which favorably impacted our consumer demand compared to the prior year driving a 2.7% growth in sales store sales.
Notably our wide on Beyond Banner is stood out with a robot 7.2% growth.
Alberto Paredero: Additionally, private label sales remained a key growth driver, posting an 8.1% increase as consumers continue to gravitate towards high-quality offerings at competitive prices. While this quarter's growth may not set a precedent for future performance, we are encouraged by the trend's improvement compared to prior quarters. Gross profit of $36.5 million represents an increase of 2.2% year-over-year. This improvement was driven by the revenue growth and 30 basis point expansion in gross margin, resulting in a record high gross margin of 25.7% for the segment. Operating income reached $11.1 million, marking a $2.6 million or 31% increase year-over-year. This performance was driven not only by revenue and gross profit gains, but also by enhanced efficiency in FD&A expenses. Cannabis retail achieved a new quarterly net revenue record of $84.4 million, representing 11% year-over-year growth.
Contributing meaningfully to the segment performance.
Additionally private label sales remained. A key growth driver, posting an 8.1% increase as consumers. Continue to gravitate towards high quality offerings at competitive pricing,
While these quarters growth. May not set a precedent for future performance. We are encouraged by the trends Improvement compared to Prior quarters.
Drug profit of 36.5 million represents an increase of 2.2% year-over-year. This Improvement was driven by the revenue growth and 30 basis points as function in Gross margins. Resulting in record, high growth margin of 25.7% for the segment.
Operating income rates 11.1 million marking A 2.6 million or 31% increase year-over-year.
performance was driven not only by revenue and gross profit gains but also by enhanced efficiency in FDA expenses,
Alberto Paredero: This performance was driven by an 8.2% increase in same-store sales, far outpacing the market and underscoring the strength of our value-buy small. The combination of robust revenue expansion and a 60 basis point improvement in gross margin led to a 14% year-over-year increase in gross profit. The segment also saw a strong profitability with $8.1 million in operating income, more than doubling versus prior year quarter. This growth was supported by gross profit momentum and continued efficiency improvements in FD&A expenses. Our cannabis operations segment continues to deliver the largest P&L improvements. Net revenue for the second quarter of 2025 was $35.8 million, reflecting a $10.9 million or 43% growth compared to the prior year. This growth was driven by EDIBELL following the acquisition of Indiva in the fourth quarter of 2024, as well as by accelerating international sales.
Canada's retail achieve a new quarterly, net revenue record of 84.4 million representing 11% year-over-year growth.
This performance was driven by an 8.2% increase in same store. Sales final Pace in the markets and underscoring the strength of our value buds model.
The combination of Robos Revenue expansion and a 60 basis points Improvement in gross. Margin led to a 14% year-over-year increase in growth profit.
The segment also saw a strong profitability with 8.1 million in operating income more than double in versus prior year quarter.
This growth was supported by gross profit momentum and continuous deficiency improvements in SC and egg expenses.
Our cannabis operations, segments continues to deliver the largest pnl improvements.
Net revenue for the second quarter of 2025 was 35.8 Million reflecting at 10.9 million, or 43% growth compared to the prior year.
This growth was driven by Edibles following the acquisition of indivi in the fourth quarter of 2024 as well by accelerating International sales.
Alberto Paredero: Gross profit achieved a significant increase compared to the prior year, driven by a 13 percentage point expansion in gross margin, reaching 25.8%. These improvements are mainly driven by our productivity program and initial synergies from the Indiva acquisition. As a result of the revenue growth and margin expansion, adjusted operating income for the second quarter came in at a positive $2.7 million, marking a $4.6 million improvement year-over-year. Over to you, Zach, for additional comments related to our strategic priorities.
Gross profit achieved. A significant increase compared to the prior year driven by a 13% its points expansion in Gross margins. Reaching 25.8%
This improvements are mainly driven by our productivity program and initial synergies from the individual acquisition.
As a result of the revenue growth and marketing expansion. Adjusted operating income for the second quarter came in at the positive 2.7 million marking a 4.6 million Improvement in year-over-year.
Zach George: Delivering consistent short-term financial performance is very important to us, while we also remain focused on our three strategic pillars, which are essential to our long-term success: growth, profitability, and people. Starting with growth, our cannabis retail segment, particularly our successful value-buy banner, continues to outperform the market. As previously mentioned, this segment delivered net revenue growth of 11% in the second quarter of 2025, supported by same-store sales growth of 8.2%, which translated into a 30 basis point gain in market share. Liquor retail also grew revenue in the quarter, despite the rationalization of some of our store footprint, driven by a 2.7% same-store sales growth. We are pleased to see how our wide and beyond banner grew 7.2% in the second quarter.
Over to you, Zack, for additional comments, related to our strategic priorities.
Delivering consistent short-term. Financial performance is very important to us while we also remain focused on our 3, strategic pillars which are essential to our long-term success.
Growth.
Profitability and people.
Growth our cannabis retail segment, particularly our successful value buds, Banner continues to outperform the market. As previously mentioned this segment delivered, net, revenue growth of 11% in the second quarter of 2025
supported by same store sales growth of 8.2% which translated into a 30 basis point gain in market share
Liquor retail. Also grew Revenue in the quarter despite the rationalization of some of our store footprint driven by a 2.7% same store sales growth
We are pleased to see how our Wine and Beyond banner grew 7.2% in the second quarter.
Zach George: Our consumers also reward us with their loyalty and appreciation of our unique offering of quality private label products at attractive prices, sales of which grew 8.1% during the quarter. In April, we announced the acquisition of 1CM, reinforcing our strategic commitment to expanding our cannabis retail footprint in Canada. We expect to close this transaction as planned by the end of Q3. Our teams are already evaluating opportunities to deploy organic investments to scale this new format and incorporate enhanced shopper insights once the 1CM assets are integrated into the SNDL portfolio. Our cannabis operations segment hosted another strong quarter with 43% revenue growth. This performance was primarily driven by the contribution of our Indiva acquisition, as well as additional momentum gained with our international partners, resulting in $3.8 million in export revenues for Q2. We see this run rate increasing substantially into Q3.
Consumers also reward us with their loyalty. And appreciation of our unique offering of Quality. Private Label products at attractive prices sales of which grew 8.1% during the quarter.
In April, we announced the acquisition of 1 cm reinforcing, our strategic commitment to expanding our cannabis, retail footprint in Canada.
We expect to close this transaction as planned by the end of Q3.
Our teams are already evaluating opportunities to deploy organic Investments to scale this new format and incorporate enhanced Shopper insights. Once the 1 cm assets are integrated into the sndl portfolio.
Our cannabis operation segment, posted another strong quarter.
With 43% Revenue growth.
This performance was primarily driven by the contribution of our indivi acquisition, as well as additional momentum gained with our International Partners resulting in 3.8 million in export revenues for Q2.
We see this run rate increasing substantially into Q3.
Zach George: Under our profitability strategic priority, our continued operational improvements and focus on cost management enabled us to achieve almost $6 million in adjusted and $5 million in unadjusted positive operating income in the second quarter. As previously mentioned, this is a significant milestone, as it is the first time in our history that we have achieved quarterly positive operating income. Our upward trajectory and pipeline of additional productivity projects give us confidence in our ability to continue raising the bar in quarters to come. Year-over-year productivity improvements totaled $3 million in the second quarter, driven primarily by efficiencies in procurement, manufacturing, and cultivation within our cannabis operations segment. These improvements contributed to matching the record gross margin reported in the first quarter. Through focused resource allocation, effective execution of our restructuring program initiated mid-last year, and enhanced spend management, we achieved a $5 million year-over-year reduction in overhead expenses.
Under our profitability. Strategic priorities are continued. Operational improvements and focus on cost management enable us to achieve almost 6 million in adjusted and 5 million in unadjusted positive, operating income in the second quarter.
As previously mentioned, this is a significant milestone.
As it is the first time in our history that we have achieved, quarterly positive operating income.
Our upwards trajectory and pipeline of additional productivity projects, gives us confidence in our ability, to continue raising the bar in quarters to come.
Year-over-year, productivity, improvements, totaled, 3 million in the second quarter.
Driven primarily by efficiencies in procurement manufacturing and cultivation within our cannabis operation segment.
These improvements contributed to matching the record gross margin reported in the first quarter.
Zach George: This represents a net decrease in absolute spending, despite inflationary pressures and ongoing growth investments. Additionally, data licensing revenue contributed $4.7 million in the quarter, providing further support to gross margin expansion. We continue to nurture and invest in our greatest competitive advantage, our people. We are pleased to see our strategic talent review process maturing and proving to be a valuable asset to the organization. Through assessments of individual potential, managers and their teams are able to craft personalized development plans that strengthen capabilities and maximize career growth, ultimately enhancing employee impact and overall company success. Building on insights gathered from our most recent annual employee engagement survey, along with deeper visibility into workforce trends, we have solidified our action plan and begun executing several initiatives aimed at elevating our employee value proposition. We're also proud to continue onboarding world-class, diverse talent into key roles.
Through focused resource allocation effective, execution of a restructuring program, initiated mid last year and enhanced spend management. We achieved a 5 million year-over-year reduction in overhead expenses. This represents a net decrease in absolute spending, despite inflationary pressures and ongoing growth Investments,
Additionally data licensing Revenue. Contributed 4.7 million in the quarter, providing further support to gross margin expansion.
We continue to nurture and invest in our greatest competitive Advantage. Our people.
We are pleased to see our strategic challenge review, process, maturing and proving to be a valuable asset to the organization.
Through assessments of individual potential managers, and their teams are able to craft personalized development, plans that strengthen capabilities and maximize career growth, ultimately enhancing employee impact and overall Company Success.
Building on insights gathered from our most recent annual Employee Engagement. Survey along with deeper visibility into Workforce Trends, we have solidified. Our action plan and began executing. Several initiatives aimed at elevating, our employee value proposition.
Zach George: Their contributions are already making a meaningful difference, and we are also strengthening our leadership bench. As we conclude this presentation, I'd like to express how encouraged we are by the momentum we've built and how energized we feel by the progress that we're making. Our team remains highly focused and motivated to navigate the challenges of a dynamic industry in pursuit of our ambition to become a global cannabis leader. Once again, I'd like to thank our entire team for their contributions and our shareholders for their continued trust. I will now hand the call back to the operator for the analyst Q&A session.
We're also proud to continue onboarding world-class diverse talent into key roles.
Their contributions are already making a meaningful difference. And we are also strengthening our leadership bench.
As we conclude this presentation, I'd like to express how encouraged we are by the momentum, we've built and how energized? We feel by the progress that we're making.
Our team remains highly focused and motivated to navigate the challenges of a dynamic industry in pursuit of our ambition to become a Global Campus leader.
Once again, I'd like to thank our entire team for their contributions.
And our shareholders for their continued. Trust.
Yewon Kang: We will now begin the analyst question and answer session. To join the question queue, you may press *11 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any key. To withdraw your question, please press *11 again. And the first question will be coming from Frederico Gomes of ATB Capital Markets. Your line is open.
I will now hand the call back to the operator for the analyst Q&A session.
We will now begin the analyst question and answer session.
To join the question queue. You may press star 1 1 1 on your telephone keypad, you will hear a tone acknowledging your request.
Keys to withdraw your question. Please press star 11 again and the first question will be coming from Frederick Rico gong.
Of ATV Capital markets. Your line is open.
Frederico Gomes: Hi, good morning. Thanks for taking my questions. Congrats on the great quarter. So you reported some good growth in international sales this quarter. At the same time, I believe that you had lower provincial board sales. So I have two questions on this. First, are those two related, you know, such that maybe you are maybe prioritizing international exports as opposed to domestic sales? And second, could you talk about the outlook for those international sales? You know, you mentioned some working capital investments there. So what sort of growth can we expect through the year? Thanks.
Good morning. Thanks for taking my questions. Congrats on the great quarter.
Zach George: Good morning, Frederico, and thank you for the question. There is quite a lot going on beneath the surface there, so I wouldn't extrapolate any kind of lack of focus on the Canadian recreational market. We are expecting meaningful growth into the back half of the year in terms of international, but it'll be off this very, very slow base. And we're monitoring those markets very carefully and developing great relationships with distributors on the ground in the UK and EU.
Um, so you you reported some good growth International sales. Uh this quarter at the same time I believe that you had lower potential board sales. So I have 2 questions on this. Uh, first, uh, are those 2 related? You know, such that maybe you are, uh, maybe prioritizing International exports, as opposed to domestic sales and second, could you talk about the outlook for those International sales? You know, you mentioned, uh, some working capital Investments there. So what sort of growth uh can we expect through the year, thanks?
Good morning, Fred Rico, and thank you for the question. Um, there is quite a lot going on beneath the surface there, so I wouldn't extrapolate. Um, any any, any kind of lack of focus on the Canadian recreational Market? We are expecting, um, meaningful growth into the back half of the year in terms of international, but it'll be off this very, very slow base. And um, we're monitoring those markets, very carefully and developing great relationships with Distributors, um, on the ground in in the UK and EU.
Frederico Gomes: Perfect. Thank you. Second question on your RISE Rewards Loyalty Program. Can you comment on how the program is rolling out so far? You know, how many members have signed up, and is that going in line with your expectations?
Perfect. Thank you. Um, second question on your uh ryze rewards loyalty program can, can you comment on how the program is rolling out so far? Uh, you know how many members have signed up and is that going in line with your statements?
Zach George: Yeah, so we are making daily progress in terms of new loyalty program members. We're going to be making announcements as we hit key milestones, but it's still early days with the program only being out for several months. And so we're in the six-figure range, but we're going to be putting out a lot more disclosure around that as we hit our key milestones. It's early days.
Yeah. So we are making Daily Progress in terms of um, new loyalty program members. Um, we're going to be making announcements as we hit key Milestones, um, but it's still early days of the program only being out for um, several months. And so we're in the, in the 6-figure range. Um, but we're going to be putting out a lot more disclosure around that as we hit our key Milestones, its early days,
Frederico Gomes: Got it. Just a final question about your view on cultivation, Zach. You know, just considering that we are seeing, I guess, an increase in wholesale prices in Canada, better supply and demand here with exports to international markets. So how do you look at a potential expansion of your cultivation footprint? You know, is that something that could make sense? Are you in any way, I guess, constrained on your cultivation side of things? And just how do you view that potential expansion?
Got it. Uh, just a final question. Um,
About your view on cultivations act. Um,
You know, just, you know, considering that we are seeing, I guess an increase in wholesale prices in Canada, better Supply demand here. Uh, we've had supports International markets. So how how do you look at you know a potential expansion of your cultivation footprint? You know is that something that could make sense? Are you in any way? I guess constrained on, on the uh, on the your cultivation side of things and uh just how how do you view that, you know, potential expansion?
Zach George: So I think it would be worth noting that our Atalville facility, while medium-sized in nature, is now fully ramped and committed both internationally and domestically for supply. Our cultivation efforts represent about 15% of our total biomass needs. So it's certainly a hedge in a rising price environment. Our relationships and the nature of our platform through our B2B partnerships and our strong retail positioning put us in an interesting place for procurement relationships. And in the short term, we're actually seeing some additional supply hit the market. So we're watching this cycle very carefully. But we've been able to access biomass in the quantums required and at specs that we need to serve consumers in Canada. So no real concerns at that point. Obviously, there are a number of opportunities in different cultivation mediums to grow our exposure there. We're trying to be very conservative with capital.
So, uh, I think it would be worth noting that our athlete facility while. Um,
You know, medium-sized in in nature is now fully ramped and um and committed. Um, both internationally and domestically um for Supply, our cultivation efforts represent about 15% of our total biomass needs. So it's certainly um, a hedge in a, you know, Rising price environment. Our relationships and the nature of our platform, through our our B2B Partnerships and our strong retail positioning um, puts us in an interesting place for procurement relationships, um, and in the short term, we're actually seeing some additional Supply, you know, hit the market. So we're watching the cycle. Um, very carefully.
Um, but we have been able to access biomass and the quantities required, um, at the specs that we need to, uh, serve, uh, consumers in Canada. So, no real concerns at that point. Obviously, there are a number of opportunities, um, in different cultivation.
Zach George: And so to date, we've continued to take advantage of procurement opportunities in the market versus investing tens of millions of dollars in new cultivation facilities.
Mediums to, uh, to to, to grow our exposure there. Um, we're trying to be very conservative with capital, um, and so to date, we've uh, continued to take advantage of procurement opportunities in the market, um, versus um, investing tens of millions of dollars in new cultivation facilities.
Frederico Gomes: Thank you for the caller.
Thank you for the caller.
Yewon Kang: And our next question will be coming from the line of Aaron Gray of AGT. Your line is open.
And our next question.
Will be coming from the line of Aaron gray, AGP, your line is open.
Aaron Gray: Good morning, Aaron. Thank you for the question. Nice quarter here. Just want to follow up a bit for the question that Fred asked kind of regarding the supply chain, but maybe bring it back to international. Are you guys satisfied with the supply chain you guys have today? Zach, you mentioned some of the relationships you're building with distributors or otherwise. You know, can you maybe touch on the margins you're achieving? I know a lot of your peers tout the higher margins in Europe versus Canada, but a lot of times it seems to depend on the supply chain that they're working with. So any commentary you can provide on that? And then maybe just any market-specific guidance in terms of where you're feeling, you know, most constructive in terms of international growth. Thank you.
Good morning. Uh, thank you for the question, nice quarter here. Um, just want to follow up a bit for the question that Fred asked kind of regarding the supply chain, but maybe bring back to International. Um,
Are you guys satisfied with the supply chain? You guys have today, Zach, you mentioned some of the relationships you're building with distributors or otherwise. Um, you know, can you maybe touch on the margins? Your aiming, I know a lot of, you know, your peers, you know, count the higher margins in Europe versus Canada, but a lot of times it seems to depend on the supply chain that they're working with. So any commentary you can provide on that and then maybe just any Market specific guidance in terms of where you're feeling, you know, most constructive in terms of international growth. Thank you.
Zach George: Good morning, and thanks for the question. Yeah, absolutely. Look, we see it's still very early days in Europe. You've got a tremendous growth opportunity, but the margins are extremely high today. We're seeing some volatility and some compression in spots. And there have been a few external shocks to the supply chain, which have also served to keep pricing higher. But these are emerging markets in every sense of the word. And you have a number of middlemen earning outsized economic returns in that market, and we think there'll be pressure on those levels going further. So we're still committed absolutely to winning in Canada, and we're unapologetic about that. But we're also excited about some of these new streams of cash flow and relationships we're building internationally. Alberto, would you like to comment further on margin profile?
Alberto Paredero: Yeah, so our margin of international sales is certainly accretive. Obviously, there is a range depending on the customer and depending on the type of product that we're shipping. But they are nicely accretive to our national margins at the moment. It's one of the reasons why we're dedicating an important portion of our cultivation efforts towards international, like even the good quality flowers that we were able to produce in Atalville. And we are expecting still for the time being those margins to remain higher than Canadian average. But as Zach mentioned, obviously, things can change very quickly in an emerging market.
Yeah, absolutely. Look, we we see, it's still very early days in Europe. You've got a tremendous growth opportunity, but there are, um, the, the margins are extremely high today. Um, we we're seeing some volatility and some compression in spots, um, and there have been a few external shocks to the supply chain, which have also served to key pricing higher. But these are, these are, um, emerging markets in every sense of the word. And, um, you have a number of middlemen earning outside economic returns in that market, and we think there'll be pressure, um, on those levels going further. So, we're we're still committed. Absolutely to winning in Canada. Um, and we're Unapologetic about that. But we're also excited about, um, some of these new, uh, streams of cash flow in relationships for building internationally. Um, Alberto, would you like to comment further on margin profile?
Yeah, so our margin of international sales is certainly a creative. Um, obviously there's a range, uh, depending on the customer and depending on the type of product that we're shipping, um, but they are, they are nicely created to our national. Um, margins at the moment,
Um, it's 1 of the reasons as well. Why why we're dedicating an important portion of our cultivation, cultivation efforts, um towards International like, given the good quality of flowers that we where they work to produce an apple go.
Um, we are expecting still for the time being those margins to remain higher than, um, the Canadian average. But, as Zach mentioned, um, obviously things can change very quickly in the American market.
Aaron Gray: Okay, really appreciate that color there. Second question for me, I just want to talk liquor for a bit. I know, you know, there's been some challenges in that segment. Nice to see return to growth in the quarter. You know, can you provide some commentary? Do you believe that was more specific to the things attributable to the company or broader category dynamics? I know alcohol as a whole has been under some pressure. So is there any further color you can provide? Because I believe you did mention there were some positive same-store sales there. Thank you.
Okay, I really appreciate that color there. Same question for me; I just want to talk liquor for a bit. I know you know there's been some challenges in that segment. It's nice to see a return to growth in the quarter. Could you provide some commentary? Do you believe that was more specific to the...
Things attributable to the company or broader category Dynamics. I know alcohol, alcohol as a whole has been under some pressure. So there's any further color, you can provide because I believe you did mention those in positive. S for sales there. Thank you.
Zach George: Yeah, it's a great question. And arguably, it could be one of the most important stats of the quarter. This narrative around secular decline in alcohol consumption is certainly being challenged by our numbers. I would say that the approach to individual banner management is a big driver for the success in the quarter. Wine and Beyond really was a lead horse there and put up really impressive results. So sort of this notion of selection as brand and the incredible theater that's created at retail with north of 10,000 SKUs is something that's a real draw for the consumer. That's clear. And you may see us lean into that even further in the future. That being said, we're still observing shifting consumer behavior and a shifting relationship generally with alc bev. So we're continuing to monitor that and not taking anything for granted.
Yeah, it's a great question and and um arguably it could be 1 of the um most most important stats of the quarter. Um this this narrative around secular decline in in alcohol consumption. Um, is certainly being challenged by by our numbers. I would say that, um, the approach to individual Banner management is a big driver for the success in the quarter. Um, 1 and Beyond really um, was the lead horse there, um, and put up really impressive results. So, um, sort of this this notion of selection as brand and the incredible, um, uh, theater that's created at retail with north of 10,000 skus is something that's a real draw for the consumer, that's clear. Um, and you may see us lean into that even further in the future that being said, we're still, um, observing, uh, shifting, uh, consumer Behavior.
Um and a shifting relationship generally with uh, with ALC Bev. So we're continuing to monitor that and not taking anything for granted.
Aaron Gray: Okay, great. Appreciate the color. I'll jump back into the queue.
Okay, great. Appreciate the color. I'll jump back into the queue.
Yewon Kang: And as a reminder, to ask a question, please press *11. Our next question comes from Pablo Zunick of Zunick & Associates. Your line is open, Pablo.
Pablo Zunick: Thank you, and good morning, everyone. Look, just first to start the housekeeping question, do you disclose the wholesale revenue number for cannabis, the 11 million, how much is international? And I'm sorry if I missed that, but can you clarify that?
And as a reminder to ask a question. Please press star 1 1. Our next question comes from Pablo xenic of unic and Associates your line is open. Pablo.
Thank you, and good morning, everyone. Look just first to start the housekeeping question. Do do you disclose of the wholesale Revenue number for cannabis, the 11 million? How much is international? And I'm sorry if I missed that but um, can you clarify that?
Alberto Paredero: Yes, Pablo, the international sales were disclosed in our press release for the second quarter. They amounted to $3.8 million.
Pablo Zunick: Okay. All right. Thank you. Thank you for that. And then, Zach, obviously, congratulations on the performance in domestic Canada, right? As you said, you grew around, I think, high-five to 16%. That's about 3%, three times the market average growth. But SNDL in Canada is still about number 12 with about 2% market share. I mean, when you think more medium-longer term, what's your aspiration there in terms of scaling up, whether organically or via M&A, to the top echelons in Canadian rec?
Um, just Pablo, the international sales were disclosed in our personal lives, and for the second quarter, the amount is $3.8 million.
Okay, all right. Thank you. Thank you for that. And then Zach, um, obviously congratulations on the performance in domestic Canada, right? As you said, you grew around, I think High 5 or 6 16% that's about 3%. Uh, 3 times, the market average growth. Um but is in the end in Canada is still about number 12 with about 2% market share. I mean, when when you see more medium longer term, what what inspiration there in terms of scaling up, uh, whether organically or via m&a to, to to, to the top in in Canadian rate,
Aaron Gray: Thanks, Pablo. Can you just repeat the question? You were asking about duration?
Pablo Zunick: No, I'm sorry. I want to repeat it again. No, I'm saying in the case of Canada in domestic recreational sales, right? Obviously, in the quarter, you grew three times the market average growth rate. So that's great. But SNDL is still about number 12 in Canadian rec with about 2% market share. So I'm just thinking more medium-longer term, what's the aspiration? You know, do you want to be a top three player? How do you think about that?
Thanks, Pablo. Can you just repeat the question you were asking about duration?
Zach George: Oh, aspiration. Yeah, understood. Look, I think we've discussed this on calls previously, but if you really look at the Canadian marketplace, almost every single discernible industry has taken the shape of an oligopoly effectively, with a small handful of very large dominant players and a handful of very active, strong peripheral operators. And we don't think that cannabis will be any different. We think that we're still coming out of the trough and the cycle, and you still see significant consolidation ahead. So we're really focused on profitable growth, and there are many levers we could pull if market share was the sole objective. But as you can see, operating income and free cash flow are the biggest priorities for us.
No, I'm sorry. I want to repeat again. Now I'm saying in the case of Canada in domestic recreational sales right at the moment. Obviously, in the quarter you grew three times the market average growth rate, so that's great. But if in the L is still about number 12 in Canadian recreational with about 2% market share, so I'm just thinking more medium- to longer-term, what's the aspiration? You know, do you want to be a top three player? How do you think about that?
Single, uh, discernable industry has taken the shape of a of an oligopoly effectively with a small handful of very large, dominant players. Um, and a handful of um, very active strong peripheral, um, operators and we don't think that cannabis will be any different. Um, we think that we're still coming out of the trough and the cycle, and you still see significant consolidation ahead. So we're really focused on profitable growth and there are many levers, we could pull if market share was the sole objective? Um, but uh, uh, as you can see operating income and free cash flow or the the biggest priorities for us
Pablo Zunick: Okay. Thank you. And then just moving on to the US assets, I don't know if you can give an update in terms of where you are in terms of taking full ownership and control of those assets and you start consolidating them. I know you own them through Sunstream, right? So if you can just clarify where we are there in terms of consolidating those assets, and then I have a follow-up. Thank you.
Zach George: Sure. So Pablo, working backwards, any ability to consolidate those assets will require the closing of the restructurings. In the case of Parallel, you have a foreclosure process ongoing. In the case of Skyman, it's a receivership. And there are two, what I would call, irritant litigations that we're still just waiting on rulings from the courts for. It's been a frustrating process for sure with an elongated timeline. And that's really driven by the lack of US operators' ability to access the federal bankruptcy courts. And so you end up in courts with environments where there's much less experience with complex commercial and distress files. And so we should have received word from these courts now almost two months ago as an outside date, and we're still waiting. So we're eager to see those results, and then we'll be able to move to close.
Okay, thank you. And then just uh, moving on to the US assets. Uh, I don't know if you can give an update in terms of where you are in terms of uh taking full ownership and control of those assets and you start consolidating them. I know you own them through sunscreen, right? So if you can just clarify where we are there uh in terms of um you know consolidating those assets and and then I have a follow-up. Thank you.
Sure. So, so Pablo working backwards. Um, any ability to consolidate those assets will require, um, the closing of the restructurings in the case of, um, parallel, you have a foreclosure process ongoing in the case of Sky. It's a receivership and there are 2. Um, what I would call irritant litigations that, um, we're still just waiting on rulings from the courts for, um, it's, uh, it's been a frustrating process for sure with an elongated time.
Zach George: And as you may have seen publicly, our board is reviewing listing status to make some strategic decisions about how to manage that exposure going forward.
Pablo Zunick: Right. Understood. And then, and again, in terms of what you can disclose, but are you able, I mean, who's managing Parallel right now? I mean, do you have, does SNDL have any say in terms of, or Sunstream any say in the way that operation is being run, or you're more limited in terms of what you can do there if you can disclose that? Thank you.
Timeline and that's really driven by the lack of um, uh, us operators, ability to access the federal bankruptcy courts. And so you end up in courts with um, an environment where there's much, less experience with complex commercial, um, and distressed, um, files. And so we should have received word from these courts. And now, almost 2 months ago, um, as as an outside date, and we're still waiting. So, um, we're, um, we're eager to see those results, and then we'll be able to move to close. Um, and as you may have seen publicly our board is reviewing, um, listing status, um, to to make some strategic decisions about how to manage that exposure going forward.
Zach George: That's correct, Pablo. So SNDL is not engaged in any plant-touching activities whatsoever in the United States, and that's really critical to maintain our strong and positive relationship with NASDAQ. So at this point, we are not able to put a hand on the wheel, so to speak, in any form. But of course, we're monitoring as a creditor and certainly have a lot of ideas on operations that we are restricted from executing on, given our operating experience internationally.
Right. And and and, and understood, and then, and and again, in terms of what you can disclose, but um, are you able, I mean, who's managing parallel right now? I mean, do you do you have a that is in the L? Have any say in terms of or, or sunscreen any say, in the way that operation is being run or or, or you're more limited in terms of what you can do there? If you can disclose that. Thank you. Sure. That's correct. Pablo. So, so sdl um, is not engaged uh, in any plant touching activities whatsoever um, in the, in the United States and that's really critical to maintain our strong and positive relationship with NASDAQ. Um, so at this point, we are not able to put a hand on the wheel so to speak in any form. Um, but of course, we're we're monitoring as a creditor. Um, and certainly have um, a lot of ideas on operations, um, that we, uh, are restricted from executing.
Pablo Zunick: Right. And one very last one. So in the case of Pennsylvania and Texas, I understand that there was a relationship with IIPR. I think in the case of Pennsylvania, that operation has been given up, that lease pretty much. But in the case of Texas, Sunstream still has a stake there, right? You have not given up that operation. Can you clarify the difference between the Pennsylvania and Texas situation? Thank you. And that's it.
On giving our operating experience internationally.
Right. And, and when very last 1, so in the case of Pennsylvania and Texas, I understand that there was a relationship with iipr. I think in the case of Pennsylvania, that operation has been given up that lives pretty much. But in the test of, in the case of Texas, um, sunscreens still has a
Has a has a stake there, right? You have not given up that operation. Can you clarify the difference within the Pennsylvania and Texas situation. Thank you. And that's it.
Zach George: Sure. Let me maybe give a broader picture for Parallel. So Parallel's asset base today really consists of operations in Florida, Massachusetts, and they're one of very few license holders today in Texas, although we believe that'll expand in the future. The majority of that business is levered to being a top five player in Florida. You're correct in that quite some time ago, the Pennsylvania assets were disclaimed. The stakeholders and special committee of Parallel in this context can make additional decisions into the close of that transaction to shed certain contracts or liabilities. But those decisions have not been made. And so we're eager to update our investors on progress with this as soon as we hear from the courts.
Sure, let let me maybe give a broader picture um, for parallel. So um parallels as a base today, really consists of um operations in Florida, Massachusetts, and they're 1 of um very few. License holders today in Texas, although we believe that will expand in the future. The, the majority of that business is levered to
Pablo Zunick: Understood. Thank you very much.
Being a top 5 player, um, in in Florida, you're correct in that, um, quite some time ago. Um, the Pennsylvania assets were just claimed, um, the stakeholders and special Committee of parallel in this context can make additional decisions into the close of that transaction to um, shed certain contracts or liabilities. Um but those decisions have not been made and so um we're eager to update. Um our investors on progress with this as soon as we hear from the um from the courts.
Understood, thank you very much.
Yewon Kang: And this concludes the question and answer session. I would like to turn the conference back over to Zach George for closing remarks.
And this concludes the question and answer session, I would like to turn the conference back over to Zach, George for closing remarks.
Zach George: Thank you, operator, and thank you all for joining our second quarter conference call. We look forward to updating you on our progress in the near future. Have a great day.
Thank you operator and thank you all for joining our second quarter conference call. We look forward to updating you on our progress, in the near future, have a great day
Yewon Kang: This concludes today's conference call. You may now disconnect your line. Thank you for participating and have a pleasant day. Good morning, and welcome to the SNDL's second quarter 2025 financial results conference call. This morning, SNDL issued a press release announcing their financial results for the 2025 second quarter ended June 30, 2025. This press release is available on companies.